PkRevenue.com – The Institute of Chartered Accountants of Pakistan (ICAP) has proposed a series of measures to be incorporated in the upcoming budget for 2024-25.
These proposals aim to safeguard the China-Pakistan Economic Corridor (CPEC) from the clutches of smuggling and illegal trade activities.
CPEC: A Gateway with Risks
ICAP acknowledges CPEC’s potential as a driver of economic regionalization in the globalized world. It highlights the project’s ability to strengthen economic ties between Pakistan and China, with positive spillover effects for the entire region. However, ICAP also warns of potential risks similar to those experienced with the Afghan Transit Trade, where smuggling and illegal activities have plagued operations.
Three Pillars for Success
ICAP emphasizes three critical factors for CPEC’s success:
1. Robust Security Arrangements: Ensuring a secure environment is paramount for the smooth functioning of CPEC.
2. Advanced Infrastructure Development: Investments in infrastructure development are crucial to facilitate trade flows.
3. Efficient E-based Customs Operations: Effective customs procedures are essential to prevent smuggling and illegal activities.
Focus on Strengthening Customs Operations
While efforts are underway to address security and infrastructure needs, ICAP argues that customs operations have received inadequate attention. To address this gap, ICAP proposes a multi-pronged approach:
• Border and Port Scanners: Installing scanners at Pak-China borders and Gwadar/Karachi ports would enable thorough container inspections, verifying contents and deterring misuse.
• Synchronized Scanning: Scanning goods at the Chinese border and upon arrival at Gwadar/Karachi ports would create a verification trail, ensuring goods haven’t been tampered with in transit.
• Real-time Data Sharing: Chinese exporters/importers using China’s WeBOC system should grant Pakistan access to verify cleared containers. Containers not cleared within a timeframe or those in transit for extended periods would be flagged for scrutiny.
• Export Controls: Goods exported from China should be shipped in pre-loaded containers with verifiable evidence of booking and Bill of Lading documents.
• Regular Monitoring: Establishing customs offices every 200 km along CPEC routes would enable effective monitoring of transit trade movements.
Enhancing Cargo Tracking and Security
ICAP proposes e-tagging of cargo vehicles for real-time tracking:
• Automated Data Entry: Upon crossing designated customs checkpoints, cargo data (location, goods description) would be automatically uploaded into the system.
• Real-time Monitoring: Both entry and exit port customs offices would have access to online cargo movement data. Containers would be sealed at entry points and de-sealed only at exit points, ensuring cargo security and preventing pilferage.
• Electronic Data Interchange (EDI): ICAP calls for establishing an EDI system between Pakistan and China for real-time reconciliation of export/import data related to CPEC cargo.
• Import Payment Verification: For imports, evidence of payment by Chinese importers to Pakistani suppliers and submission of bank guarantees for government levies would be required before cargo release.
Lessons from Afghan Transit Trade
ICAP emphasizes the importance of learning from the challenges faced in Afghan Transit Trade, which has been plagued by issues like misdeclarations, delays, and inadequate monitoring, leading to smuggling and pilferage. The proposed measures aim to prevent a similar scenario in CPEC.
Safeguarding CPEC’s Integrity
The free movement of transit cargo necessitates robust customs facilitation and monitoring at entry/exit points and along transit routes. Establishing special economic zones and free zones within CPEC also requires efficient customs procedures to prevent pilferage and ensure duty/tax benefits are not misused. Effective measures to combat smuggling are crucial to protect Pakistani industries and duty-paid goods from unfair competition arising from smuggled Chinese goods.
By implementing ICAP’s proposed measures, Pakistan can create a robust and secure environment for CPEC’s operations, ultimately fostering economic growth and regional integration.
