Pakistan’s fruit exports halted

Published: December 21, 2011

KARACHI - Pakistani exports of fruits to Iran have practically stopped following the United Nation’s sanctions on the neighboring country. Under the sanction on the brotherly neighbour, State Bank of Pakistan (SBP) has also stopped issuing E-forms to the exporters of fruit causing huge losses to them. The exporters who were all set to export around 3000 containers of Kinnow presently would be losing a lucrative market and revenue of at least $30 million, sources said.

The exporters who were waiting to export the huge available stock of Kinnow to Iran this year were shown a letter issued by SBP at various banks, in which the banks were barred from issuing the e-form to them. This decision by the SBP has been taken following the UN sanctions on Tehran.

According to fruit exporters, this was a setback for them as they would not be able to export almost 3000 containers of Kinnow this year to an already confirmed and valued market in the neighbouring country. Talking to Profit, Waheed Ahmed Co-Chairman, Pakistan Fruit and Vegetable Exporters, Importers and Merchant Association (PFVA) said that the export of fruit to the neighboring country has practically stopped after the fresh move and has instead given rise to the illegal trade of fruit with Iran.After a complete halt of exports through legal ways, the smuggling/illegal export to Iran via land routes would be increased that would cause huge losses in revenue to the national exchequer, he said.

The association, he said, would however approach the concerned authorities to take the issue seriously as the loss of a lucrative market would simultaneously affect the exporters, growers and transporters badly. The county exports about 60,000 tonnes of Kinnow annually to Iran alone which is between 30 to 40 per cent of its total global Kinnow trade, sources pointed out. According to Waheed, the banks were showing an older notification issued by SBP which said that economic sanctions and embargoes sanctioned by US prohibit trade and financial transaction with 10 countries including Iran.” The branch managers and foreign exchange in charges are advised that in view of the risks involved, should not handle any type of transactions including the imports, exports, remittances and guarantees etc. expressed in US dollars pertaining to the mentioned countries, or banks owned by these countries under US sanctions”.

Though the notification bears the issuing date of December 2008, it was now being shown to the exporters when they demand the E form from banks. Interestingly the same forms have been issued during the last two years despite the notification. However the banks were now implementing it this year, he said. He said that the US and International community should compensate the country’s exporters, who indirectly have been affected by the sanctions, through giving market access to other countries of the west.

According to sources, the fresh move, on the part of US and Pakistan’s central banks, was another setback to the country’s exporters who were already facing banking issues. The unwillingness by Pakistani banks to accepting Letters of Credit (LC) of Iranian banks was badly hurting Pakistani exports to the neighboring country. The local banks were earlier refusing to accept LCs of even those Iranian banks which did not fall under UN or United States sanctions. Earlier, according to sources, the UN and the US had imposed a ban on six major banks as part of a sanctions regime on Iran for alleged illicit nuclear activity. However, Pakistani banks were point blank refusing to receive LCs from even unsanctioned banks of the neighbouring country. This constitutes a major hindrance to Pakistani exporters.

Despite repeated requests by both foreign and local exporters, the banking issue is not being resolved by the concerned authorities in Islamabad. Intriguingly, the sources claimed, this comes at a time, when LCs of sanction-free banks of the host country are being accepted by Pakistan’s competitors in the region. As central banks of Pakistan’s rival countries are facilitating their exporters in terms of trade with Iran, Islamabad’s exports to Iran are likely to suffer and lose potentially lucrative markets in Iran, they pointed out.

Under the present situation, Iranian importers are either utilising other suppliers or import via Dubai by opening LCs from banks located in the United Arab Emirates (UAE); thus goods ultimately destined for Iran are transited through Dubai. On arrival, new documents are being prepared for these goods which are then being shipped in launches to small ports in Iran, the sources added. The caution exhibited by the State Bank of Pakistan (SBP) which forbids local banks from accepting such LCs have placed major exporters of Pakistan at a great disadvantage as they mostly refuse to ship goods directly to Iran due to higher risk entailed, sources highlighted. The commercial attache of Pakistan in Tehran, in his report, had also underlined the issue, saying that due to the banking problems, there was a consistent decline in the country’s exports to Iran specially for major items like cotton cloth, yarn and textile apparel. According to the report though, the country’s embassy in Tehran had repeatedly requested bodies such as the Ministry of Commerce and Trade Development Authority of Pakistan (TDAP) to address the issue with SBP; but the problem remains unresolved. “If banking problems are not resolved on a priority basis, exports are destined to fall as Iranian importers switch to other sources, where they can conduct business through LCs,” the report warned.