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Indo-Pak Trade Relations Moving Ahead
Removing Procedural Hurdles with Positive Mindset Urgently Needed

Indo-Pak Relations


Welcoming India and Pakistan readiness to re-link broken thread of bilateral engagement “to discuss old political disputes and resolve most crucial issue of trust deficit”, we have argued to our western brother nation to “Build Trade Bridges for Trust Building” (Radiance, Feb 6, 2011). We called upon Pakistan to de-link political issues and come on “board to share the benefits of blooming Indian economy.” We asked: “Why Pakistan is shying away to share the benefits of surging Indian economy?” and called to “Open your hearts and your markets to Indian trade and industry. This will create conducive environment to resolve outstanding issues.”

It is heartening that within a short period of only 13 months we are seeing light on the horizon and Pakistan, though cautiously, has covered a long distance to grant much awaited ‘Most Favoured Nation’ (MFN) status to India. In November last, the Government of Pakistan approved in principle Commerce Ministry scheme to grant MFN status to India “after a lengthy discussion.”  Now on Wednesday (Feb 29) the cabinet of Pakistan under the chairmanship of Prime Minister Syed Yusuf Raza Gilani “approved a roadmap to normalise trade with India by gradually eliminating a list containing 1,209 negative items until December 31.”

Defending the decision, Hina Rabbani Khar, Foreign Minister of Pakistan on Mar. 1 said in Islamabad, “We want to work the geo-economics of the region to our advantage.” She empathetically argued that three wars with and perennial hostility towards India had not achieved any results on outstanding issues.

Defending the shift in Pakistan’s earlier position that trade with India would be normalised only after ‘positive movement’ from India on Kashmir, the Minister said: “If the vision of Jinnah is anything to go by, he had bequeathed us normal trade relations with India and that remained the case till 1965.” She maintained that there was a good case for improving ties with India.

Referring to the keenness on both sides to pursue dialogue, Ms. Khar said: “In the past few months, we have been able to build a degree of trust. We gave 40 years to war and hostilities and it has not yielded results on Kashmir. Let us give time to this track or do you want to continue with hostilities for another 40 years?”

Counting Indian steps favouring Pakistan, Ms. Khar reminded that three memoranda of understanding for removing Non-Tariff Barriers had been signed during the Indian Commerce Minister Annad Sharma’s recent visit to Pakistan. Also, she flagged the fact that India had dropped its opposition to the time-bound European Union waiver on trade preferences that was offered to Pakistan to help it recover from the devastating floods of 2010.”

Earlier, announcing the cabinet approval in Islamabad, Information Minister Firdaus Ashiq Awan held that “normalising trade ties with India was in the interest of Pakistan as it would not only help strengthen the national economy but also boost economic activities in the region.”

It was reported that when question on Kashmir was raised in cabinet meeting, the P.M. reminded that trade on LoC has touched the Rs 14 to 15 billion mark. If both parts of Kashmir are getting benefit of bilateral trade why rest of Pakistan and India should not? This indicates that Pakistan is gradually delinking Kashmir from economic ties with India. We need not to alarm from Pakistan’s assurance to its people that Government “was fully committed to the Kashmir cause and had been extending moral and diplomatic support to the people of Kashmir.” This will help ease the opposition to normalization of relations. There are elements that nourish on enmity with the neighbouring countries.

The move to switch to a system of “negative lists” that will restrict the import of around 1,200 items from India compared to the earlier regime where only 1,900 products were permitted to be shipped across the border. Pakistan will now permit import of around 6,800 products from India. This means trade for 90% items will be opened as against the present 17% only. The move will not only boost exports of textiles and pharmaceuticals from India, it will also result in direct trade between the two neighbours. In the absence of normal relations, several products were routed to Pakistan through third countries such as the UAE. During the last financial year, trade between India and Pakistan was estimated at $2.6 billion.

Commerce Minister Anand Sharma visited Pakistan from Feb. 13 with a large delegation of 150 of India’s top corporate leaders. His Pakistan’s counterpart Makhdoom M. Amin Fahim, with senior officers was at the border to receive the delegation. Mr. Sharma was the first Commerce Minister to visit Pakistan after three decades. The trip gave desired momentum to the opening of the jammed doors.

Realising the potential the two sides hold for bilateral trade – estimated now at $2.7 billion officially, and some five times more routed through third countries – they decided it was time to move ahead and make it easier for at least commerce to flourish.

Given the long history of conflicts and distrust, nobody expected from either side of an overnight change. But the beginning has been good and enthusiasm was visible during the meetings between business leaders in Lahore, Karachi and Islamabad.

India has welcomed the development. “We now need to continue the momentum of regular exchanges which we have started since mid-2011,” Commerce Minister Anand Sharma said. He said, “Ours is a history of missed opportunities. We certainly don’t want to leave behind the same environment for our children.”

Now both countries should expedite putting in place a liberal visa regime, opening up bank and communication facilities, upgrading the road and rail links and yards facilities on checkpoints, hazel-free documentation on borders and safe and swift transportation of goods to the destination. Removal of barriers on state borders is also important.

As President of India-Pakistan Chamber of Commerce and Industry (IPCCI), S.M. Muneer pointed out without the provision of banking services, opening of letters of credit, and cross border transactions of funds, trade cannot take place. He urged to remove all non-tariff barriers also.

Trade leaders in India also welcomed the move. Terming it a historic decision, FICCI secretary general, Rajiv Kumar hoped, “This will not only normalise India-Pakistan bilateral trade but also pave way for much higher intra-regional trade within the SAARC region.’’ Complimenting the step as “courageous”, he admired Pakistan’s commitment towards improving economic ties with India despite some domestic opposition.

Confederation of Indian Industry (CII) called the announcement “path breaking” and maintained that it will create and facilitate environment for both the economies to grow. “Pakistan can import raw-material and finished goods from India at a competitive prices and India can get benefit of the strength of the many sectors where Pakistan is strong,’’ Sunil Kant Munjal, past president CII and chairman Hero Corporate Services Ltd said.

We hope all hurdles in the path will be speedily addressed with positive mindset for promoting long ranging benefits of the region. We look forward to both countries opening transit facilities to convert the zone as international trade hub. Transport of goods to third countries by road and rail links will help both India and Pakistan. Markets of Bangladesh, Nepal, Burma and other countries of the east region will be opened to Pakistan and provide Indian trade to expand its volume to Central Asia and Europe.


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