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Stuck in transit

Mir Sediq Zaliq
Despite hopes that the stalled Afghanistan-Pakistan Transit Trade Agreement (APTTA) needed only some final adjustments and concessions for its implementation, 2011 closes with huge amounts of goods bound for…
28.12.2011  |  Kabul
Trade officials have for months been unable to unjam the terms of the signed transit agreement, leaving many vehicles stranded. (Photos: Sahar Majeed) 
Trade officials have for months been unable to unjam the terms of the signed transit agreement, leaving many vehicles stranded. (Photos: Sahar Majeed) 

Thousands of containers and trucks with goods belonging to Afghan traders have for months been backed up in Pakistani docks, trapped by the wrangling of two governments that already signed a new transit trade agreement.

As favourable as the main import route via Karachi is for Afghanistan, alternatives may have to be developed, Afghan Minister of Commerce and Industry Anwar-ul-Haq Ahadi said after the sides failed to break the deadlock at talks in December. 

“Currently, it is beneficial for us to import our commercial goods via Karachi. It is also beneficial for Pakistan. Pakistan makes money out of it,” Ahadi told media after the sixth conference on commercial cooperation between the neighbours. “We expect that Pakistan does not set harder conditions for us. If it does, Afghan traders would have to import their commercial goods via other routes, even if that costs them more.”

The minister, who in July signed the transit agreement with his Pakistani counterpart in the presence of US Secretary of State Hillary Clinton, said he would personally lead a delegation to the Iranian port of Chabahar to explore the alternate route for goods bound for Afghanistan. 

Anti-smuggling measures are stifling trade

Prior to the APTTA, Afghan convoys could carry commercial goods only as far as Peshawar. Under the agreement, Afghan convoys can go to and from Pakistan’s Wagah border-crossing with India, as well as its southern sea ports. However, things broke down with Islamabad’s imposition of a system of stiff security deposits on goods in transit, aimed at preventing rogue traders from selling the goods in Pakistan rather than taking them to their stated destination.

After talks in Islamabad in September, Ahadi said Pakistan had accepted a reduction of taxes on goods and that security deposits on shipments should be reduced. But until modifications to the agreement are formally approved by both governments, thousands of truckloads of goods in transit will remain trapped.

Afghan officials highlighted the Pakistani concerns, as well as the backlash from Afghan traders who can’t afford the high insurance to move goods through Pakistan.

“Pakistani officials say that when a certain commercial item is loaded on a truck in Karachi for Afghanistan, it does not reach Afghanistan, but is rather unloaded and sold in Pakistan without being taxed,” said Sayed Yahya Akhlaqi, the head of  transit facilitation at the Commerce and Industry Ministry.

Rogue traders offload Afghanistan-bound goods in Pakistan, prompting preventative measures that have snarled the route.

But the tax amount placed on Afghan trucks was too high, he added. “An Afghan trader who has a four-truck convoy of commercial goods must pay one hundred per cent customs tax for every truck to a bank. Should any of those trucks get lost in Pakistan, Pakistan can get the money from the bank.”

If Afghan traders have more than four trucks, they have to pay deposits of twenty-five per cent to specific Pakistani banks: Habib Bank, Al-Falah Bank, Standard Charter and National Bank.

Afghan businesses are feeling the pinch, said Azarakhsh Hafezi, head of the International Relations Department of the International Chamber of Commerce of Afghanistan: “The insurance and the bank deposits for trucks are a huge burden on Afghan traders and affect their transaction ability.”

A major problem is that no Afghan insurance companies are willing to issue the required policies, said Akhlaqi. Only one Pakistani company will insure the Afghan loads, but rates are prohibitively high.

“Insuring commercial goods is a new thing and it is not what insurance companies commonly insure,” Akhlaqi said.

Not a complete standstill

Talks in September yielded some progress, Akhlaqi said. While insurance companies wanted 1.8 per cent of the value of the load, the sides managed to agree on one per cent. And for more than four trucks, the bank deposit required by the Pakistani government was reduced to twenty-five percent of the customs value.

The trade and transit agreement, which replaces a bilateral trade agreement from 1965, now enables the broad transit of Afghan trucks. But old-standing frictions still hamper progress. Akhlaki specifically blamed the Pakistani cabinet for the hold-up in implementation. “The government of Pakistan lacks goodwill and is not willing to be accountable,” he said.

Transit-related problems are still mainly political, say experts

According to the Afghan ministry, annual bilateral trade is worth four billion US dollars, so both sides have much to lose if the problems are not resolved. But apart from smuggling and tax-evasion concerns, experts point to overriding fluctuations in the political climate.

“If political relations between the two countries are good, there are fewer problems with regard to trade and transit,” said economist Azarakhsh Hafezi. “But if not, trade relations sour and problems deepen.”

“The insurance and the bank deposits for trucks are a huge burden on Afghan traders and affect their transaction ability.”

Hafezi said the current freeze in progress on APTTA can likely be traced to two events: the September assassination of Afghanistan’s top peace envoy Burhanuddin Rabbani, attributed to the Haqqani faction that has sanctuaries in Pakistan, and the November killing of two dozen Pakistrani soldiers on the border by NATO forces.

Ghulam Mohammad Eelaqi, a former Afghan deputy commerce minister, said Pakistani officials consistently blurred the distinction between commercial and political: “As long as this mentality does not change, Afghan traders will confront these problems.”

But he also noted that there are influential business groups in Pakistan that do not want the transit agreement to be implemented. “There are some Pakistani transit companies that carry Afghan traders’ commercial goods. If the transit agreement between Afghanistan and Pakistan is fully implemented, Afghan transit companies would also be able to carry commercial goods of Afghan traders.”

No immediate alternative to Pakistan

Despite the Afghan commerce minister's warning that other routes will be cultivated, this is easier said than done. Although Afghanistan signed a transit agreement with Iran, allowing it to use Chabahar port, this too is still experiencing problems in its terms.

Looking north, there is also no smooth ride for goods to Afghanistan that way either. For example, Turkmenistan stops wagons carrying Afghan traders’ gas, while Afghan traders face problems getting visas to Tajikistan.