PAKISTAN and Uzbekistan have signed a memorandum of understanding (MoU) on bilateral trade envisaging the use of Afghan territory as the land route. The MoUs signed during the visit of Prime Minister Shaukat Aziz to Uzbekistan is a part of the ongoing efforts to forge closer economic ties with the Central Asian Republics (CARs) and to make Pakistan a transit trade hub.

Textile Minister, Mushtaq Ali Cheema says the MOU can open up avenues for the local industry by providing access to the emerging markets and cheep industrial raw material available in the former socialist countries.

Uzbekistan has cotton, copper and raw material used for steel industry that can be imported to feed the local textile mills and the steel industry.

Apart from imports, the CARs including Uzbekistan are a potential market for Pakistani fresh fruit, sports goods, plastic wares leather garments and matches.

Pakistan also provides the shortest and economically most feasible transit route to Uzbekistan, Arabian Sea and beyond. Peshawar is linked by land route to Termiz (Uzbekistan) via Afghanistan involving a distance of 880 km.

Currently, the CAR’s major transit trade is being routed through Iranian seaport Bandar Abass--3800 km away from the Uzbek capital, whereas Peshawar-Termiz land route reduces this distance substantially as Karachi and Gwadar seaports are 2700 km away from there.

To exploit geographical advantage for economic benefits, governments of Pakistan and Uzbekistan during the last couple of years have taken a number of initiatives. But Pakistan is still unable to realise the trade potentials because of non-availability of a secure direct land route.

A major problem is that Afghanistan located at the centre of CARs and Pakistan, has no transit trade protocol with Pakistan or any of the central Asian countries including Uzbekistan that creates hindrance in making the route economically and security-wise feasible.

The absence of such an agreement and the prevailing law and order situation in the war-ravaged Afghanistan compels businessmen on both sides to opt for an air route which is very expensive.

Many believe that establishing trade links with the five landlocked former socialist states mainly depends on peace and security in Afghanistan.

A stable Afghanistan can offer Pakistan an opportunity and a corridor to reach CARs. No trade agreement will bear fruits, if Afghanistan is missing from it," says Manzoor Elahi who has been forwarding goods via land route to Uzbekistan since its independence in 1991.

Elahi says that Pakistan should help Afghanistan in improving its security and stability as that would go a long way in facilitating Pakistan's relations with central Asian states also. He reckons that a tripartite agreement involving Pakistan, Afghanistan and Uzbekistan could solve the problem.

Businessmen intending to have access to CARs markets via land route are also compelled to take risks by making advance payments because of the absence of formal agreement between Pakistan and Afghanistan.

Similarly, according to Elahi, every Pakistani or Uzbek businessman has to deposit certain amount with the border check posts of Afghanistan as security of such goods. This sometimes creates mishaps and financial losses.

Pakistan provides transit facility to Afghanistan through Afghan Transit Trade Agreement (ATTA) signed in 1965, and this pact can be adopted on reciprocal basis for getting similar facility for Pakistani imports and exports with CARs.

Under ATTA, Pakistan is providing transit facilities to Afghanistan at nominal service charges as daily 400 to 500 containers are dispatched from Karachi seaport to various destinations in Afghanistan.

`We can ask the Afghan government to allow our exports, imports and transit goods for CARs via its land route on reciprocal basis. This will put an end to the existing practice of depositing huge amount of money at Afghan border check posts as 'security' and encourage the businessmen to start trading via such shortest land routes," Numan Wazir, president of Industrialists Association, Peshawar said.

Apart from constraints involved inland route trade, incompatibility of banking system and other financial services in the Uzbekistan is also a major hindrance that restricts many from heading towards CARs.

Banks and even the business community of most of the CARs are not familiar with letter of credit (LC)facility and that is why they prefer to deal on advance payments, which increases the risks.

National Bank of Pakistan (NBP) has a branch in Uzbekistan but its operations are restricted and it cannot provide required financial services to businessmen.

Since many Pakistani and international insurance and freight companies have begun operating in the various parts of Afghanistan, there should be no problem for the State Bank of Pakistan (SBP) to allow commercial banks for opening import LCs and facilitate trade with CARs.