In a revealing assessment by the Pakistan Business Council (PBC), the misuse of the Afghan Transit Trade (ATT) agreement along with unchecked smuggling from Iran has been spotlighted as significant drains on Pakistan’s economy.
These activities not only undermine local industries but also significantly reduce the Federal Board of Revenue’s (FBR) ability to collect needed funds.
The ATT, an arrangement intended to facilitate the movement of goods to landlocked Afghanistan through Pakistan, has been exploited beyond its original purpose. This misuse allows goods, originally destined for Afghanistan, to illegally re-enter and saturate the Pakistani market, thereby undercutting local manufacturers and evading import taxes. According to the PBC report, this not only impacts the competitiveness of Pakistani businesses but also deprives the government of crucial revenue streams.
Concurrently, the extensive smuggling of goods from Iran exacerbates the situation. Products such as petroleum and various consumer goods enter the Pakistani market through porous borders, without any form of official oversight or taxation. This illegal influx has created a parallel economy where smuggled goods significantly undercut the prices of locally produced items, leading to substantial losses for the state and legitimate business sectors.
To address these critical issues, the PBC has proposed several stringent measures. Firstly, it suggests that all goods moving under the ATT should be subjected to Pakistani duties and taxes, which should then be transferred to the Afghan government. This would ensure that while Afghanistan can benefit from essential imports, Pakistan does not lose out on tax revenue. Furthermore, it recommends that these payments be made in USD and deposited directly with the State Bank of Pakistan, thereby safeguarding the economic interests of Pakistan.
Additionally, the PBC advises implementing quantitative restrictions on goods trafficked under the ATT, based on realistic assessments of Afghan consumption needs. This measure aims to prevent the oversupply of goods that might lead to illegal re-entry into the Pakistani market.
In the face of ongoing economic challenges, the Pakistani government has already placed several restrictions on imports under the ATT. However, the PBC stresses that any future relaxation of these measures should be carefully negotiated and agreed upon with the Afghan government to ensure robust implementation and adherence.
Beyond ATT-related issues, the PBC report urges the Pakistani government to actively engage with Iran to mitigate the smuggling problem. By strengthening border controls and enhancing surveillance, the government can better regulate the flow of goods, thereby protecting its economic interests.
The PBC firmly believes that by adopting these proposed measures, Pakistan can effectively curb these economic leakages. This would not only shore up the revenues of the FBR but also provide a more equitable playing field for Pakistan’s formal economic sectors, which are crucial for the country’s overall economic stability and growth.
The revelations and recommendations by the PBC underscore a critical juncture for Pakistan’s trade and economic policies. Effective management of the ATT and stringent countermeasures against smuggling are essential if Pakistan is to protect its economic sovereignty and foster a healthier business environment for all stakeholders involved.
