Pakistan’s Trade Policy

Case of Cross Border Trade issues and Challenges

Raza Ullah
Alternate solutions Institute Pakistan
- The drivers of import and export costs,

- Issues that hamper Pakistan’s integration into regional and global markets
- Case of Afghanistan and Central Asian trade APTTA
Opportunities

 Pakistan lies at the trade hub of Afghanistan, Iran, Uzbekistan, Turkmenistan, Tajikistan,
India and China.
 Pakistan borders trade offers opportunities to 67% of global market nations (around
4.8 billion of total global population 7.2 billion).
 Pakistan trade in South Asian region comprises 15% with 57% to Afghanistan.
Policy Gaps

 Export products concentration

 Cross border trade
 Transformation from efficiency to innovation driven economy
Afghan Transit and Bilateral Trade

 APTTA signed initially in 1965, served the purpose for five decades
 Revised APTTA signed in 2010, after the new agreement the trade volume
between two countries has dropped to its lowest ebb and continues to
decline.
The problems faced by traders

Time: Due to prolonged, cumbersome bureaucratic procedures

Cost: Unjustified charges (shipping Cos, NLC, Customs) and uncalled for informal
charges by LEAs.
Few problems faced by traders on ground

1. Overcharging by Shipping Companies (Cost)

2. Different Tariff Regimes for APTTA and General Containers (Cost)
3. Prolonged and Cumbersome Procedures for Rectification of Minor Problems
such as Spelling Rectification (Time)
4. Lack of Security to Bonded Carriers (Cost)
5. Dysfunctional Trackers (Cost & Time)
6. Unjustified and Informal Charges by Authorities/Officials (Cost) (Recently,
Customs increased insurance ratio from PKR.1,000 to PKR.2,500/1 million)
 The faults in APTTA – 2010 are clearly manifested in decreasing trade volume
from USD 2.5b to USD 500m and continues to reduce.
 The trade is gradually but rapidly shifting from Pakistan to Iran, India and
China.
Afghanistan opted not to participate in Afghanistan-Pakistan Transit Trade
Coordination Authority (APTTCA) 7th meeting scheduled in September-2017 and
sent letter for renewed APTTA after inclusion of India.
India apparently wants to link its trade channel through Wahga and Attari borders
bypassing and overriding Pakistani trading community.
Due to inaction of Pak Railways and NLC are causing reduction in trade volume
between Pakistan and Afghanistan leaving ground to Iran, India and China.
Factors affecting smooth
implementation of APTTA 2010
 Trust Deficit between Pakistan, Afghanistan
 Prevailing security situation in Afghanistan
 Uncertain/Unstable policies of Pak, Afghan govts/Lack of stable and
sustainable policies of Pak, Afghan govts
 Border closures as counter-reactions in the wake of security or terrorist
incidents on both sides of the border
 Requirement of unnecessary and hard-to-get documentation for visa from
traders of Pakistan and Afghanistan
Ground realities/First hand
experiences faced by Traders
 Overcharging by Shipping Companies
 Shipping companies demand higher security for 40-feet container (from PKR
600,000 to PKR 800,000 which are entitled for PKR150,000).
 After security deposit the process takes a month while refund takes another
25 days costing traders.
 Sometimes, the security deposit for container is manifold higher than the cost
of stock in container.
Ground realities/First hand
experiences faced by Traders
 Two Different Charges for APTTA and General Containers:
APTTA containers are charged rent up to USD100/day while general containers
are charged up to USD40/day.
 Rectification of Spelling etc:
Previously shipping companies carried-out rectifications in documentations or
spelling etc. before ship anchoring at port to avoid delays. However, now Custom
dept. has overtaken the responsibility which delays the process up to 12 days
increasing cost of trading/trader in shape of damrages and fare.
 Bonded Carrier (BC):
1. Registered BC deposit security deposit of PKR30 million to GOP for safe and sound
transportation of goods/stocks/containers to Afghanistan.
2. Registered BCs charge PKR170,000 per container however if any mishap or accident or
robbery or theft happens on route GOP deducts all fares, taxations etc. however traders
are left high and dry without any relief.
3. Subsequently legal procedure at police stations are carried-out in a prolonged, cumbersome
process wherein transporters takes his vehicle while stocks etc. are kept in custody by
police, the per day levied fare, demurrages are borne by trader without any of his fault.
4. BCs go scot-free without any responsibility for the stock damages which in fact shall be
responsible.
5. The procedure indicates that GOP is concerned only with its receivables and is
unconcerned/ignorant about losses of traders. This ignorant attitude of GOP can safely be
termed as ‘push factor’ for traders who are shifting to port Chabahar, Iran to avoid
overcharging and delays.
 Bureaucratic Procedure:

