A BORDER TRADE ZONE IN AF PAK TO REDUCE EXTREMISM-1

ESTABLISHMENT OF BORDER TRADE ZONES IN
PAKISTAN
Concept Paper
Overview/Background
Reconstruction Opportunity Zones or ROZs were envisaged
for the economic uplift of Pakistan’s frontier area
bordering Afghanistan. These ROZs were essentially an
“Alternative Livelihood Program” (ALP) designed to offer the
populace brighter solutions to synthesize the demands of
flesh and spirit in an area short of economic
opportunities, having no agriculture base or an
independent infra-structure.
Traditionally Pakistans FATA region as well as Balochistan
was viewed as an imperial buffer zone designed to act as a
strategic damper in between the settled areas and the wild
tribes of Afghanistan and Iranian Balochistan.
These areas were literally no regulation areas governed by
ancient tribal laws and their economy was based on
grazing , gun running , kidnappings for ransom and raiding
and looting of the settled areas.
Lack of normal options to make a living and the above
mentioned political vacuum led to the following reactions in
the area:--
1. A land governed by ancient tribal customs .
2. Frequent foreign infiltration including
Persian,Russian,Afghan and German in both first and
second world wars.
3. Cold war low intensity battle zone with initially
Afghanistan as a spearhead of USSR and later
transformation of the border area as a base of
operations against the USSR during the Afghan proxy
war from 1979 to 1992.
4. Base area of Taliban and other extremist groups
during the Afghan civil war from 1992 till 2001.
5. Base area of anti US Islamist groups from 9/11 till
todate.
2

While man to a certain degree is autonomous much of what he
is as a person , his world view and his actions are heavily
dependent on the state policy .
Due to various historical reasons the border areas of British
India and its successor states remained militarized and did not
enjoy the fruits of modern civilization and also later remained
divorced from the benefits that independence from the British
after 1947 had conferred to Pakistan and India.
The British used the FATA ad Balochistan Border districts as a
base to launch the Second Afghan War in 1878-80 in order to
curtail Russian influence in Afghanistan.
3

A traditional watch tower in Waziristan
This led to establishment of a pro British Afghan dynasty who
subordinated its foreign policy to British Empire from 1880 to
1919. The Border areas during this period remained the first
line of defence of British India against a Russian invasion of
India.
A harsh legal code known as Frontier Crimes Regulations (FCR)
was imposed by the British in FATA .
4

In May 1919 British control over FATA collapsed within few
days when the king of Afghanistan declared a holy
war.Following the Third Afghan War of 1919 the British adopted
a forward posture and garrisoned the FATA with regular troops
amounting to almost two divisions. And used airforce as a
punitive weapon against the tribals very similar to the drones
being used by the US since 2002.
The British are known to have used this area for a regime
change in Afghanistan in 1919 . The Pakistani state as an ally
of US-Saudi Arabia also employed this border area for a proxy
war aimed at regime change in Afghanistan from 1978 to
1992.This was the most fateful era for the FATA particularly
when its traditional Pashtun tribal society was transformed by
design into a Sparta like society based on religious extremism
and with the political slogan of Islamic Jihad.
A Tribal Jirga in North Waziristan
Huge amounts of weapon and money were pumped unto this
region and basic transformations introduced in its body politics.
5

