ISLAMABAD-The Federation of Pakistan Chambers of Commerce and Industry’s (FPCCI) Businessmen Panel (BMP) has suggested the government to reduce the tariff rates on smuggling prone items to the lowest level to curb smuggling, as Afghanistan’s imports through Pakistan under the transit trade facility has gone up nearly two-thirds to $7.3 billion in the last fiscal year.
The FPCCI former president and Businessmen Panel (BMP) Chairman Mian Anjum Nisar observed that the total elimination of smuggling only through administrative measures at the borders was difficult and the remedy lies in reducing incentive for smuggling by reducing tariff rates. Smuggling is eating vitals of Pakistan economic fabrics and needs to be curbed through fiscal and administrative measures. It renders industrial products uncompetitive and discourages legal imports thus make colossal losses to the trade, industry and government exchequer.
Despite efforts of Federal Board of Revenue (FBR) with limited resources cannot control smuggling form boarders of Iran and Afghanistan. This will result in higher government revenue, provide impetus to local trade/ industry and generate employment opportunities. He said that elimination of smuggling, which is causing loss of billions of dollars to the national exchequer, could help reduce dependence on debts. Mian Anjum Nisar said that the government could save billions of dollars annually by eradicating the menace of smuggling. Then there would be no need for dependence on loans to meet the budget deficit, he added.
He said that smuggling had become a big threat to economic growth. The BMP chairman urged the authorities concerned to stop harassing traders and establish an effective monitoring system at borders to stop the illegal trade. He said that smuggled goods through the borders of Afghanistan, Iran China, India and the Afghan Transit Trade form a chunk of the informal economy. He said that high rate of taxes and duties give way to smuggling. Therefore, there was dire need to bring down the rate of duties and taxes especially on smuggling- prone items. There seems to be some correlation between the surge in transit trade and the decline in Pakistan’s purchases. Out of the increase of $2.8 billion in imports under the Afghan transit trade (ATT) in the previous fiscal year, about $2.3 billion was on account of goods that Pakistan did not import due to the balance of payments crisis, showed official statistics.
Afghanistan imported $7.3 billion worth of goods through Pakistan in fiscal year 2022-23, which ended in June this year. Imports were $2.8 billion higher than the preceding fiscal year. Pakistani authorities have run an analysis of its own imported goods that showed a double-digit dip during the previous fiscal year and compared with the increase in goods import under transit trade. It was revealed that some of those goods were imported under the ATT Agreement but then smuggled back to Pakistan.
Two days ago, the government took a raft of measures, including a complete ban on the import of goods under the transit deal, imposition of 10 percent fee on some other imports and a new condition of bank guarantee equal to duties and taxes in order to ensure that the goods imported by Afghanistan reached their final destination. The commerce ministry issued the Statutory Regulatory Order (SRO) and amended a 2004 order that governed the country’s import and export regime. It banned the import of tyres, black tea, nuts and dry fruits, fabrics, cosmetics, vacuum flasks and home appliances under ATT. An analysis of 20 major imports of Afghanistan showed that in FY22 Kabul spent $3.3 billion on their imports, which jumped to $5.6 billion, or 70 percent, in FY23. In the case of Pakistan, the import of those items dropped.
There was a 48 percent reduction in imports of synthetic fabric by Pakistan but imports of the product through ATT registered a 35 percent increase during the previous fiscal year, showed the official statistics. Similarly, Pakistan’s imports of electronic equipment decreased 62 percent but imports of those goods by Afghanistan increased 72 percent. Being a landlocked country, Afghanistan has the right to import goods for its consumption through Pakistan’s sea, air and land routes. However, various government studies and intelligence reports have proved the misuse of transit trade agreement. Afghanistan has never taken the responsibility of smuggling and rather blamed Pakistan for its lax enforcement measures. Afghanistan also does not accept Pakistan’s stance of mismatch between its consumption and imports. It insists that being a trading nation, it also imports goods for their sale to the landlocked Central Asian states.