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August 7, 2020

Transshipment policy to boost economic activities soon

Top Story

August 7, 2020

ISLAMABAD: In a major development, the PTI government is about to introduce first-ever transshipment policy to stimulate the economic activities in Pakistan’s ports, particularly Gwadar Port, which will help generate not only job opportunities but will also help lower the freight charges of cargoes for exporters.

Transshipment is when cargo or a container is moved from one vessel to another while in transit to its final destination. And to this effect an excellent example of transshipment would be the transport from Durban to Manila because there is no direct connection between the two ports. And transshipment allows ports that would otherwise have limited maritime services because of their small hinterland to have a high connectivity to global maritime trade. This connectivity can be leveraged with the setting of logistics zones generating added value and anchoring the port's cargo base.

Adviser to Prime Minister on Commerce and Textile Mr Abdul Razak Dawood in a wide-ranging interview with The News on Thursday starting from the county’s domestic commerce to trade issues with important regional countries such as China, Afghanistan and Iran stated that commerce ministry is vigorously working on Pakistan’s first-ever transshipment policy that will help the Gwadar Port to become more functional and China can benefit the most from the Gwadar Port as it will be able to send its goods to Oman, Iraq and all Middle Eastern countries, Central Asian States by using the transshipment policy of Pakistan. He said that the transshipment policy will prove a game changer in terms of making Gwadar Port a hub of economic activities.

While referring to ports of Jebel Ali (Dubai), Salalah (Oman) and Singapore, Mr Dawood said that these ports provide the transshipment services which is why said ports are successful.

Pakistan’s transshipment policy will not only help earn foreign exchange but will generate many jobs through shipping agents and making warehouses fortransshipments in ports ensuring the relief in cargo freights for exporters.

Dawood said that the government will play the role of a facilitating regulator and provide a flexible environment to boost the transshipment industry as per the available potential. Keeping in view the importance of the strategic location of Pakistan, the adviser stated that Gwadar Port could act as a sister port of a number of other important ports in the region, which could complement each other in transshipment activities.

Dawood stressed that Pakistan could reach its true potential of transshipment when China, Afghanistan and other Central Asian economies were connected with Gwadar Port via the land route.

He also mentioned that trade under Afghan Transit Trade Agreement is being done through Gwadar Port which is why the burden on Port Qasim and KPT port has substantially reduced.

The adviser said that both Pakistan and China have opened the Khunjrab Pass on August 3, 2020 for resumption of trade on a temporary basis to facilitate the trucks carrying goods on both sides of the border got struck because of COVID-19. He also said the opening of Khunjrab Pass was also necessary to clear the backlog on trade apart from generating the economic activities in areas of Gilgit-Baltistan (GB). He said that trade under FTA-II with China started from January 1, 2020 which was hampered on account of COVID-19 has now kick started. He said the trade through Khunjrab Pass will also bring prosperity in the bordering areas of both the countries.

He said that trade with China through sea is also underway saying bilateral trade under FTA-II has been affected which can be gauged by trade figures. He said that in 1918-19, the imports from China was at $12.59 billion which reduced in 2019-20 to $11.965 billion while the export to China was at $1.914 billion which tumbled in 2019-20 to $1.734 billion.

Talking of trade with Afghanistan which is the captive market of Pakistan, Dawood said that the export of Pakistan to Afghanistan has massively dwindled which now stands at $857 million which was at $1.3 billion in 1918-19. It is pertinent to mention that in 2014-15, export to Afghanistan was at $1.875 billion. He said that Pakistan Chief of Army Staff General Qamar Javed Bajwa has recently held a successful meeting with President of Afghanistan Mr Ashraf Ghani at Kabul and he (Razak Dawood) will soon visit Kabul on the trade issues in the follow up meeting of COAS with Ashraf Ghani, top man of Afghanistan.

Dawood said during his visit to Kabul he would discuss with his counterpart trade issues under Afghan Transit Trade Agreement and bilateral trade. He said that under Afghanistan Transit Trade, there are two issues that Pakistan would highlight and plead; one is about placing restriction on qualities of export products and second one is depositing the transit funds with Pakistan’s authorities at border by Afghan importers.

He said that Pakistan wants to impose restriction on quantities of export products in Afghanistan arguing that if there is a factual need of one item in 1000 numbers in Afghanistan but that particular items is imported in 100,000 numbers and the remaining quantity is smuggled in Pakistan which is detrimental to Pakistan’s local industry and to avoid this practice, Pakistan wants to impose the restriction on quantities of products imported in Afghanistan under Afghan Transit Trade Agreement.

The adviser also said that Pakistan also wants Afghan importers under Afghan Transit Trade to deposit transit funds with Pakistan authorities at the border and when the trade transition is over, the transit fund will be refunded accordingly.

About bilateral trade, Dawood said that Kabul authorities want to develop an industrial base in Afghanistan and desires Pakistan to play its role. He said that Pakistan would help Kabul establish an Industrial base but will ensure the win-win situation ensuring the protection of industry already established in Peshawar and KP while helping Afghanistan.

Talking of trade with Iran, he said that Iran imports rice, mangoes and other things but formal trade through banking channels is not possible because of sanctions imposed on Iran. However the trade under the barter system is underway and the preferential trade Agreement (PTA) is not operational with Iran. The trade figures with Iran show that Pakistan exports have alarmingly reduced to $0.01 million in 2019-20 which was at $12.44 million in 2018-19. However, the imports from Iran have increased from $415.21 million in 2018-19 to $437.49 million in 2019-20.

Mentioning about the domestic economy which is over 90 percent of GDP and is currently at halt, he said that the government has opened up almost all sectors of the economy in a period starting from August 10 to October 1, but the challenge is how to create the demand of products at commercial and retail level.

He said that the government may further reduce taxes and give incentives to people in the shape of installments for buying the cars, motor bikes, refrigerators, fridges, ACs and other things and this is how the demand will be generated at domestic level. And lowering the interest rates on credit to private sector will also help stimulate stalled economic activities in the domestic economy.