When the US arrived in Afghanistan and a ham handed attempt
was made by Pakistans military dictator General Musharraf to
chastise the FATA. It was a rude shock to the Pakistani
military - those who it had regarded as its servile tools of policy
were now retaliating and attacking the Pakistani State who
they saw as having betrayed the ideals that it stood for. The
key to dealing with the Pashtuns is to engage them and trade
goods with them rather than trading bullets.
There is famous Pashto saying that if treated politely and with
grace a Pashtun will readily go to hell with you but if treated
with aggression and contempt a Pashtun wil even refuse an
open invitation to paradise.
US forces in Afghanistan with all their military and armament
superiority received a rude shock by Pakistan’s FATA now
being used as the bastion and base of many militant groups
fighting against US forces in Afghanistan.
When crude attempts to crush the FATA tribals by both
Pakistani military and the US failed it dawned on the decision
makers that offering the tribals of FATA an ALP may be a better
alternative than drones or bullets.
This realization however was not translated into practice thanks
to the lethargy of key decision makers on both sides who still
were not fully convinced about ALP being better than the power
of the gun.
Repeated failures to pacify the FATA or curb militancy in both
Pakistan and Afghanistan have however convinced policy
makers in USA, NATO States and Pakistan that ALP in the
shape of ROZ was the best strategy to bring peace and
security in Afghanistan and Pakistan. The ROZ however may be
a total failure, that is if and when it is implemented. It is too
little too late.
The USA occupied Afghanistan in November 2001 and its
almost more than 10 years since then and yet the United
States has failed to win the hearts and minds of a substantial
part of Afghan populace. The reason lies in abject failure of
6

USA's economic policy. This in turn has led to a
counterproductive situation.
There is nothing inevitable in history but those who cannot
identify the critical time span in any crisis and who fail to seize
it by the horns are bound to fail. Such unfortunately has been
the case with US strategy in Afghanistan. The US President
failed to find the right strategic talent for Afghanistan and thus
thrust mediocre US policy makers on Afghanistan who neither
knew, nor recognised anything higher than their shallow
mediocrity!
The main thrust of USA's policy in Afghanistan was to construct
roads and schools and clinics. These were important but no
substantial class of stakeholders which had a vested interest in
success of US policy inside Afghanistan was created. No major
employment opportunities were created. No major effort was
made to encourage private enterprise.
No major attempt was made to privatise Afghanistan's main
economic potential i.e its massive custom revenues most of
which do not land in government coffers and are skimmed
away by corrupt custom officials as bribes and by smugglers as
profits once Afghan imports are re-exported i.e smuggled to
Pakistan.
US approach in short was bureaucratic, conservative and in
final summing up timid ! Bearing Point a large US firm got the
major contract for economic reform. It hired Americans and
expatriates who would not have got any decent job in USA or
even a medium level country. In addition they hired some
Afghan Americans who came to Afghanistan for a short term
period , to make a quick buck and go back to their relatively far
more comfortable permanent places on the California coast.
A 30 or 50 year incentive to industries to export quota free to
USA , combined with a buy back guarantee with USA with the
condition that all quality standards were met would have let to
creation of industrial parks in Pakistan and Afghanistan by mid
2004 and by mid 2005 or late 2005 many hundreds of
industrial units would have been functioning in Afghanistan and
Pakistans FATA and border districts of Balochistan.
7

Thus at least permanent long term employment could have
been created for 200,000 to 500,000 FATA/Balochistan
tribals/Afghans.
Instead the main thrust of US economic policy was on roads,
schools and clinics which benefited a handful of foreign
construction companies and created a low income short term
employment for an Afghan labour which could not have
exceeded 300,000 at any time. Schools and clinics awarded to
the Louis Berger Group Inc. (LBGI) were in turn sub-
contracted by LBGI to Afghan contractors, many being US and
European passport holders at about 25 % to 30 % of the total
cost.
These contractors in turn sub-contracted the works to local
petty Afghan contractors at low rates. Thus hardly 10 % of the
total amount earmarked for these schools and clinics were
actually spent resulting in leaking and collapsing roofs and
highly sub-standard construction. This faux pas was well
covered by the Washington Post in late 2005.
It has been estimated that the contraband non drug mafia in
Afghanistan is larger than the drug mafia of Afghanistan.In turn
both the mafias have overlapping key figures involved in both
the trades.It has been estimated that some 80 % of
Afghanistan's imports are smuggled back to neighbouring
Pakistan where custom duties are very high.
The United States made a somewhat lukewarm effort to re-
structure the low paid and highly corrupt and inefficient Afghan
customs. Another approach could have been to award the
custom collection and enforcement task to an international
private firm like Cotecna or SGS. This way Pakistan’s custom
revenues could have multiplied by 400% to 600% and the
Pakistan Government could have been made financially far
stronger, while also reducing its overwhelming dependence on
foreign aid. Moreover transit fees should have been levied
to cater for the wear and tear of our infrastructure.
8