 Out-of-order scanning machines and other machinery fault cause delay of yet
another 10-days. Out-of-order scanner is the responsibility of GOP however
the cost of delay is borne by trader.
 After 10-days, custom authorities cause further delay on pretext of checking
stock. The checking destroys and distorts all packing leaving stock vulnerable.
Theft of stock is another harsh reality with no reparation or compensation.
 All the uncalled for/unjustified cost due to various pretexts are borne by
trader. However, the delays can be reduced by greasing the palms of
concerned authorities. The delaying tactics are caused to make money and
bribing.
 NLC charges PKR 2,500/ without any role in BCs
 LEAs charges up to PKR 30,000 from ring road Peshawar to Landi Kotal
 PA Khyber Agency charges PKR 3700
 Afghan govt. charges PKR 9000/truck
 Driver shifts these unjustified costs to trader increasing his cost of trade and
reducing his income to his disappointment.
 Tracker:
GOP has granted contracts of trackers to unprofessional monopolized companies
apparently on the basis of favoritism. The companies have false trackers and
tracker system without any efficiency. They determine vehicle location on mobile
phone instead of tracker and charging PKR7,000/vehicle just for no service.
The tracker contract shall be granted on merit to genuinely professional
companies for exact delivery of required services.
 APTTA Revival:
1. FBR SRO-101 disallowing ‘loose cargo’ is also one of the reasons for delayed trade under
APTTA.
2. Argument offered against ‘loose cargo’ is that it will prevent theft and looting without
verification of number of theft cases since 1965 till 2010.
3. SRO-101 causes greatest financial loss to Pakistan Railways (PR) and NLC.
4. Another loss is that PR and NLC had fixed freight rates and working as organizations which
private truckers keep raising freight rates whimsically without any check or control by any
authority leading to increase in trade cost to traders.
5. Authorities deliberately have ignored and rendered Pakistan Railways and NLC inefficient
and dysfunctional to benefit BCs owned by their blue-eyed fellows.
6. Under Geneva Convention traders are allowed to import goods as per their financial
capacity i.e. less than a container in loose cargo, however this fundamental right is denied
under APTTA – 2010.
Potentials for enhancing Pak - Afghan
bilateral trade

 Pakistan should revive its cement exports to Afghanistan that witnessed a

massive decline and unannounced ban on cement export by Afghan govt.
 Pakistan can look for providing expertise and resources to the growing Afghan
services sector.
 Allowing, facilitating Afghanistan to join CPEC improving its trade and
investment
 Dawn News reported that grapes and pomegranate exports significantly
suffered due to frequent closure of Pakistan- Afghanistan border. It added
that the sight of hundreds of long-haul trucks stuck along border towns had
become all too common in 2016, with tonnes of fruits and perishable items
going to. The report further added that in 2015, around 52,000 tonnes of
pomegranates were exported to Pakistan. In year 2016 exports dropped to
15,000 tonnes, a small fraction of the total production.
 A media report cites an Afghani trader Haji Nasrullah Zahir that they were
ready and hoping to export up to 40,000 tonnes of grapes from Kandahar, but
Pakistan closed the gate for 17 days [in October], not allowing Afghan traders
to export their produce. He further added that this was not the first time that
border closures had happened. They had exactly the same issue in 2015
during harvest time. The Afghan Minister for Agriculture Mr. Asadullah Zamir
commented on the issue that Pakistan used security issues as pretext to
sabotage exports.
Chabahar Agreement

The three-nation transport and transit corridor pact between India, Iran and
Afghanistan was signed in Tehran on 23 May, 2016. The pact will open an
alternative trade route for Kabul, bypassing Pakistan.
Chabahar Agreement

It opens an alternative route to world markets for Afghanistan.

 •For India and Iran, it offers a strategic advantage as Pakistan has
restricted Afghanistan’s trade with India by not fulfilling the terms of a
previous agreement.
 •Importance of Chabahar: Alternative to Pakistani ports. Problems faced
with Pakistan due to political conflicts at times; erratic closing of borders
and creating obstacles to Afghan-India trade. Chabahar provides an
alternative and reduces dependence on Karachi port.
Conclusions and Policy Measures

 Effective Trade Policy should provide concrete measures in three principle areas
 To lower the transaction costs of trade,
 To increase competitiveness in world markets as a tool of economic growth and poverty
reduction,
 To minimize cross border trade hurdles
 Linking academia and industry to foster innovation driven economy
 Separating politics and trade (which is hard to achieve), Chinese international
trade a model to follow
 Minimizing regulatory hurdles including other trade measures
 Developing a favorable entrepreneurial ecosystem including improving on
intellectual property rights, institutional support and an integrated holistic
approach towards development of national trade