Monday, October 30, 2017

‘Afghan transit trade will have to shift to Gwadar’

 BR RESEARCH  OCT 30TH, 2017 0 

Muhammad Zubair Motiwala is an eminent industrialist, businessman and social worker. He is a Founder Chairman of Pakistan-Afghanistan Joint Chamber of Commerce & Industry (PAJCCI), Managing Director of Diamond Textile (Pvt.) Ltd. and Director Motiwala Industries. He was the focal person from Pakistan during rounds of Afghanistan Pakistan Transit Trade Talks specifically focused on finalization of APTTA 2010. At the same forum, an understanding was developed to form Pakistan-Afghanistan Joint Chamber of Commerce and Industry to address and resolve the issues of informal trade.

 Following are the edited excerpts of a conversation between BR Research and Mr. Motiwala.

BR Research: Are there any plans to shift Afghan Transit Trade to Gwadar port, especially in view of the recent construction of the Turbat-Quetta road?

Zubair Motiwala: The government is very clear. We have given this port to the Chinese. If we shift transit trade to Gwadar, all the income and benefits will go the Chinese. The utilization of the port is their domain. They kind of own the plot for a certain period of time.

But one thing is for sure that the Afghans do want trade to shift to Gwadar. And I think there is no harm. The current ports’ conditions cause a lot of problems and transit trade containers are problematic containers. We have an agreement to examine 5 percent and scan 20 percent of the containers. This process causes delays so much that 40 percent of our business has gone to Chabahar, Iran. There are also lots of other problems like the borders closing down, etc. Ultimately, I think the trade will have to shift to Gwadar.

BRR: Has there been any working on this?

ZM: The Afghans and clearing agents are in the process of meeting with the Chinese. They are still in the process of finalizing tariffs such as port charges, damages’ charges, and other charges. Once this is done and the road is fully complete, the shift will be made speedily because it is in our mutual interest as that route is shorter.

We are in touch with both the authorities. A few days ago, we had a notable meeting with people from the Ministry of Commerce, FBR, Ministry of Industries, Port Qasim etc. on transit trade and export to Afghanistan.

BRR: How soon do you see this happening, if it does?

 ZM: Not in this year I believe; I think it will go on to the next year.

BRR: Are there any requirements for Gwadar?

ZM: No. Port Qasim is a port of Pakistan and Gwadar is a port of Pakistan. Afghanistan is a land locked country; there are 44 land locked countries. There is nothing new about it. We have exaggerated the issue. It’s not a problem; I believe it’s a blessing. We gain so many benefits from transit trade. We get payment for port and storage utilization, there are truck drivers and hotels on the route. There are umpteen numbers of benefits for Pakistan and for Afghanistan.

BRR: Has the implementation of APTTA decreased nefarious activities like smuggling and under-invoicing?

ZMWe have tried to find IT solutions to it. There are chips placed on containers as well as the truck. Their route is followed and Google comes into play. As a result, there has been a remarkable improvement, but it is still going on.

We have tried to implement models that are practiced in the entire world. And the best model was Nepal-India. They have the agreement with Her Majesty acting as a guarantor. For APTTA, US is somewhat participating as a mediator.

The Nepal-India agreement has some penal clauses that we have tried to implement. Our fear is that the manufacturing sector in Pakistan can get the injury. The industry suffers and the traders who pay duties suffer. The minimum incidence on any goods imported is not less than 40 percent with sales tax, withholding tax etc. That’s a huge difference between a normal importer and someone who is smuggling. Anything that has a difference of 20 percent is viable for them since the expenditure of bribes and other stuff is about 8-12 percent.

BRR: How badly has smuggling through transit trade impacted Pakistan’s economy?

ZM: Let me give you an example. We had assembly plants of Sony, Sharp and other TV producers. They all closed down because all TV sets were coming from Afghanistan. We tabulated the numbers and told the Afghans that the number of TVs imported by them exceeded their population. Tea is the biggest problem for Pakistan because the Afghans do not drink black tea, but still thousands of tons of tea is coming in and being re-routed to Pakistan.

BRR: Other than IT solutions, what other measures have been taken to combat smuggling?

ZM: There are penal actions such as if the goods are found stored in Pakistan, the penalty is the amount of duty plus the variance between the retail price and the cost. Then there should be quantitative restrictions. For example, Nepal can import 100,000 tonnes of potatoes a year through India. If they exceed this, then they have to pay the normal duty. We are fighting to have such quantitative restrictions imposed under APTTA as well.

BRR: Do the problems with the Frontier Corps still exist in the form of bribes?

ZM: Everything still exists. On that front, through IT and other changes, there has been improvement but it has not been significant.

BRR: You mentioned trade through Chabahar has increased. Has that come at a cost to Pakistan?

ZM: Of course. Iran is charging very minimal rates for port usage. Afghanistan is importing from the world through Iran. Afghanistan’s imports have increased but Pakistan’s exports to Afghanistan have decreased. And that share by and large has been taken by India through Iran.

BRR: If you were to put one reason to that, what would it be?

ZM: Our enmity with India. They are contesting Pakistan everywhere to finish us economically. India is selling at a cheaper price, they are giving air freight subsidy, they are subsiding travel of traders, and we do not have the resources to do all that.

BRR: Do you see America’s role in all this?

 ZM: I am apolitical, but we can see that this region is like a class and they want to make India the monitor of the class. Now it is a stated policy, but we have been feeling this for a long time that they feel that India should control the entire region. But China will never like it so there will be a problem with two powers. And I am very fearful that Pakistan may suffer the lashes of these things.

BRR: What is your take on Afghanistan wanting to allow imports from India through Wagah?

ZM: I am totally opposed to this. The first reason is that we have to have better bilateral relations; then only we can enter into trilateral relations. Our bilateral relations with Afghans are not very good and everyone knows our relations with India. So first we have to improve on bilateral relations and then we can talk about trilateral relations

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