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TRADE-PAKISTAN: Smugglers Profit From Landlocked Afghanistan

Ashfaq Yusufzai

PESHAWAR, Aug 4 2007 (IPS) - Taking advantage of the United Nations-facilitated Afghan Transit Trade Agreement (ATTA), a massive contraband trade has grown around goods imported into Afghanistan and smuggled back into the markets of this frontier town in Pakistan.

Mohammad Fida, owner of a huge shopping complex in Peshawar’s famous Kharkhano Market is candid. “Smuggling is not considered an unlawful activity here. Thousands of shops in Pakistan sells goods brought clandestinely from Afghanistan,” he says disarmingly.

Officially, Pakistan has a bilateral trade of two billion US dollars with Afghanistan. But the volume of clandestine business between the two countries is estimated to be more than ten billion dollars every year.

The Kharkhano market established in 1985 has 4,500 shops, owned by both Pakistani and Afghan traders. Afghanistan has been riven with conflict for close to three decades. Millions of Afghan refugees have made Peshawar their home.

The shops do booming business. Everything from electronic goods to air conditioners, clothes, cosmetics, automobile spares, even tyres, are from outside Pakistan. Here prices are cheaper than anywhere else, attracting shoppers from all over the country.

The ATTA enables landlocked Afghanistan to import goods through ports in Pakistan without paying customs duty. It was signed in 1965 under a U.N. agreement to protect the interests of landlocked nations.

Ever since, smugglers have prospered on the booming trade in clandestine goods, transported back into Pakistan on the back of donkeys, even camels, through hard mountainous routes.

“Pakistan is losing more than two billion dollars in revenue every year due to the smuggling. Afghanistan has a small market, but the volume of goods imported far outweighs local demand there,” explains Mohammad Ali Khan, a business reporter with Pakistan’s oldest newspaper, Dawn.

During the Taliban regime, Pakistan cracked down on the illegal trade by issuing a list of 24 items that could not be imported from Afghanistan under the ATTA. The items included television sets and cosmetics, both banned by the Taliban militia.

“Yet imported items were arriving here in such huge quantities that Pakistani authorities found it hard to cope with the situation,” said Ibrahim Shinwari, an official in the traders’ association in Karkhano Market. Items like wheat, flour, ghee, oil, timber and cement were smuggled in from Afghanistan, he told IPS.

Both Pakistani and Afghanistan’s authorities profited from the huge bribes paid out to ensure the illegal trade continued without interruption.

The goods flooding Pakistan are not only imports into Afghanistan under the ATTA, but smuggled items from China, Iran and the Central Asian states.

“As there are no manufacturing units in Afghanistan, it is dependent on its neighbours,” explains Shinwari.

The Ministry of Commerce in Islamabad has calculated the official volume of trade between Pakistan and Afghanistan at 71 percent. Traders here, including Shinwari, rubbish the claim as highly inflated.

He points out that Pakistan’s official trade policy for 2007-08 has little to offer to help increase exports to Afghanistan. He predicts that it will be difficult to achieve the ambitious trade target of 19.2 billion dollars, including 2 billion dollars with Afghanistan.

Pakistan has emerged as a major trading partner of Afghanistan during the post-war reconstruction phase because of its geographical, ethnic and cultural advantages.

Until the Taliban were ousted from Kabul by U.S.-led troops in end-2001, more than 3.5 million Afghans lived in rural and urban Pakistan for three decades making them familiar with Pakistani consumer goods.

The bilateral trade climbed up from 492 million dollars in 2003-04 to 1.63 billion dollars in the previous financial year, mainly because of exports.

But due to many problems, exports have witnessed a decline of almost 400 million dollars in 2006-07 from the previous year. Pakistani manufacturers have been losing out to mainly Iranian and Indian competitors.

Liaqat Ahmad Khan, president of the Sarhad Chamber of Commerce and Industry (SCCI), in Peshawar, says the government claims that Pakistan is located at the doorstep of Central Asia, but in reality it has never focused on the benefits of geographical proximity to these emerging markets.

The Federal Board of Revenue on Dec. 30, 2004, notified the opening of customs stations at nine different routes to facilitate trade. But that has not been formalised because of lack of facilities, poor road infrastructure and above all security concerns in the tribal belt. However, the informal trade conducted by smugglers is brisk.

In his trade policy speech, Commerce Minister Humayun Akhtar attributed the decrease of almost 400 million dollars in exports to Afghanistan to reduced demands of petroleum, leather and rice, as flow of other consumer goods is normal.

Numan Wazir, president of the Industrialists Association Peshawar, says trade and industry in the NWFP is mostly focused on the consumer markets in Afghanistan, but the government’s inability to give incentives is cramping business.

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