KARACHI: In order to curb the misuse of Afghan transit trade, Pakistan Business Council (PBC) has recommended renegotiation of the Pakistan Afghanistan Transit Trade Agreement.

In a letter to Dr Gohar Ijaz, the Federal Minister for Commerce and Industry, PBC Chief Executive Ehsan A Malik has put forward a set of recommendations to curb the misuse of Afghan transit trade, saying that Pakistan’s negotiating position is stronger due to current geo-political environment.

The PBC letter said, in our meeting on 19th September, we discussed the need to curb the misuse of Afghan transit trade. You had enquired if PBC had done any work on this. Whilst PBC has for many years been highlighting the harm that this misuse causes to tax revenues and the formal sector, in August 2020 we had published guidelines for renegotiating the treaty.

Pakistan concerned about ‘misuse’ of transit trade deal with Afghanistan: FO

Key recommendations are placing quantitative and qualitative limits, restrict the quantity of consumer goods in proportion to Afghanistan’s population, place qualitative checks in line with established and verified consumption preferences and patterns.

For example, if Afghanistan’s population is 37 million and the per capita consumption of tea is 0.6Kg, it may be allowed to import 22,000 tons of tea. Further, if the tea drinking habit is green tea, then don’t allow import of black tea which is diverted to and consumed in Pakistan. The quantitative limit should also apply to electronic gadgets and domestic appliances.

Deny transit access to industrial inputs for which no industrial capacity exists in Afghanistan and for those that capacity exists, allow quantity in proportion to verified track record of manufacturing. Require all traders availing transit facilities to be registered for income and sales tax in Afghanistan.

Assist the Afghan government to achieve a high level of tax documentation and accountability.

Subject all transit goods to deposit of Pakistan import duties and sales taxes upon entry into Pakistan. Refund duty and taxes collected only to the Afghanistan government, thereby forcing traders to register there for tax.

PBC also recommended seeking parity duties and taxes between Afghanistan and Pakistan to reduce the incentive to evade Pakistan taxes. Require transit goods to be imported under letters of credit drawn on banks operating in Afghanistan (and not third countries such as the UAE).

In the event the LCs are not possible, require remittance to originate from Afghanistan through banking channels. In the interest of transparency and compliance with FATF and Anti-Money Laundering laws, do not allow payments to be made from third countries.
It also advised to continue to resist the inclusion of auto-parts and cigarettes in the list of items admissible for transit.
Prevent flow of Indian goods overland from Wagah to Afghanistan, especially on Indian trucks, due to security risks and the likelihood of diversion.

PBC further recommended to continue satellite tracking of containers up to the Afghan border, strengthen deviation monitoring en-route, share actions taken to provide deterrent and heighten checks on returning containers to ensure that goods do not re-enter Pakistan.
Whilst it may not be possible to secure all the aforementioned, Pakistan’s negotiating position is stronger due to current geo-political environment. You had shared some data on imports ostensibly meant for transit to Afghanistan but diverted to Pakistan.

However, whenever we have sought import data from the Ministry of Commerce or the FBR, we have been advised that the law does not permit sharing of import data without the importer’s permission. We request that the law be reviewed in the interest of transparency.

Published in Business Recorder