FTZs on border with Kabul not feasible: Lack of security
By Sabihuddin Ghausi
KARACHI, March 10: The idea of setting up free trade zones FTZ) by Pakistan and Afghanistan in border areas is bound to be a non-starter for want of security, a proper work environment, basic infrastructure facilities, and a perpetual insulation from all social, economic and political currents of the country and the adjoining areas.
“Environment at Wana, Bajaur and other tribal areas on Pakistan-Afghan border are not hospitable for investment,” a big garment manufacturer and exporter remarked. He is also actively involved in manufacturing and export of garments in one of the four Qualified Economic Zones (QEZs) on Jordan-Israel border. He asked a question, “Who will guarantee the security of investment, protection of the lives of supervisors and workers in factories and offices and safe passage of products from the tribal areas?”
For more than five decades, the Pashtun tribal belt has remained a safe sanctuary for the criminals and where women are not allowed, till this day, access to education and even to vote in elections.
His views were endorsed by many business leaders in Karachi, who recalled that way back in 1995, the PPP government headed by Ms Benazir Bhutto, created a tax free industrial zone at Gadoon Amazai in the NWFP tribal belt to provide an alternate gainful employment to those who were involved in poppy cultivation.
“The tax concessions were massively abused by the businessmen and the workers had to be scouted in areas other than Gadoon,” a leader of Karachi Chamber of Commerce and Industry recalled while pointing out that the Gadoon experience failed.
Among other points, US President Bush in his brief stay at Islamabad last week, made a casual reference to the setting up of qualified economic zones (QEZ) in Pakistan-Afghanistan border areas to provide employment opportunities to the tribal people. Bush promised a tax free access to the products of these QEZs in the American market.
Taking a cue from this casual reference of President Bush, Federal Interior Minister Aftab Sherpao was more than categorical and firm on Thursday to declare that Pakistan and Afghanistan are all set to create such free zones in the border areas.
Amjad Rashid, a Karachi based global food merchant, who is actively engaged in the relief and rehabilitation work at Iraq, Afghanistan and now in Kashmir, observed on Thursday that the lady Economic Counsellor in the US embassy in Islamabad was “non committal” on issue of her government’s role in setting up such trade zones on Pakistan Afghanistan border.
In a suggestive note to Prime Minister Shaukat Aziz as President Bush was due to arrive in Islamabad, Amjad Rashid urged the government to explore the possibility of getting American financial support for setting up industries in Pakistan-Afghanistan border areas. The USA is understood to be giving assistance through various subsidiaries for setting up industries in Afghanistan.
He also suggested setting up of industrial projects under joint venture in border areas and their products should be given duty free access to the USA market as was being extend to industries in the QEZs in Israel Jordan areas.
Aziz Memon, a reputed business leader in Karachi, recalled that in December 2001, immediately after 9/11 incident, a senior US government functionary in Washington briefed him on QEZs scheme in Israel-Jordan border areas.
Under this scheme, the units mostly, textile and of garments, have been set up in the QEZs. The Israeli investors have 8 to 15 per cent financial stakes in these projects and employees are the Jordanians, mostly from the Palestine refugee camps.
The products of these industrial units are given duty free access to the American market, which gives 25 to 30 per cent edge to the exporters. This offsets the high production cost that has to be incurred because of the distant location from the source of raw material and inputs.
This scheme is said to have done wonders and contributed much in cooling down the rising tempers of the poverty ridden Palestinians. “Creating an economic inter-dependence between the two hostile nations for finding a solution to political problem is a time-tested and age old strategy of the Americans,” a senior business leader remarked.
Business sources in Karachi say that about a dozen Pakistani investors, mostly from Karachi, are actively involved in setting up and operating industrial units in the Jordan-Israel border areas. The products of these units are marked ‘Made in Israel’. Israel enjoys duty free entry in the USA market.
Businessmen in Karachi doubt if this American strategy can work effectively with Pakistan to normalize its relations with its two neighbours —Afghanistan and India. Pakistan remained a front-line state with Americans to counter Soviet Union presence in Kabul during the decade of eighties and now in de-settling of Talibans and the Taliban-led resistance against the Americans in Afghanistan. Since 1947, Pakistan never enjoyed cordial relationship with any Afghan government.
Out of sheer necessity, Afghanistan emerged as the growing trade partner of Pakistan in last few years. Pakistan’s exports to Afghanistan increased from $315.69 million in 2002-03 to about $493 million in 2003-04 and to about $748 million in 2004-05. Exports in first four months of the current fiscal year were at $333.66 million showing a rise of 127 per cent over exports in the corresponding period last year. Businessmen expected Pakistan’s exports to Afghanistan would exceed $1 billion mark.
But, recent political developments and particularly, the one in which the outbursts in Islamabad against Kabul has come from the top, is bound to give a setback to Pakistan-Afghanistan trade.
Traders see bitterness and tension on business front too, as India is keen to have an overland transit facility via Pakistan to Afghanistan and to the entire Central Asia. Pakistan and Afghanistan signed the transit trade agreement in 1965.
Businessmen fear that India could persuade Afghanistan to seek a verdict from the International Court of Justice on providing India a transit passage to Afghanistan.
“Never,” Commerce Minister Humayun Akhtar responded to a question recently at the Pakistan Japan Business Forum meeting, when he was asked whether Pakistan would seek an overland transit facility through India if a free trade agreement is signed with Nepal.
Last week, State Minister Ms Hina Rabbani Khar attended a two day meeting of the Pakistan-Nepal Joint Economic Committee meeting at Kathmandu. She hinted at the possibility of concluding an FTA with Nepal. In case of such a possibility Pakistan could reach landlocked Nepal via China or India.
