Rising tensions between India and Pakistan on Line of Control (LoC) threaten to sabotage the peace process between the South Asian giants. Cease fire agreement between them in 2003 had calmed the disputed border territory and gave way to Track-I dialogue between these countries. Over the years democratic powers had tried to open trade corridors for each other, building confidence of the investors and worked on the Non-Tariff Barriers (NTBs) especially on visa issues.
The dream of regional integration in South Asia is highly dependent on political and economic relations between India and Pakistan. First of all I will like to mention what enhancing trade and investment opportunities could bring to the people of these countries. In the light of current dispute on the LoC we shouldn’t forget what we are going to loose from all this.
In the South Asian region India is the biggest trading partner with Pakistan. We really need to look at the position of both the countries and who will be the looser in this whole game. So here I would like to mention some of the potential gains from trade with India and current state of affairs and how well authorities from Pakistan are dealing with that. According to data obtained from the Federal Bureau of Statistics, Pakistan, Pakistan’s total exports to India form the period of July, 2012 to November, 2012 was Rs. 12,360.59 Million which is 1.31 percent of the total exports of the country, Imports in the same period amounts to Rs. 56,016.56 Million which is 3.23 percent of the total share of Imports in the country. Trading relations between these countries have significantly improved over the years.
We also need to look at the status of highly talked Most Favored Nation (MFN) status to India. While India has awarded Pakistan MFN status in 1996, Pakistan was supposed to grant MFN status to India last year but the bureaucratic procedures and pressure exerted by the different groups in the country resulted in lingering this process. For many of us MFN would certainly means like granting India the more favored importing country, for clarity: “This only implies that Pakistan will give the same treatment to Imports from India as it does to imports from any other WTO member states with which Pakistan doesn’t have Free Trade Agreement (FTA) or Preferential Agreement (PTA). (Source: Ministry of Commerce, Pakistan).”
According to recent study conducted by Sustainable Development Policy Institute (SDPI), informal trade between India and Pakistan is around US $4.2 billion, which is way above the formal trade. So what we both the countries are gaining from this informal trade? A study by Dr. Hafiz Pasha for Ministry of Commerce, Pakistan shows that if Pakistan grants MFN status to India and mutual relaxation in NTBs, then the volume of trade can rise from US $2.7 billion to US $7.1 billion. Same study also took into account macro-economic impacts of trade liberalization with India; here is brief summary of those: Gross Domestic Product (GDP) of Pakistan could be 1.5 % higher, net increase in employment in the medium term is about 169,000, consumer welfare gain estimated to be Rs 70 billion and likely improvement in the global trade balance for Pakistan. Other important point that is worth mentioning here is the rising interest of entrepreneurs from both sides of the border for the investment opportunities. The recent trade liberalization efforts paved the way for consolidated foreign direct investment (FDI) policy and many other areas of economic corporation.
So we really need to think out of box, where this conflict will lead us to. Hostile environment between both these nations have some serious repercussions for the people living on both sides of LoC and border. All the efforts made so far for Track-I and Track-II dialogue are put aside when a single bullet is fired on LoC. There is very important role that comes in here which rests with civil society, media and business community on both sides of the border. Media can act as a catalyst for exaggerating this conflict or they can exert pressure on both the governments to normalize relationships in favor of the citizens of these countries. Business community on both sides of the border have huge stake in normalizing relationships with India, so sitting quietly won’t help them now, same is the case with all the big chambers of the countries.