It is significant to note that many key Afghan governors on the
bordering provinces as well as some ministers are known to
have a close link with the non drug contraband mafia.
During the past six years many Afghans and Pashtuns saw
Daisy Cutters, Chinooks and armoured cars but no one saw the
benefits of USA's advent in Afghanistan. Both the countries got
a lot of hot lead and shrapnel but no Marshall Plan other than a
Marshal being created in Afghanistan! In Afghanistan this was a
case of lack of vision on part of the US Government.
Out of the more than US$ 10 billion that Pakistan received in
aid, a very nominal part was spent on the Pashtun areas
despite the fact that this aid was meant to basically pacify the
Pashtun areas of Pakistan which are definitely the centre of
gravity of Al Qaeda/Taliban. This was wholly a US failure for
which late remedies are now being made by the Kerry-Lugar
Bill.
No special Export Zone with the right to quota free guaranteed
export reinforced by buy back guarantees was created in the
NWFP and Balochistan provinces of Pakistan. These Zones
could have gone a long way in creating employment and
prosperity in the Pashtun areas and vastly reducing the sense
of alienation among the Pashtuns.
The reasons for this were more ethnic than anything and the
USA made no effort to arm twist the tinpot Musharraf regime
into spending this money on the Pashtun areas of Pakistan.The
only investment that Pakistan's non Pashtun dominated
government made on the Pashtun areas was in form of Cobra
helicopter munitions,7.62 mm bullets,155 mm artillery etc in
pounding the Pashtun areas indiscriminately, targeting mostly
non combatants women and children.
In addition no major effort was made to create a stock
exchange or float investment bonds giving good interest which
could have created a substantial class in Afghanistan whose
success and prosperity was linked to US policies in Afghanistan.
9

It was just a matter of a little imagination and printing bonds
with the backing and sovereign guarantee of US government
for payment of interest in USD for a period of 10 to 20 years.
Unfortunately there was no brilliant man like Nixon in the US
leadership who could think of a coup like delinking of goald
standard in the early 70s.
A condition could have been imposed that in order to buy these
FATA Fund Bonds all companies had to register in Pakistans
FATA Trade Zone area thus bringing money to FATA as well as
a long term class of stake holders in the FATA.
A policy of ROZs would have paid huge strategic dividends to
the USA as well as transforming the life scheme of the FATA
and marginalizing extremism in the region.
This way employment would have been created and potential
recruits of Al Qaeda and Taliban given decent risk free long
term jobs in the industrial units established as part of this
policy.
The USA has invested many billions in Pakistan and
Afghanistan but its priorities are not clear. Vaccillation ,
procractination and supreme indecision remain the hallmarks of
US policy in Pakistan and Afghanistan.
THE GEOPOLITICAL ANGLE
If the USA drags its feet and fails to invest in the proposed
Border Trade Zone in Pakistan the initiative will pass to China
and the loss that US foreign policy will suffer by this faux pas
would be irrevocable.
The basis of this assertion is the following situation described in
paragraphs below.
10

The Peoples Republic of China visualizes Pakistan as the main
strategic transit zone through which it intends to route all
imports as well as exports of the Singkiang Trade Zone as well
as all strategic mineral imports to China from Afghanistan
(Ainak Copper mining complex already owned by China) as well
as Pakistani Balochistan , specifically the Saindak Copper
Complex.
For the above purpose China intends massive multi billion
dollar infrastructure improvements in Pakistan which would
lead to an all weather class 90 dual and four lane carriageway
as well as a top class rail link from Chinese Singkiang Special
Economic Zone to the Pakistani Indian Ocean deep sea port of
Gwadar.
The proposed Chinese plan will be fully operational by
2020.China views Pakistan as its shortest western strategic
conduit to the Arabian sea in peace as well as war when the
previously major Chinese oil import route via Strait of Malacca
may be under total blockade.In order to remedy this strategic
imbalance China has already created a major railway to Burma
and the second Chinese major strategic corridor to the sea is
from Singkiang to the Indian Ocean ports of Karachi and
Gwadar.
11

