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ISLAMABAD: The government is all set to amend Export Policy Order (EPO) 2020 and Import Policy Order (IPO) 2020 to formally start barter trade with Iran and Afghanistan and overcoming stagnation in bilateral trade, sources close to Secretary Commerce told Business Recorder.

Afghanistan and Iran have been important trading partners of Pakistan since independence. With the objective of transforming excellent diplomatic relations into bilateral trade, Pakistan signed Preferential Trade Agreement with Iran in 2006. Pakistan’s export to Iran reached $399 million after operationalization of the PTA in 2008-09, but then declined gradually, due to imposition of regulatory duties and non-tariff measures on Pakistani exports, and subsequently due to the US sanctions on Iran.

Pakistan’s exports to Afghanistan also declined sharply due to non-existence of a banking system and freezing of the assets belonging to the Central Bank of Afghanistan after political events of August 2021.

Sharing the background, Commerce Ministry said in 2019 a high-powered committee under the chairmanship of Minister of State for Revenue was constituted to look into the impediments in the way of Pak-Iran bilateral trade. During the 8th JTC, held on July 4-5, 2019, the Iranian side shared a draft barter trade mechanism for consideration and finalization by Pakistan. In light of detailed deliberations involving relevant public and private sector stakeholders, the State Bank of Pakistan submitted a proposal for establishing a barter trade mechanism between Pakistan and Iran as the best viable option.

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Subsequently, this Ministry arranged multiple meetings with stakeholders wherein it was decided that Quetta Chamber of Commerce & Industry (QCCI) from Pakistan side and Zahidan Chamber of Commerce & Industry (ZCCI) from Iran side would sign a MoU to establish barter trade mechanism.

The MoU/agreement was finalized in consultation with stakeholders including FBR, SBP, Pakistan’s Mission in Tehran, FPCCI and QCCI, and finally the agreement on barter trade between QCCI, Pakistan and ZCCI, Iran was signed on the sidelines of the 9th session of Pakistan-Iran Joint Trade Committee at Tehran on November 7, 2021.

However, with an aim to improve bilateral trade and transit, Pakistan and Afghan authorities, among other things, have agreed to establish a barter trade mechanism.

The proposed regulatory amendments will cater to barter trade arrangements both with Iran and Afghanistan.

As per minutes of the 9th JTC read with clause iv of the Barter Trade Agreement, Governments of Pakistan and Iran have undertaken to institute appropriate regulatory measures to allow trade under barter mechanism. Moreover, both governments have committed to expand barter trade arrangements by involving other chambers.

As per Para-3 of Export Policy Order (EPO), 2020, exports from Pakistan are generally governed under the Foreign Exchange Regulations of the State Bank of Pakistan (SBP). As such, existing provisions of EPO do not cater to barter trade arrangement; hence, an amendment may be needed to align EPO with the proposed Barter Trade Agreement.

Similarly, under para-3(1) of Import Policy Order (IPO), 2020, imports are allowed against all modes of payment subject to the procedure prescribed by SBP.

In view of the foregoing, Commerce Ministry has proposed that to provide regulatory cover to barter trade arrangements, relevant provisions of EPO 2020 and IPO 2020 may be amended by adding following proviso/s thereto: “Provided that exports and imports shall also be allowed under barter trade arrangements as approved by the Ministry of Commerce”.

Both FBR and SBP have supported the proposal. Moreover, the modalities for operationalization of the barter trade arrangement(s) would be finalized and notified by Ministry of Commerce separately for each agreement/ arrangement in consultations with the stakeholders.

As per section 3(1) of the Imports and Exports (Control) Act, 1950 Federal Government is empowered to prohibit or restrict import into or export from Pakistan of any commodity, and/or [to] “regulate generally all practices (including trade practices) and procedure connected to the import or export of such good”.

Copyright Business Recorder, 2022


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