A FOUR-man commission appointed by the Supreme Court to examine illegal border crossings at Torkham, the main border crossing between Pakistan and Afghanistan, has returned with a startling claim that up to Rs6bn in revenue is being lost every month due to the undocumented trade taking place there.

The report’s findings are controversial, mainly because some members of the commission disagree with the figures. But what is not controversial is that the volume of the undocumented trade taking place at the overland crossing is very large and growing every year.

Know more: Nation loses Rs5bn to 6bn a month due to illegal trade at Torkham, SC told

Getting quantitative estimates of undocumented economic activity is notoriously difficult, but what ought to be readily acceptable to everyone is the large size of undocumented cross-border economic activity taking place along at least three of Pakistan’s four borders.

According to an estimate produced a few years ago, the size of the undocumented trade at Torkham, and other crossing points in its vicinity, was $2.5bn per year.

Today, those involved with drawing up that estimate say the figure could be larger than $4.5bn. Likewise with India, where an estimate drawn up by researchers at the Sustainable Development Policy Institute a few years ago put the size of the informal trade close to $1.7bn (the formal documented trade was $1.9bn).

Today, that figure, according to the authors of that report, would be much larger due in part to a hike in GST and custom duties in the last budget on precisely those items that are the mainstay of this informal trade. A very similar picture exists on informal trade with Iran.

Clearly, burgeoning regional trade flows are pushing very hard against the myriad obstacles in their path. These obstacles include infrastructure deficiencies, a policy framework that is stacked against freer trade with our neighbouring countries, and security-related considerations.

In short, Pakistan’s neglect of its overland trade potential with its neighbours over the years has pushed the burgeoning trade energies into the margins. In this situation, trade continues but without the accompanying benefits to the state of using business relations to build better ties and to reap a revenue windfall in the process.

This is a rather sad reflection on the harm that short-sighted thinking can do. Viewing our neighbours through a lens that is dominated by geopolitical considerations is giving us the worst of both worlds.

It is depriving us of the benefits that closer economic ties can bring to the country, while pushing trade energies into a domain where racketeers thrive and the state is little more than a hapless spectator to a chaotic and uncontrolled expansion in undocumented cross-border trade.

It is high time we sought to rationalise our overland trade links with our neighbours, and sought to tap the energies bursting at the borders rather than struggling to subordinate them to geopolitical considerations.

Published in Dawn, September 3rd, 2015

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