The proposed plan once implemented will sea China as the key
trading as well as the principal economic power in West
Asia.China would then no longer be dependent on the sea lanes
of South China sea as well as Strait of Malacca.
This paper suggests a US led initiative for Pakistan by simply
investing not more than 10 Billion US Dollars in the proposed
BTZ on improving existing roads.
12

We hold the view that tangibly the US has high strategic stakes
in the region and both Pakistan and Afghanistan constitute the
strategic heartland of world politics.
Pakistan needs to engage all major powers rather than
depending on the largesse of a single great power. This makes
Pakistan more vulnerable both economically and strategically.
We hold the view that Pakistan needs to engage all major
powers rather than depending on the largesse of one single
great power.This would make Pakistan more vulnerable both
economically as well as strategically.
The US also needs to utilize Pakistans strategic position in
pursuing a policy which is advantageous not only to the US but
to Pakistan also.
The border area of Pakistan is presently a strategic calamity for
the US but with a relatively small investment of US$ 10 Billion
this becomes a great strategic opportunity.
14

CREATING EMPLOYMENT IN FATA IS THE BEST COUNTER
TERRORISM STRATEGY
• There are no reliable statistics available on the FATA
unemployment rate.A good way of explaining it is as
following that while FATAs population is 7 % of Pakistan ,
on the average since 1947 it has got 1 % financial
allottment in national budgets........that while occupation
of 97 % of FATA is agriculture only 7 % of FATAs total
area is cultivable.
• Officially accepted figures of unemployment are 7 to 12
%.As per labour force survey of Pakistan unemployment
rate in NWFP was 12.85 % while that in NWFP rural was
12.47 %.
• Unofficial estimates received from FC Intelligence place
unemployment from 60 to 80 % and almost 100 % in
some parts of the year.
• According to World Health Organisations report of 2001
some 50 % of FATA tribesmen are living in abject
poverty.
• The Industrial zones that we have suggested in this
concept paper will be the major strategic effort to create
unemployment , thereby , denying all extremist groups
potential recruits.To rephrase a famous author deny the
terrorists the accidental recruit who joins a group
because of economic deprivation and frustration.
• If some one has to manipulate the life scripts of the FATA
citizens let it be the good guy represented by a clean
public private partnership as envisaged in the BTZ
concept rather than wealthy billionaires who adopt
terrorism as a political tool to fame and power.
The Border Trade Zone (BTZ) Concept
versus Reconstruction Opportunity
Zone Concept (ROZ)
Background-Reconstruction Opportunity Zones (ROZ)
15

In July 2006, US Intelligence officials informed the House of
Representatives’ Committee that Al Qaeda had become
progressively active in Western Pakistan and Afghanistan,
where they allegedly enjoying safe haven and increased
financial support. In order to reduce the threat of attack on US
interests from these regions of Pakistan and Afghanistan, which
is home to a large number of former Mujahedeen, a plan for by
creating Reconstruction Opportunity Zones was approved by
US. The proposed Reconstruction Opportunity Zones are
intended to create job opportunities by allowing goods
produced in designated zones of Pakistan and Afghanistan to
enter the duty-free and quota-free to the United States.
Potential imports from Reconstruction Opportunity Zones in the
two countries are to include agricultural goods, clothing,
textiles and handicrafts. In fact in the name of trade with
Pakistan and Afghanistan, a long term plan has been chalked
out by US, Israel, India and other partners to separate frontier
regions from both the countries.
Later an Act was introduced in which the zones declared as
Reconstruction Opportunity Zones would solely encompass
portions of the areas of Pakistan, which may include the FATA
(Federally Administered Tribal Areas), areas of Azad Jammu
and Kashmir (which were devastated by the Oct 2005
earthquake), areas of Balochistan that are within 100 miles of
Pakistan’s border with Afghanistan, the NWFP (North West
Frontier Province, now renamed KHYBER PAKHTUNKHWA -
KP) and territory of Afghanistan. The President of US may, on
designation by competent authorities in Pakistan or Afghanistan
include other areas as ROZs in which merchandise may be
introduced without payment of duty or excise tax as
Reconstruction Opportunity Zone. The sole purpose of the Act,
as also given in the text of the Act1
, is to stimulate economic
activity and development in the border region of Pakistan and
Afghanistan and critical fronts in the struggle against violent
extremism. This reflects the strong support that the United
States has pledged to Pakistan and Afghanistan for their
sustained commitment in the GWOT (Global War on Terrorism)
as well as to support the 3-pronged US strategy in the border
region of Pakistan and Afghanistan, viz:
1. political,
2. military,
1
16

