Under-invoicing on import from China goes to $5.4b

Lahore – The massive under-invoicing or unexplained imports from China to Pakistan has increased to $5.4 billion in 2015.

According to seventh annual publication of Pakistan Business Council, the massive under-reporting or miss-declaration in imports was still unabated as the gap between Chinese reported exports to Pakistan and country’s reported imports from China had increased to $5.4 billion in 2015.

The Pakistan Business Council (PBC), in its report, ‘Selected Trade and Manufacturing Data for Pakistan’, said that since the signing of the Free Trade Agreement (FTA) in 2006, the total “unaccounted for imports from China” makeup a whooping $25.8 billion in un-taxed imports. It said that FTAs had failed to boast exports and termed the efforts of the commerce ministry for signing more FTAs as appetite for the country.

“In 2015, the gap between Chinese reported exports to Pakistan and Pakistan’s reported imports from China increased to $5.4 billion,” the PBC said. Since the signing of FTA in 2006 between the two countries, the total unaccounted-for imports from China made a whopping $25.8 billion in untaxed imports.

The PBC also said there were huge leakages in transit trade. It said imports of primary raw materials for non-existent industries, as well as products for which there was no significant demand in Afghanistan, continued.

The free and concessionary trade agreements (FTAs) Pakistan signed with six countries largely remained unfruitful for the economy, as the country cultivated trade deficits in relation with almost all the partners.

The country has so far signed concessionary trade agreements with six economies. Except Sri Lanka, the country faced trade deficits in relation to all the countries. The share of Pakistan’s manufacturing sector in its domestic market was slowly eroding, the think tank added.

Trade agreement with Sri Lanka was signed in 2005 and Pakistan’s exports at that time were worth $0.154 billion, which increased to $0.26 billion by 2015. Trade balance was $0.187 billion. However, in trade agreements with China, Malaysia, Indonesia, Mauritius, and Iran, Pakistan witnessed a trade deficit.

Despite the PBC’s repeated requests for a moratorium on fresh FTAs, the commerce ministry is currently busy in finalizing Phase II of the China-Pakistan FTA as well as FTAs with Thailand, Turkey and South Korea, it added. Furthermore, the PBC stated that there was no significant demand in Afghanistan, despite having imports of primary raw materials destined for non-existent industries as well as products.

For instance, the import of black tea by Afghanistan, a nation which traditionally does not drink this type of tea has increased its imports of black tea by 150 per cent in 2015 as compared to year 2014. It said that in the absence of a level-playing field for domestic manufacturing, no amount of improvements in the supply of energy would make a difference to investments and jobs in the manufacturing sector. The PBC further said that the objective this publication was aimed at sensitizing Pakistanis in general and the policy-makers in particular to the slowly eroding share of local manufacturing in its own domestic markets.

The report said Pakistan’s exports, which were stagnant at $24-25 billion levels for the past two years, saw a significant drop in the last calendar year. Pakistan’s current export levels were roughly half of its import. At the current levels, Pakistan is headed for a major balance of payment crisis, it added