REGIONAL TRADE GROWTH DEPENDS ON NORMAL INDO-PAK RELATION

TARIQ AHMED SAEEDI (tariqsaeedi@hotmail.com)
Aug 10 - 16, 2009

To increase the share in global trade and draw world's attention towards its economic potential Pakistan is in a dire need to not only take unconventional decisions related to external trade but also to hammer out differences with neighbouring countries. While unconventional decisions imply adjustability of focus in accordance with the dynamics in world trade, to build new trade relations or strengthen existing ones musters up a great deal of flexibility on the part of political leaderships.

To say that government demonstrated pragmatism while setting export targets for next three years would be correct. In a first three-year strategic trade policy framework 2009-2012, government set targets to scale up exports to only $23 billion by 2012. Perhaps even with traditional markets and long-attached basket of exporting products, the target may be achievable despite recessionary pressures lingered on importing economies. This target seems to be kept at shallowly low-level and underestimated to ensure its attainability.

No doubt, exports during last fiscal year missed target set in the beginning and decreased by 6.7% to $17.8 billion from $19.1 billion in FY08. In fact, some industrialists calculated far more decline in exports in quantity, saying freefall of Pak rupee against dollar in one year decelerated actual momentum. The decline may have induced government to project an under-ambitious target. Nevertheless, does this approach synchronize with government's resolves to market and products' diversification? Exports growth is vital for the economy to rev up. That is possible only if government shifts its focus from traditional to non-traditional markets and shores up falling exporting industry.

The economic slowdown is sprouting a score of measures in exporting destinations of Pakistani products, which could further imperil growth of exports. The corporate-rescue policies in UK and Europe may bring about major changes in custom duty structures. For example, EU is now comparing benefits of free trade agreement with India and Pakistan. The block grants duty free access to textile exports that form only 1 percent of aggregate domestic market. Pakistan's textile exports constitute 1.1 percent. That India having a similar or above proportion would get an access remains to be seen.

This clearly indicates that Pakistan's traditional trade partners are in mood of realigning external trades. Therefore, a lesson for South Asian countries to learn is to strengthen intraregional trade. In three-year trade policy, government envisaged to lift up share of country's trade with regional countries from 17 percent to 25 percent. That means an aggregate growth of 8 percent or annual growth of 2.66 percent is required for three years.

Normal Pak-India relations, two major economies of South Asia, can support making this target achievable. Regional block of EU has given its member countries a great opportunity to capitalize on geographical proximity. Much to the chagrin of south Asian people, however the performance of block known as South Asian Association for Regional Cooperation has proved squarely belied the very meaningful acronym. Let alone cooperation in other areas, intra-SAARC trade is negligible.

The Pak-India trade is more or less $2 billion, which according to economists is a fraction of untapped potential. Unpredictability characterizes the India-Pak relation, thawing for a while to be refrozen. That history of Pakistan and India fills with a long list of missed opportunities was rightly described by Muhammad Ali Durrani, ex-national security adviser during a meeting in New York in October last with his counterpart in India, M.K. Narayanan. The relation took historical turn in a recent meeting between Pakistani and Indian prime ministers in Sharm-el-Shaikh, when both made a history by delinking composite dialogue with action of terrorism.

Terrorism has become a stymie of rapprochement process between the two countries. Last time composite dialogue went in slumber following Mumbai pogrom main culprit of which is of Pakistan's origin. Likewise, Islamabad has detected involvement of Indians in many anti-state activities in Pakistan. In Sharm-el-Shaikh in the sideline of Non-Aligned Movement meeting, the Indian premier demonstrated unprecedented flexibility that was rare in past Indian governments by agreeing to probe in to India's hand in Balochistan's anarchy. There has always been a psychological barrier in mindsets of leaders of both sides of the border, making them stubborn, belligerent, and hawkish during the negotiation.

Pakistan is not exceptional in confronting with challenges to curb insurgency. India is also making headway to control anti-state activities of Maoists- a peasant-led rebellion. Maoists' insurgency is mounting in Chhattisgarh, central Indian state ruled by BJP-led government. It is perhaps untraceable a commonality between Maoists and militants in Pakistan, be they Taliban or any other. But, there is. Such rebellion groups are gaining strength because of income inequity. Downtrodden segments of the society are the fodders of such motley cohorts.

Recently, United States to understand the reason behind accretion came up with a new tactic, saying to renegotiate with Taliban. This, the state secretary says, is to contract out insurgents or would-be ones against money more than opponents pay. Democratic government in Pakistan and congress-led United Progressive Alliance in India would do their best in removing the hitch that is stopping both to come out of poverty trap. Pakistan has challenge in front to meet the expectation of international community to rein in militants. The difference is that now Pakistan has rolled its sleeves up to wipe out militants, at least from North West frontiers. Pak-India avowed that dialogue would continue come what may. Non-state actors have been involved in attacks on Pakistan or India; therefore, it is stupidity to suspend the dialogue in case of terrorists' attacks.

While India is a market of over one billion people, Pakistan can be a transit route for it to Iran, Afghanistan, and Central Asian Republics. By permitting India this rout, Islamabad can demand an action in reciprocal by seeking transit to East Asia countries of Sri Lanka, Singapore, etc. India's exports to Singapore are over four percent. Indo-Pak trade list has included 1938 items. It had only 13 items earlier. People of both the nations want to purchase each other's goods and services. New Delhi was to host a trade show called made in Pakistan in February 2009. If India-Pak relations normalises then SAARC regional trade would see sky-high growth.