3. and economic tools,
with Reconstruction Opportunity Zones as a critical part of the
economic component of that strategy.
The US President has powers to withdraw, suspend, or limit the
application of duty-free treatment with respect to
Reconstruction Opportunity Zones in Pakistan or Afghanistan or
enterprises if either Pakistan or Afghanistan fails to adequately
take the actions described in Act or when US national security
is threatened or foreign policy interests are undermined.
As an eligibility criteria, Pakistan or Afghanistan, as the case
may be is bound to establish, or is to make continual progress
toward establishing a market-based economy that protects
private property rights, incorporates an open rules-based
trading system, and minimizes government interference in the
economy through measures such as price controls, subsidies,
and government ownership of economic assets. Another
criteria is progress towards establishing the rule of law,
political pluralism, and the right to due process, a fair trial, and
equal protection under the law.
The economic policies should reduce poverty, increase the
availability of health care and educational opportunities,
expand physical infrastructure, promote the development of
private enterprise and encourage the formation of capital
markets through micro-credit or other programs. The countries
have to develop a system to combat corruption and bribery,
such as ratifying and implementing the United Nations
Convention against corruption and protection of core labour
standards.
The aim of Reconstruction Opportunity Zones is to establish US
backed market-based economy that protects private property
rights so that governments of Pakistan and Afghanistan cannot
exercise their influence and interference in the economy of
these selected areas through measures such as price controls,
subsidies, and government ownership of economic assets. Thus
US intend to establish its direct control over Reconstruction
17

Opportunity Zones so that more or less these zones become
independent from Pakistan and Afghanistan internal influence
and pressures.
Stringent conditions have also been set by US for Pakistan and
Afghanistan to show continuous progress towards establishing
the rule of law, political pluralism, right of a fair trial and equal
protection under the law.
Furthermore, the agreement demands from both countries to
tune their economic policies in such a manner that it should
reduce poverty, increase availability of health care and
educational opportunities, expand physical infrastructure,
promote the development of private enterprise and encourage
the formation of capital markets through micro credit or other
programs. It is quite evident that there might be no influence
of the governments of Pakistan and Afghanistan in
Reconstruction Opportunity Zones while INGOs (International
Non Governmental Organizations) may be running the show.
When we are left with limited options what can be done is the
major question. Way back in 2007, while talking to media
persons the then- Commerce Minister Humayun Akhtar Khan
had said that President Musharraf had pressed President
George W. Bush in 2006 for establishing Reconstruction
Opportunity Zones (ROZs) that would create job opportunities
in parts of Pakistan and Afghanistan and act as counter
preventive measures for extremism and militancy.
The designation of parts of Pakistan as ROZs (Reconstruction
Opportunity Zones) is a first initial step in the right direction.
This is the only way to suppress the insurgency and reverse
Anti-Americanism in particular and anti-western sentiments in
general in the region. Earlier, the US had wasted almost US$
143 Billion in Afghanistan without achieving any gains. Experts
on the region advocated a Pakistan Free Trade Agreement
(FTA) with the USA that would allow about US$ 15 Billion of
exports to America. This hard earned money would belong to
the Textile exporters who would have to build extra capacity
and hire more workers. The new employees would then
become more integrated in society and could send their
children to the best schools in their vicinity who could graduate
and perhaps go to the USA and Europe. This would bring back
18

