ASIABUSINESSOPINION

Integrated transit trade management system

By Myrah Qadeer Khan

Regional integration and intra-regional trade have played an important role in the economic prosperity of many countries, the Association of Southern Asian Nations (ASEAN) being one such example. The first attempt to regulate and codify all the scattered provisions – under the auspices of trade between Pakistan and Afghanistan in 1965, when Pakistan and Afghanistan signed a bilateral Transit Treaty. The treaty recognized the right of Afghanistan to access to seaports of Pakistan, but did not address Pakistan’s access to Central Asia through the territory of Afghanistan (Analysis of Afghanistan Pakistan Transit Trade Agreement, May 2014).

In spite of the bilateral Afghanistan Transit Trade Agreement (ATTA, 1965), Pakistani stakeholders still held the perception that the extension of transit facility to Afghanistan was being used for unauthorized trade, causing injury to the domestic industry and loss of revenue. Negotiations between Pakistan and Afghanistan on a new transit treaty commenced in 2008 after visiting a delegation from Afghanistan tabled a draft text for Pakistan’s consideration. The text of the Agreement was prepared by the World Bank’s consultants.

A significant concern regarding Afghan imports transiting through Pakistan has been the issue of unauthorized trade. Unauthorized trade could occur as (i) transit diversion, whereby goods in transit to Afghanistan are diverted in Pakistan for consumption/sale; and (ii) transit goods intended for Afghanistan brought back to Pakistan across the porous border after physically entering Afghanistan.

There are currently five security levels under Afghan Pakistan Transit Trade Agreement:

  • Insurance Guarantees
  • Tracking devices
  • Bank Guarantee for vehicles
  • Bonded Carrier license
  • Container security deposits

Afghanistan objected to the black list for transiting certain goods (e.g. Tobacco, spare parts, batteries) through Pakistan in light of various measures applied by Pakistan on transit trade including insurance guarantee, cross-border certificate, tracking devices, and bonded carriers. The Pakistan delegation agreed to look into this matter (Afghanistan-Pakistan Transit Trade Coordination, October 8-9 2013) .

It was pointed out that transit goods to Afghanistan are going from Pakistan to Iran due to lack of infrastructure at transit points in Pakistan. The project of Integrated Transit Trade Management System would make Pakistan a hub of transit. Steering committee on integrated transit trade management system in 3rd meeting chaired by finance minister senator Mohammad Ishaq Dar discussed and approved broad contours of the Land port Authority which is to overcome all the cross border movements of some goods and people.

The potential of transit trade through Pakistan warrants immediate attention of the government to put in place  a robust and efficient transit trade management system that is capable of providing maximum facilitation to Pakistan’s trading partners as well as countering the threat of illegal trade by strengthening custom control.

To achieve its goals of better connectivity with neighboring countries and expansion of trade links, the government has announced the initiative of economic corridor which aims to build a high quality modern expressway linking Gwadar with Kashgar as a modern equivalent of ancient silk route. The Economic Corridor will open up countless economic opportunities for Pakistan from China to Central Asia. In addition to this, Afghan government has been signed to connect Pakistan with Afghanistan through a reliable rail and road network. Also, the government realizes that future economic growth depends on the development and modernization of transport and logistics infrastructure. It is the government’s vision to develop transport corridors that open up new areas, facilitate trade and give benefits for maximum people for uplifting socio-economic condition.

Below, describes the current situation with respect to these provisions; there are major delays in transit trade due to filing, poor infrastructure, and time consumed at borders to negotiate through the overcrowded border crossings. The Trade Project has initiated a dwell time study which is expected to be completed in May 2014. The study highlights the points of delay on the Transit route from the Port of Karachi to exit points. The challenges in implementing trade facilitation measures have resulted in diversion of transit trade to the ports of Iran.

I think, Pakistan must facilitate transit trade to bring back the traffic lost from Pakistani ports. Poor infrastructure at Customs border posts (Torkham and Chaman) also has a negative impact on the free flow of transit traffic. Efforts are being made to establish data exchange facilities between Pakistan and Afghan Customs authorities at Torkham and Chaman border crossings.

The railways have been a preferred choice for Afghan traders for the transit trade of their goods due to cost advantages; however, due to excessive delays and lack of space in railway transit, transit traffic has diverted to road transport. Roads accommodate a larger share of transit trade traffic. The up-gradation and proper maintenance of roads will ensure timely movement of goods.

This article provides a series of stand-alone and integrated solutions and recommendations related to ITTMS. These are mentioned below as following;

Recommendations

  • Improve custom and trade facilitation
  • Identify the major points of delay in transit and take necessary action to address the policy , infrastructure and logistics issue and ensure these are implemented within reasonable timeframes
  • Infrastructure development at the land border crossings of Torkham and Chaman will improve capacity so as to enable them to cater to the needs to overland traffic
  • Separate transit for pedestrians traffic and vehicle movement at border crossings points is recommended
  • It  is recommended that Pakistan continue the policy of following the private sector to develop and manage seaport facilities on long leases under BOT
  • Establishment of new dry ports is recommended
  • Under international transit system such as the TIR, containers are not checked en-route unless there are exceptional circumstances. In the case of Pakistan, goods are subject to multiple checks en-route. These excessive checks need to be curbed to expedite transit trade.
  • Security is a major concern highlighted by many stakeholders and impact transit trade. Better safety measures along the transit corridors will help strengthen confidence among traders and the stakeholders and encourage use of the ports of Pakistan.
  • There is a need for both the sides to notify the regulations facilitating the commercial presence of freight forwarders and transport operators in their respective territories.
  • Improve trade policy and export promotion
  • Enhance economic zones regime, focusing on areas of conflict and vulnerable populations
    Improve security of supply chains
  • Pakistan should improve the clearance procedures for perishable consignments at Chaman and Wagha to facilitate Afghan exports
  • The contracting parties should develop a module in their automated clearance system to monitor the transit of dangerous goods
  • There is a need to amend laws and regulations in the context of trade agreements
  • Provide infrastructure for developing better controls
  • Provide advance use of technology
  • Integrated use of technology
  • Swift custom operations
  • Provide transparent and corruption free system at  land ports with strong hold on the ground
  • It is recommended to introduce monitoring mechanism to match the International standards
  • Visit the sites to review the existing arrangements and identify the impediments for future up gradation of the land ports
  • Scanning facilities at Karachi port and Wagha border
  • Trained workforce
  • Check on delayed clearances is recommended

Myrah Qadeer Khan is an intern at the Economic Corridor Division of the Ministry of Foreign Affairs, Pakistan.

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