BILATERAL TRADE WITH INDIA

Setting up of warehouses at the borders proposed

By ASHRAF KHAN
May 30 - June 05, 2005

South Asian Association for Regional Cooperation (SAARC), the 15-year-old regional body had long been ineffectual due to the bitter rivalry between its two largest members, India and Pakistan. Its renaissance reverberated early last year when the summit warranted a trade bloc among the members in the backdrop of a thaw in military as well political standoff between the two rivals. No doubt the South Asian Free Trade Area (SFTA) hinges on these two countries.

Late last year, Pakistan and India had agreed on 500 products that would receive tariff concessions in another step towards a proposed free trade agreement for South Asia. India and Pakistan agreed on tariffs ranging from 10 to 25 percent on the 500 goods which would be part of a South Asian free trade pact.

South Asian leaders had long called for a free trade deal but the proposal has gone nowhere amid constant friction between India and Pakistan, the region's two largest members. The nuclear-armed neighbours have moved in past over one and half year to mend ties. Pakistan and India had deployed around one million troops to their common borders since December 2002 when gunmen attacked the Indian parliament allegedly linked to Islamabad. But things have changed now and instead of deploying armies at the borders, building up of warehouses are being proposed to augment trade between the two countries to cater for the huge bilateral trade volume, which an historical animosity has prohibited thus far.

"I suggest that official trade could be facilitated if we build warehouses at Wagah border, where trucks unload on one end and re-load on the other as we do today in the Indo-Bangladesh border," Onkar S. Knawar, president Federation of Indian Chamber of Commerce and Industry proposed to the audience here who also include Pakistan's State Minister for Commerce and Trade. Onkar was leading the largest-ever business delegation visiting Pakistan after the thaw.

BARRIERS TO BE REMOVED

Bilateral trade is improving and is on course to rise more than 150 percent till March to about $500 million, but the detente is spreading all too slowly for Indian businessmen. Barriers to commerce cemented by more than half a century of hostility mean companies selling everything from wheat to tyres to Pakistan are forced into costly detours via third countries such as Afghanistan or the United Arab Emirates, or Hong Kong. "It is a tragedy that unofficial trade between our two countries is as high as $2 billion. We must convert this into official trade," Onkar said.

However, a Pakistani minister said his country would give serious consideration to Indian businessmen proposal of setting up warehouses at the borders between the two countries to give impetus to bilateral trade through land routes. Among other grievances of India key problem is that Pakistan is withholding most favoured nation (MFN) status, meaning it does not extend its lowest tariffs to India. And it has reason for that.

Pakistani commerce minister during his visit to India last month said there were problems in the way of granting MFN and urged patience while confidence-building measures, including a dialogue over whether Pakistan could meet some of India's fast-growing energy needs, were still in their early stages. "Let's continue to build faith in each other," said the Pakistani commerce minister. "Give it time. Don't expect too much. A few months, a few years here and there, is not a very long time," he said.

Indian business pundits now have developed understanding to Pakistani concerns. "We understand that industrial infrastructure is the key difference between the two countries and Pakistani manufactures' apprehensions are genuine," Dr Amit Mitra, secretary general of FICCI told PAGE. "Let me emphasis that this is not an export mission to Pakistan...this is a two-way trade mission and you would be happy to know that several of our delegates are looking to buy from Pakistan immediately," Onkar told the conference earlier.

Mitra, however, talking to PAGE said that lets forget about MFN for the time being. Instead, he proposed that Pakistan must have a negative list for trade with India comprising items which it feel might be a threat to domestic industry and open up all of the remaining items for trade between the two countries. "This will maintaining Pakistan's comfort while at the same time, vast areas of trade will open," he said and added currently Pakistani has a positive list of 768 items of import from India. "We will surely consider Indian delegation proposal of setting up warehouses at Wagah, state minister for commerce and trade Hamid Yar Hiraj assured the delegation.

The 104-member delegation led by FICCI president Onkar S. Kanwar arrived Monday here to hold dialogues with the Pakistani counterpart Federation of Pakistan Chamber of Commerce and Industry (FPCCI). "We will also announce relief in the forthcoming budget (next month) with regard to bilateral trade with India," Hiraj said while talking to press at the side of conference on India-Pakistan Economic Relation, jointly organized by FPCCI and FICCI. Bilateral trade jumped to 500 million dollars for the current year as compared to 360 million dollars last year, FICCI secretary general Amit Mitra told earlier.

"It could be increased many folds rather conservatively to $10 billion within five years if we reach on concrete terms," an Indian delegate said. Indians also assured Pakistani side that they would look at lower tariff barriers but would like to give an assurance that if there were any non-tariff barrier, they would pursue their government to remove them forthwith. Indian also expressed their keen interest to see Pakistan as a bridgehead for India's contact with Afghanistan, West and Central Asia and India can become a corridor for Pakistan's contact with the South East Asia.

Besides other recommendation, FICCI has proposed that FPCCI itself be authorized to certify genuine business leaders on the basis of which they would receive multiple entry and long terms visas for the entire countries.