Modi should push Pakistan-India economic deal
By Babar Ayaz
Post Nawaz-Modi meeting last week the question on the desktop of the pro-Pakistan-India trade lobby is: will the new government rise to keep up the understanding reached between the two countries by Manmohan Singh commerce minister?
From hindsight wisdom in Islamabad the government must be thinking that they should have struck the deal last year when they came close to giving India the Non-Discriminatory Market Access (NDMA) status. Why the anxiety? Reason: just a one line statement of Indian Foreign Secretary Sujahta Singh that India will take up the trade talks from the 2012 position. Much progress was made in 2013.
Pakistan’s businessmen who have remained closely associated with the talks say that the deal was almost finalised in late 2013 and the previous government’s commerce minister Anand Sharma was waiting for Pakistan to announce the NDMA. “But contrary to the perception that GHQ stalled the move it was the foreign office which advised that the trade deal should be done with the new government in Delhi”, an irritated businessman told me. Some businessmen feel that was a bad advice because Modi’s government was expected to play hard ball.
Had Pakistan given the NDMA status to India instead of waiting for the new government it would have been in a position to negotiate SAFTA arrangement with the BJP government. Under SAFTA Pakistan textile exporters could have benefitted immensely as import duties in India would have to be lowered.
Whether all this can still be achieved, the hopes are dim. Nevertheless an optimist commerce ministry insider predicted: “Modi government will honour what their predecessor had agreed to as it was a win-win deal and developed after hard work by both interlocutors.”
Pakistan’s leading businessman Mian Mohammad Mansha is also hopeful that both countries will move towards expanding trade relations as both Nawaz and Modi are committed to economic development and are pro-business. “We should open trade and investment with India as it is a myth that we cannot compete with them,” he emphasised. And he is right Pakistan is already competing with the Chinese goods which have flooded the market. Even Indian goods are finding their way in to Pakistan mainly through Dubai and smuggling as well.
Mian Mansha says that competition is good for business and in areas where India is subsidizing its industries, Pakistan should also help the export-oriented industries, after all it is sinking money in financing 401 public sector businesses. “Indians are sharp, as soon as Pakistan got the GSP status, they gave concessions to their textile industry so that the industry can compete with our exports to the European market,” he illustrated his contention.
He says we should be investing in each other’s country. “MCB has already applied for permission to open branches in Amritsar, Delhi and Mumbai,” he disclosed. Mian Mansha debunks the reports that the army was against trade with India. “The NDMA to India was cleared at the highest level in the establishment,” he said emphatically.
Pro-trade lobby however agrees that there is a business lobby in certain sectors who oppose trade with India. The farmers lobby is in the forefront of the anti-India trade. At times they are supported by a section of media notwithstanding the fact that protectionism serves the vested business lobbies at the expense of the consumers.
“Trade with India should not be treated as international trade, it should be like the inter-district trade, I mean like district Faisalabad trades with Amritsar,” this was the bold comment by a leading farmer and former Advisor on Agriculture Afaq Tiwana in Musharraf’s government.
He clarified that these are his personal views because many of his colleagues from Farmers Association of Pakistan are apprehensive about agriculture produce imports from India. He says that there are a number of advantages in removing barriers in the way of Pakistan India trade. “For example India is way ahead in agriculture technology like manufacturing combined harvesters at much lower prices than we import from the west, their seed technology is very developed, they have capital liquidity,” he explained.
On the supply side, he thinks that Pakistan is in a better position to ensure regular supply to India’s huge food processing industry as compared to India where landholdings size are small while Pakistan has many medium and large size farms. Tiwana agrees with his colleagues that Indian agriculture is heavily subsidised with which Pakistani farmers cannot compete, but adds that countervailing duties can be enforced if we see Indian exporters dumping our market at unrealistic prices. But for that Pakistan needs an alert regulatory system which should monitor all imports from all markets and not only India.
Estimates are that the unofficial trade between the two countries is over $4 billion. This does not include smuggling of items which move both ways depending on the market price. Officially Pakistan’s total trade with India is around $2.4 billion and is increasing rapidly in spite of present trade restrictions. Official trade with India according to market estimates could expand to over $6 billion in a couple of years if the barriers are lifted by both the countries.
Textile is not the only sector, Pakistan can be the major beneficiary and work with Indian IT industry. India’s IT export is fetching them over $50 billion a year. The cost of doing Business Process Outsourcing (BPO) in India is rising. Many IT industry leaders have told me that they would be more than happy to invest in the local IT industry and out-source business to Pakistan.
While much focus of both the countries has been on the trade relations, their governments are weary about allowing investment in each other’s countries. Given the fact that we share many business communities like Sindhi Hindus, Parsis, Gujrati, Punjabis and Bohra, there is a great scope of investment in each other’s countries.
A leading hotelier Byram Avari once said that peace between the two countries would be strengthened if the businessmen will have long-term investments in each other’s country. The expansion of the economic relations would create a strong foundation for a lasting peace, only if our establishment allows debundling it, from other complex historical disputes. India and China have done that and today China is the biggest trade partner of India.
The writer is author of What’s wrong with Pakistan? He can be reached at firstname.lastname@example.org