education and moderation to the people similar to Malaysia and
Korea.
Unfortunately, the concept of ROZs is under strict scrutiny after
the passage of the Kerry-Lugar bill by US Senate by the
present Government in Pakistan, Opposition political
parties, media and other pressure groups. This Bill is yet to be
signed by President Obama. If the ROZs which have already
been stalled by the Obama Administration remains inactive
what options are we left with for a long term solution to the
grievances of the people of FATA and for the economic uplift of
the region?
The Kerry-Lugar Bill has been a source of great concern for
Pakistan but there are other options that could accommodate
and assimilate the Kerry-Lugar Bill and local aspirations.
Concerted efforts are needed for establishing a Free Trade Area
(FTA), that is also evident from the text of the ‘Afghanistan
and Pakistan Reconstruction Opportunity Zones Act of 2009’
(See Annexure D). The phenomena of the ROZs may be
transformed into FTA which will benefit both the people of
FATA and neighbouring countries and the international
community. By encouraging investment inside Pakistan a tax
free product may be exported to other parts of the world, this
will also reduce cost of the product because of cheap labour
and duty free imports and exports and also provide job
opportunities for locals.
The people of FATA region were behind the constructing and
establishing of Free Trade Zones in the UAE and elsewhere in
the Middle East, so why not engage these people in
establishing an area that may benefit them for times to come?
19

If we evaluate the aid promised by the US, only a paltry
sum of US$ 179.5 million has been paid against the
promised US$ 1.5 billion for 2010. The
Reconstruction Opportunity Zones for FATA regions
were promised in 2006 but the legislation failed twice
in Congress because of opposition from the US textile
lobby.
20

PROPOSE
D
BORDER
TRADE
ZONE
CONCEPT
23

SALIENT ASPECTS OF THE NEW
ECONOMIC CONCEPT TO TRANSFORM THE
BORDER AREAS OF PAKISTAN
24

1. The BTZ must not be dependent on any foreign State as
is the case presently where it is wholly dependent on US
largesse in terms of allowing duty free textile imports which
may negatively affect US textile business. In order to
succeed the ROZ must be based on Pakistan’s internal
dynamics. Since US policy in Af-Pak is in a transitory and
fluid stage the proposed ROZ with tariff-free incentives to
USA may never materialize.
1. The key concept on which the BTZ should be based is “to
transform the illegal contraband smuggling regime
on the entire Afghan Pakistan Border into benefit
for locals on both sides of Durand Line”. This can be
done by regulating smuggling into a legal system which
benefits the common citizen, eliminates graft and illegal
gratification that go into the pockets of custom and law
26

enforcement agency officials and divert these to the
common man. Some 25% to 35% of the US$ 2.06 Billion
value of Afghan transit trade via Pakistan ends up as
profit for the smuggling mafia on the border. If
Afghanistan is restricted to importing all its non-Pakistan
origin imports transiting via Pakistan by buying it from
the BTZ established on the Pakistan border, a large
portion of this would contribute to economic uplift of
Pakistan’s frontier districts/agencies rather than going
into the pockets of smugglers/corrupt government
officials. This measure alone will transform the lives of
the border people who may wait in vain for the US
Congress to approve the tariff-free laws.
2. Establishment of Afghanistan/CIS BTZ in FATA/
Balochistan. Shift focal point of Afghan Transit Trade via
Pakistan from the Afghan border contraband mafia to
Pakistan’s FATA. Bring the Afghan Transit Trade via
Pakistan into Pakistan’s tax system. This free trade zone
will become the hub of all logistics of Afghanistan and
Central Asia via Pakistan. All Afghan transit trade goods
will only be bought by Afghan traders from companies
registered in the ROZ area which in this scheme would be
the entire designated area of all FATA agencies and
designated frontier districts of Balochistan. This measure
would eliminate the contraband trade mafia who takes
away the entire margin of profit in Afghanistan’s imports
via Pakistan from Japan/India/ Europe/ USA, etc and
then re-smuggles the goods imported under the ATTA
back to Pakistan. This single incentive will have a greater
impact on the economy of the FATA/Frontier districts
than the proposed US ROZ Bills which may never see
light of the day.
3. Warehousing and Trade Hubs: Warehousing and trade
hubs with facilities of warehousing, one window border
clearance operation with 24 hours security can be
established at Torkham, Parachinar, Thal, Miram Shah,
Wana, Zhob, Qamruddin Karez, Chaman, Nushki,
Dalbadin and Taftan. These zones will facilitate not only
Afghan Transit Trade but also Central Asian and Iran-
Europe Trade. The following maps show the location and
communications of the proposed hubs:--
27

