A lowering of barriers to formal trade will not only result in formalisation of current informal trade but also encourage hitherto unengaged players
By Pradeep S. Mehta and Dr. Abid Qaiyum Suleri
If a person completely unaware of sub-continental history was to read about current Indo-Pak relations, he would probably never guess that barely sixty years back the combination of the two was spoken of as one country. Cultural, linguistic and religious ties which have bound together their peoples for centuries have been rendered impotent in the period that has followed independence from British rule. Sanity has given way to the blinding effect of communal differences and turf battles which have spawned continuous cross-border tensions between the nuclear-armed neighbours and intermittent terrorist activities.
Given this rather unsettling history of Indo-Pak relations, the ‘Aman ki Asha’ initiative to improve ties by building better business and cultural relations represents a gust of fresh air. The potential of this initiative to generate a peace dividend through trade and investment facilitation across the border has been fairly revealed by the two day meet organised a few weeks ago by CII in cooperation with the Times Group, the Jang Group of Pakistan and the Pakistan–India CEOs Business Forum. Cooperation in the pursuit of self interest and profits could be the ideal salve for long strained relations because of the immense clout that business lobbies wield with their governments.
Trade between India and Pakistan has always been a sorry tale of intermittent progress being blunted by subsequent regress. Annual trade volumes leapfrogged from $251 million to $2.3 billion over 2000-01 to 2007-08. But the 26/11 terror attack on Mumbai took the wind out of the sails of this upward trend and squashed the resulting peace and economic dividends thus earned. 2008-09, therefore, saw a 19 percent drop in bilateral trade to $1.81 billion.
However, it is important to assume a positive attitude and treat such regress as only a temporary setback as the future though uncertain is shaped significantly by the trinity of hope, foresight and planned action. This is especially true in the case of Indo-Pak relations as there is much to gain: according to some estimates, trade between the two nations can reach $10 billion. It should be noted that informal trade between the two countries has been estimated by different sources as ranging from $0.5-$3 billion. Such informal trade is obviously undertaken at great risk to involved agents and involves a sacrifice in profit margins born out of measures to escape the official ban on such trade. This restricted trade regime also deprives consumers of their right to choose. A lowering of barriers to formal trade will not only result in formalisation of current informal trade but also encourage hitherto unengaged players to access markets and sources of supply across the border.
There are some obvious means to effect the lowering of the mentioned barriers. Pakistan can replace the lengthy positive list for India’s importable items with a negative list to enable trade in newly emerging products. Likewise, India can reduce its non tariff trade barriers towards Pakistan. Easing of visa requirements to facilitate more effective exchange of human capital and business travel; and the scrapping of visas restricting stays to a single city and the associated requirement of reporting to police stations are other obvious measures. Flexibility in mode of travel as well as port of entry is another desirable step not only to enhance trade ties, but also to improve people-to-people relations. Roaming facilities to link the mobile networks of both countries would enable business travellers to keep in touch with developments at home and thus make such visits less stressful and more effective.
The exploitation of other potential avenues for economic cooperation requires more careful planning and coordination between the two countries. Textiles features in the top three exports of both countries to each other paving the way for potentially beneficial collaboration in terms of research and development and integrated sourcing. A partnership will boost quality of exports and enable these countries to enhance shares in markets in both EU and US.
The challenge of enhancing food security suggests another such avenue. According to estimates of Food Security Risk Index by Britain based Maplecroft, Pakistan is ranked 11 with a tag of ‘extreme risk’ and India at 25 with a label of ‘high risk’. SDPI, SDC and WFP recent report, “State of Food Insecurity in Pakistan” estimates 48.6 percent people in Pakistan are food insecure. In spite of large areas under wheat and rice cultivation, India and Pakistan are worse off than China because of significantly lower yields. Technological cooperation between the apex agricultural organisations of both countries might provide a viable solution in this regard. Both the countries can rely on food imports from each other in the time of need, rather than importing from third country. Food import from neighbouring country would not only be quicker but cheaper as well.
Another area of potential cooperation could be in the education sector and facilitate broadening of the human capital base in these two countries which are still marked by low average education levels and inadequate leveraging of human productive potentials. Such cooperation can take the form of student exchanges which can pave the way for closer relations in other fields such as culture and business and lower the risk of miscommunication between the citizens of these countries. Mutual recognition of academic degrees would not only help in human resource development but would also open up the doors for trade in other services such as health, engineering, and financial sectors.
However, the harvesting of potential in all its mentioned forms is crucially dependent on improvements in cross-border connectivity: efforts to bring a formal direct land route between the countries into operation; improvement in flight connectivity between major Indian and Pakistani cities; and enhancement of the capacity of the Wagah border to support large volumes of trade.
As discussed, the potential benefit from plucking the low hanging fruits of economic and related cooperation between India and Pakistan as well as planned economic coordination is immense. The meeting of minds facilitated by the Aman Ki Aasha initiative promises to generate the necessary goodwill and exchange of ideas that can fast track such economic alliances. This is reflected amply by the enthusiasm of business communities at the recent meeting. The lethargy and animosity of the past six decades calls for sustained efforts by business leaders to continue building bridges of mutual interest and cement budding alliances.
Pradeep S. Mehta is the Secretary General of CUTS International; Dr. Abid Qaiyum Suleri is the Executive Director of Sustainable Development Policy Institute.