Oct 10 - 16, 2011

It is heartening to read that an entourage of 80 businesspersons visited India to boost bilateral trade. It appears from the news flashes that some tangible result will come out and there is a light at the end of the tunnel.

India is on the growth trajectory, whilst we are going full speed astern with a minimal GDP of two per cent, which is disastrous for the social and economic wellbeing. Our entrepreneurs are disheartened due to power, gas problems, and relocating themselves at Bangladesh, Sri Lanka and other peaceful heavens.

It is time that we learn from the experience of India and boost our formal trade, instead of trading informally through third countries on switch bills of lading.

After independence in 1947, India was the larger and most significant trading partner of Pakistan, with exports to India at 56 per cent of total exports, mostly comprised of jute and its products from eastern wing. Imports were only 32 per cent of total imports.

The sad episode of 1965 halted trade. From 1975/76, the volume of trade scaled up and got an impetus in 1987. During 2001 to 2007/08, bilateral trade witnessed eight fold increase from $236.2 million to $1.95 billion, whilst again trade declined in 2009/2010 to $1.20 billion. After signing of SAFTA agreement, exports to India increased substantially to $313 million in 2008/09, but declined again in 2009/10 to $272 million. Imports from India increased at faster pace from $802 million in 2005/06 to $1.45 billion in 2009/10. Informal trade said to be about 75 per cent of formal trade involving goods such as chemical, industrial machinery, tyres and viscose fabrics etc. The volume of informal trade is reflective of the trade potential between the two countries.

Businesspersons are of the opinion that visa regime is the biggest hurdle. After partition, there was no visa requirement for travelling between India and Pakistan boosting our bilateral trade, but on July 1948, India unilaterally announced imposition of permit regime confined to western borders. In retaliation of Indian move, Pakistani cabinet decided on September 4th 1948 to impose permit system on both wings.

The proponent of permit regime as per records is Vallibhai Patel who feared that migrated Muslims may return back to India. The 1952 saw the India/Pakistan passport replaced in 1965 by international passports.

Let us forget the past and both the governments must take an overview of these curbs on visa, in the light of 2011. The public opinion in both countries asserts itself jointly to end the partition of hearts and mind based on the fact that world is changing and arch enemies Russia and America are talking about no visa regime. EU is on the same page. The only way forward to boost trade is liberal visa regime, so that people may move more freely to different cities and trade, otherwise the exercise will remain futile.

The second important factor in boosting trade is to overcome the logistic infrastructural bottlenecks. It is recognized that sea is the cheapest mode of transportation and ships carry about 90/95 percent world trade, thus Karachi/Bombay sea lane should be used to make trade competitive.

The Shipping Protocol signed in 2006 will facilitate trade. If we look in the past prior to 1965, British India navigation vessels "Dwarka" and "Dumra" had weekly, passenger and freight services, which were subsequently replaced by Scindia Steamship regular service of passenger and cargo by "Saraswati" and "Sabarmati". These ships facilitated trade and passenger services.

Pakistan's commerce ministry must comprehend that sea route is the cheapest mode of transportation followed by Railways, which is dysfunctional in Pakistan, and land logistics are the most expensive mode, which must be the last option.

Pakistan must give MFN status to India on reciprocal basis. It is well known fact that after WTO regime discrimination in application of customs tariffs is not accepted, thus the only tool is non tariff barriers, phyto sanitary and standards requirements, which need to be addressed and eased out, so that no irritants remain to curb the free flow of trade.

There is an enormous potential in trade of agricultural commodities. The two countries, being 3rd and 4th largest cotton producers of the world, must team up for developing the backward and forward linkages in the textile and garment sector to reap the true benefits. We can learn from advanced agro food industry of India and hitech textile industry. Textile machinery is manufactured under licence from Germany and Switzerland at much lower cost in India. The IT is fully developed in India, we may also learn and develop opening new avenues. We may import polymers at cheap rates from India too. Diesel imports from India may be cheaper. India exports five million tons of diesel and our imports are 4.5 million tons, thus we may reduce our dependence on Kuwait Petroleum.

Due to worldwide recession, it is time to look towards Brazil, Russia, India and China (BRIC) countries in particular India to boost our trade, as enormous potential exists for trade between the two countries.

The main hurdle in the way has been political irrationalities. Trade relations have always been governed by political interest rather than by economic interest. In this process, both countries suffered huge economic losses over the years. The shipping corporation of India has equally showed keen interest and appointed General Maritime as their shipping agents, however no progress in lifting volumes have been made.

It is hoped that commerce ministry will remove the hurdles, and convince Indians to forego nontariff barriers to enable smooth flow of trade for mutual interests. Planners must also find a solution to level balance of trade, which is in favor of India. Without free visa regime, open to all cities, improved bilateral relation will stay a pipedream.