4. Industrial Opportunity Zones which seek to be designated
as a ROZ by US laws, but is not wholly dependent on the
US and negotiates similar trade preferences with EU,
SAARC, ASEAN countries should be initiated with:-
(a) Steel re-rolling mills be allowed to use scrap duty-
free
in case they are established within a 5 Km radius
of the Durand Line. Presently scrap is being illegally
smuggled all the way from Afghanistan to Lahore
and
Karachi. This does not benefit the common man or
the
State of Pakistan.
(b) Edible oil mills be allowed to import edible oil duty
31

free in case they are established within a 5 km
radius of
the Durand Line. Sales tax be imposed on these
mills if buyers are local buyers.
(c) Flour mills be allowed a special wheat quota from
Pakistan if they are established within a 5 km
radius of the Durand Line.
5. Buy-back incentive scheme with specific economic zones
like EU, ASEAN, SAARC etc. Under this the specific
economic zone countries get exclusive rights to invest.
6. Create a system which attracts businesses in Pakistan’s
settled areas to form JV with business concerns in FATA.
32

KEY ELEMENTS REQUIRED TO MAKE THE SCHEME A
SUCCESS
1. The prime component of success is
infrastructure in the proposed concept.
Infrastructure basically means communications
which require improvement despite the fact that
some 90% of communications are already in
place and operational.
2. While the ROZ concept was interlinked with the US
economy and affected US internal economics, the BTZ
concept only requires US and international donor aid
for development of roads and communications in the
BTZ area. BTZ is Pakistan- centric rather than US
economy centric.
3. Providing security is the key element of the proposed
system and a principal responsibility of the Pakistani
State.
4. Creation of a private security element by granting
special security company licenses to FATA business
concerns dealing in security.
5. Establishment of FATA as a province with full
provincial status.
6. Abolishing the FCR.
7. All licensing to be done by an independent business
licensing authority with guaranteed processing in
three working days. This authority should be managed
by a top notch international consulting company.
8. A new Agreement to replace the existing
Afghanistan Transit Trade Agreement (Annexure
B). While Afghan Transit Trade Agreement allows
Afghanistan duty-free import via Pakistan there is no
restriction on imposing taxes on transports and
logistics. In 2009 Afghanistan imposed an arbitrary
tax on all vehicles entering Afghanistan with goods
known as “Sharwali” which was something in excess
of 2000 Pakistani Rupees. Pakistan can impose similar
taxes and raise funds for improvement of FATA.
Presently it is estimated that some 150,000 Afghans
cross the Pakistani border without visa at all the 200
plus entry points. The FC and Pakistani security
agencies take illegal gratification for entering without
33

visa between Rupees 100 to 500 per person. If this is
institutionalized as a legal scheme it can raise millions
of US Dollars for FATA. The idea would be to issue
each Afghan a monthly renewable border pass which
makes their entry more respectable and also brings
more revenue to the Pakistani state that can be
utilized for the uplift of FATA.
34

A BORDER TRADE ZONE IN AF PAK TO REDUCE EXTREMISM-1

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