Don’t Let FBR Kill Afghan Transit Trade in the Nameof Controlling Smuggling
Respectable General Asim Munir,
The objective of this direct letter is to draw your attention to an urgent issue that can spiral into more tensions and crises for the State of Pakistan, which already finds itself in the midst of multiple political and economic crises.
- One of these vexing issues is the relationship with Afghanistan and the presence of terrorist outfits there. The latest decision to expel all undocumented foreigners, including 1.7 million Afghans, and the new restrictions imposed on the Afghan transit trade are likely to exacerbate this simmering crisis.
- Your resolve to curb smuggling and regularize cross-border traffic through passports is indeed laudable and much needed. Pakistan must underscore its internationally recognized border with all neighbouring countries by allowing border crossing only with a formal travel document, i.e., a passport. The scourge of special cards and passes for tribes that straddle border areas must be abolished to regulate and verify human traffic.
- As far as the drive against smuggling is concerned, it is desirable, but not without contextualizing the issue. For decades, Pakistan’s bureaucracy shifted the blame of its inability to address domestic inflationary pressures arising from smuggling associated with the Afghan transit trade. All the measures taken to contain “smuggling” stemmed from a myopic tendency to externalize issues, scapegoating our inability to manage and address domestic supply-side problems.
- People at large have also welcomed Interior Minister Sarfaraz Bugti’s public admission that security officials played a role in the illegal cross-border movement of currency and commodities. He also recalled your warning that “all those involved in the practice would face court-martial and jail.”
- That all augurs well for correcting mistakes on the way to improving governance based on the realization that smuggling via transit trade or the abuse of this facility by the land-locked Afghanistan resulted from a callous collusion between Afghan importers, their Pakistani partners, and the bureaucracy.
Respectable General,
Deceptive Comparison of rise in Transit Trade
- The Federal Board of Revenue (FBR) has cited a whopping 67% increase in Afghan transit imports – $6.7 billion in 2022-23 from nearly $4 billion in 2021-22 – as the justification for the new measures to deter smuggling.
- This is clearly misleading on many counts and officials are trying to hood-wink the top brass of the country. Following points merit your consideration to prevent further damage to Pakistan’s interests and its reputation abroad.
- Firstly, the data provided by the customs officials themselves suggests that the total transit trade through Pakistan in 2018/19 stood at $5.25 billion and in 2019/20 at $5.6 billion.
The year 2021 was exceptionally low because of the collapse of the Ghani Government bringing the trade to a halt for a few months. Using 2021 as the base year is thereby misleading
- Secondly, the latest FBR measures clearly violates the following:
- APTTA Article 1, (Purpose of APTTA)
- Article 3 (Freedom of Transit)
- Article 32 (Levies and charges),
- Article 33 ( Freedom of Transit), and
- Article 5 of General Agreement of Tariff and Trade (GAAT) of the World Trade Organization (WTO).
- FBR measures also contravene decisions of the 7th APTTCA meeting.
- Charging processing fees without providing services and discriminating in processing based on the countries also violate both the legally binding provisions of the WTO as well as the World Customs Organization (WCO), of which both Afghanistan and Pakistan are members.
- Thirdly, at least five requirements under APTTA are already in place – with a heavy financial cost to let Afghan traders – to let the transit cargo go through Pakistan
- financial guarantee: Insurance guarantee equivalent to the amount of Custom duty in Pakistan,
- Bonded Carriers to take goods from Karachi port to Afghanistan,
- Seals and satellite tracking device attached to every container,
- Cross border certification by officials of both countries, and
- Electronic data interchange (EDI) for real time information sharing between customs.
- Adding any further measures to the afore-mentioned facts will only increase the cost of doing business through Pakistan.
Respectable General,
- A few questions for your consideration:
- Can the FBR or any other agency identify any Afghan transit container missing or unaccounted inside Pakistan in the past 10 years during their journey from Karachi to Torkham / Karachi to Spin Boldak / Karachi to Ghulam Khan?
- Why not take Afghan importers in confidence and check out how many are genuine and how many Pakistani importers/traders are involved in this?
- How can Afghan importers be held responsible once the Customs at Karachi have processed containers, taken a security deposit (equivalent to the customs duty on the declared goods), sealed them, and attached a satellite tracker for their journey to the border?
- Backward movement into Pakistan or manipulations of the containers on Pakistani soil is the sole responsibility of our security and Custom agencies. How can that be an excuse for imposing further restrictions on the transit cargo?
- Cigarettes, automobiles, and automobile parts are banned under transit trade but Pakistani market is awash with all three. Surely, this aspect cannot be attributed to trade under APTTA.
- Despite a ban, how are these commercial items then making it into Pakistani market? Who is facilitating their availability across the country?
- Clearly, Pakistani authorities, politicians and businessmen are themselves deeply involved in the smuggling of diesel/petrol from Iran daily. To cover up their corruption, the relevant authorities are just blaming the Afghan transit.
- As pointed out by an editorial of the daily Dawn, “the shelves of most shops are stacked with such products because no one asks the powerful trader community to provide documentary proof that taxes were paid on the ‘import’ of such items”.
- No anti-smuggling drive can be successful “without making it difficult for the traders to sell smuggled under-invoiced goods. The key will be to dismantle the nexus among traders, and security and Custom officials who oversee the transit trade from the Karachi/Gwadar ports to the borders with Afghanistan.
- Besides the loss of revenues, a transit trade shift away from Pakistan would automatically mean a direct hit on tens of thousands of jobs, including the trucking industry. With a precarious economy and millions of jobless, Pakistan cannot afford such reactive measures that amount to punishing the innocent instead of going after the nexus of corrupt officials.
- Regulation must remain above compassion and compromise. But any action, especially the implementation of new regulations, must be sequenced in a manageable timeframe, instead of giving short-term notices. This has not only triggered panic among Afghan traders, refugees, and citizens but also invited negative reactions from the Kabul regime.
- Since the Taliban takeover, Pakistan’s trade with Central Asian countries through Afghanistan has increased to $500 million from $50 million in 2021, showing the upside potential of the transit trade. The steps we are taking on our side of the border vis-a-vis the Afghan transit trade are likely to hamper our access to Central Asian markets.
- While the intent to curb smuggling and bolster revenue streams is admirable, it is instructive that Pakistan navigates this issue with prudence and foresight. Disproportionate measures might save some losses in the short term but can have adverse repercussions on the broader regional economic connectivity as well as geopolitical front, potentially undermining Pakistan’s access to crucial Central Asian markets and souring ties with its immediate neighbor, Afghanistan.
- For Pakistan to embark on economic revival and truly leverage regional market access, it’s essential to strike a balance between regulation and fostering beneficial regional trade relationships, ensuring that both security and economic interests are harmoniously aligned.
- Please, don’t let the FBR bureaucracy to undermine long term national interests for short term illusory gains.
Thank You.
Imtiaz Gul
A concerned citizen of Pakistan
