Transit, Regional Connectivity and
Integrated Border Management:
The Way Forward
Regional Conference on Strengthening
Transport Connectivity and Trade Facilitation
December 10, 2013
TradeProject
Project
Trade
Agenda
• Background: Pakistan’s Strategic Location
• Pakistan’s Regional Framework
• Regional Connectivity and Transit Issues – Strengths, Weaknesses,
Opportunities, and Threats (SWOT) Analysis
• Way Forward: Improving Regional Connectivity
o
o
o
o
o
Grant Most Favored Nation (MFN) Status to India
Implement TIR Convention
New Trade Routes
Trade Facilitation
Building Supply Chains
• Conclusion
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Pakistan’s Strategic Location:
Benefiting from Transit Trade
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Pakistan’s Regional Framework
• SAFTA: South Asia Free Trade Agreement (2006)
• CAREC: Central Asia Regional Economic Cooperation Program (2010)
• APTTA: Afghanistan-Pakistan Transit Trade Agreement (2010)
• QTTA: Quadrilateral Traffic in Transit Agreement among Pakistan,
China, Kyrgyzstan and Kazakhstan (2004)
• ECOTTA: Economic Cooperation Organization Trade Agreement (1998)
• CBTA: Cross-Border Transport Agreement among Kyrgyzstan,
Tajikistan, and Afghanistan (Pakistan has observer status)
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Regional Connectivity and Transit Issues:
SWOT Analysis (I)
Strengths
• Strategic location provides the shortest route to seaports
• Three seaports open throughout the year
• Road connectivity to the seaports is in reasonable condition
Weaknesses
• None of the transit agreements is fully functional
• APTTA partially functional but trade substantially reduced
• Pakistan has not acceded to TIR Convention
• Security concerns and political uncertainty
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Regional Connectivity and Transit Issues:
SWOT Analysis (II)
Opportunities
• Pakistan borders the two fastest growing economies in the world: India
and China
• Pakistan’s western neighbors are rich in energy resources
• China’s Western Provinces (bordering Pakistan) need a link to the
nearest seaports
• Donors investing in CAREC corridors
• Current Government of Pakistan keen on increasing regional
connectivity
Threats
• Transit trade not viewed favorably by general public
• Vested interests prevent full utilization of Pakistan’s potential
• Local industry may oppose due to perceived increase in smuggling
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Way Forward: Improving Regional
Connectivity
• Grant MFN Status to India
• Implement TIR Convention
• Open New Trade Routes
o Provide links with inland dry ports
• Trade Facilitation
o Accelerate implementation of the World Trade Organization (WTO)
Agreement on Trade Facilitation/Revised Kyoto Convention (RKC)
o Negotiate/fully implement bilateral transit agreements
o Integrated Border Management Systems
• Build Supply Chains
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Implementing the TIR Convention
• Pakistan is the only ECOTTA country (of 10 total) not yet implementing
the TIR system
• Its implementation was approved in 2002 but is still pending
• Implementing TIR involves the following:
o National guarantee associations and customs authorities control access
o Goods accompanied by TIR Carnet, which serves as the control document
in the countries of departure, transit, and destination
o Duties and taxes covered by an internationally valid guarantee
o Goods travel in approved secure vehicles and containers
o Customs control measures taken in country of departure are accepted by the
countries of transit and destination
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Open New Trade Routes
•
At present only
(A) Wagah – Attari is open for limited trade
•
Other land crossings that can easily be re-opened:
(B) Lahore – Patti (Burki road)
(C) Kasur – Ferozpur (Ganda Singh)
(D) Sahiwal – Fazilka (linking Southern Punjab)
(E) Munabao – Khokhrapar rail (linking Sind)
•
Open direct shipping routes
o
Karachi-Mumbai
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Trade Facilitation: RKC
Adopting the following measures would significantly increase connectivity
and cut trading costs:
•
•
•
•
•
Risk management
Streamlined border procedures
Harmonization and simplification of documents
Automated processes
Information availability
RKC: To achieve these objectives, full compliance is necessary
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Trade Facilitation vs. Tariff Reduction
Increase in Global Trade and GDP (USD $ trillion)
2.6
(USD $ trillion)
Trade
GDP
1.6
1.5
4.7%
1.1
1.0
14.5%
2.6%
9.4%
0.4
10.1%
0.7%
0
Ambitious scenario
Countries improve trade
facilitation halfway to global
best practice
Modest scenario
Countries improve trade
facilitation halfway to
regional best practice
Tariffs
All tariffs removed globally
Note: Based on export value; includes only the effect of “Border Administration” and “Telecommunication and Transport Infrastructure”
Source: Ferrantino, Geiger and Tsigas, The Benefits of Trade Facilitation – A Modelling Exercise; World Economic Forum (2007
baseline)
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Trade Facilitation: Integrated Border
Management
Cooperation at the National Level:
• Grouping border management-related functions in a single body
• Introduce a layer of coordinated governance (e.g. joint services or
groups) while relevant organizations continue to function separately
Cross-border Dimension:
• Establish cross-border cooperation among Customs authorities
• Establish joint controls, align opening hours of border stations and the
construction of juxtaposed Customs offices
• Advance electronic information on cargo and container shipments
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Integrated Border Management: Cross-border
Movement of Trucks
• Joint scanning and weighing could reduce equipment needed
• Allowing cross-border movement of trucks to the nearest dry-ports could
reduce the cost of building infrastructure at ports
Source: Wagah - Attari Border, tribuneindia.com
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Source: Wagah - Attari border, dawn.com
Supply Chains: Surgical Goods
Pakistan’s Surgical Goods Cost Margins
Increasing Exports through Partnerships
• Sialkot produces high quality surgical
goods
•
•
•
100%
Raw materials (35.0%)
Sialkot’s exports remain low (USD $300
million in 2012)
80%
Cheaper raw-materials and coordination
with India can increase exports
substantially
40%
Miling & machining (5.9%)
20%
Rough grinding (4.6%)
Forging & shaping (1.5%)
60%
0%
Similar examples in sporting goods from
Sialkot
(USD $million)
Pakistan’s Top 10 Countries for Surgical Goods Exports (USD $ million)
80
70
60
50
40
30
20
10
-
Top ten destinations
Other
Asia 6%
9%
67
29
US
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EU
44%
US
41%
26
Germany
UK
11
6
5
France
Italy
India
5
Brazil
5
China
Source: Surgical Instruments Manufacturers Association of Pakistan (2012)
4
Australia
4
Japan
Supply Chains: Plastics and Chemicals
Plastics
• Pakistan imports over USD $1 billion of Polyethylene (300kt) and Polypropylene (300kt)
• Less than 10% are imported from India, whose petrochemical plants are located near
Lahore
• Most plastic manufacturing units (over 400) are located near Lahore
• India can import cheaper, high quality plastic goods such as water coolers, bottles and
parts from Pakistan
Polyethylene Granules
Plastic goods (e.g. water coolers)
PET (Resin)
Chemicals
• Pakistan has surplus capacity for soda ash and caustic soda
o India currently imports these products from more expensive sources
• Huge demand in Pakistan for dyes, colouring materials and organic chemicals
Dyes and coloring materials
Textiles
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Conclusion
• Pakistan needs to redesign its transit trade policies
• Five big steps needed:
o
o
o
o
Grant MFN Status to India
Accession to TIR Convention
Open New Trade Routes
Trade Facilitation:
– Implement recent RKC/WTO Agreement on Trade Facilitation
– Integrated Border Management Systems
o Reduce Taxes on International Trade
• Improving regional connectivity may not require major resources
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Thank You
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