Caravan in Motion: Indo-Pak Trade

Caravan in Motion: Indo-Pak Trade

Majyd Aziz

Preamble:

26 November 2008: Ajmal Kasab goes on a rampage and by the time the guns go off, 257 people lose their lives in and around Taj Mahal Palace Hotel in Mumbai. Probably every Pakistani became persona non grata in this landmark hotel.
26 September 2011: 70 Pakistani businessmen led by Commerce Minister, Makhdoom Amin Fahim accompanied by a team of government officials arrive on a historic visit to India. They are transported to this very Hotel where charming ladies, clad in colorful saris, welcome them with a captivating smile, a cool beverage, and an aromatic garland.

This symbolism of positive change is awesome. Three years ago, the two nations were on a high alert, ready to settle scores once and for all. And now, in less than three years, the hotel personnel accorded amazing hospitality and bent backwards to make the delegation’s stay a memorable one.

It is in continuation of this feel-good environment that Mr Anand Sharma, the Indian Commerce Minister, invited his Pakistani counterpart, Makhdoom Amin Fahim, to Mumbai and New Delhi with a vision to upgrade the present status of trade and investment. Pakistan’s Commerce Minister while accepting this historic invitation conveyed the message that he wanted a strong delegation of Pakistani businessmen to accompany him as the new thinking in Islamabad is to involve the private sector in crucial decision making process.

When PIA flight PK 278 left Karachi for a short flight to Mumbai, the delegation was optimistic but there was this uneasiness that it might just be a goodwill tour, even though it was after 35 years that a Commerce Minister led such a delegation, and that the road towards liberalization of bilateral trade and investment was still meandering, was full of potholes, and there were many blind spots ahead. But there was a ray of hope.

Paradigm Shift:

This first ray of hope in the long drawn process of normalization and progress of bilateral trade and investment relations between Pakistan and India was the issuance of the Joint Statement at the conclusion of the 5th round of talks on commercial and economic cooperation held in Islamabad on April 27 and 28, 2011 by the Commerce Secretaries of the two neighboring nations. Both Dr Rahul Khullar of India and Mr Zafar Mahmood of Pakistan were buoyant and bullish from the onset and as Dr Khullar told some of us businessmen in Islamabad, “a successful Commerce Secretary should think and act like a businessman”.

Inspite of the roadblocks erected by vested interests, such as smugglers, extremist forces, myopic-vision hardliners, and those who do not desire a peaceful environment in the sub-continent, the fact of the matter is that there is now a positive karma hovering around those who are in a position to introduce a new thinking in bilateral trade relations as well as in formulating a fundamental change in the trade and investment regime that has impeded and deterred meaningful progress.

The prime decision agreed by both the officials desired sensible confidence building measures, removal of distrust and misunderstanding, and appreciating the concept of business-friendly environment in its truer and broader sense.

The Joint Statement has highlighted all the issues that need positive consideration so that a win-win situation is achieved. It is recognized that India’s exports and investment, if any, would generally dwarf Pakistan’s exports across the border. However, if this eventuality is taken as a reason for Indian dominance of trade and investment, then it would be fruitless to talk about trade enhancement. The solution lies not in indiscriminate and frivolous imports but in essential needs of the country, like oil and petroleum products, machinery, industrial raw material, alternate energy, processes for recycling, processes for productivity increase of agricultural products, information technology, and even joint ventures

The contentious issue of Non-Tariff Trade Barriers has also been a point of focus. There is an apparent shift in the thinking in New Delhi. It would provide a much-needed fillip to the trade regime if NTBs are sincerely addressed and are not made a subject of scoring points.

The issue of facilitation of trade, e.g. at the Wagah-Attari route, the shipping protocols, the easy and quick issuance of business visas, the opening of branches of banks, the decision of Manmohan Singh government to withdraw objections in WTO against the granting of short-term EU incentives to Pakistan, the people-to-people contacts thru initiatives like Aman Ki Asha, etc have also been helpful and are aimed towards progress. At the same time, SAFTA should be an achievable goal and the time-frame for its approval should be shortened.

The modalities for the visit were worked out between the two Ministries and other government officials with the cooperation of FICCI and FPCCI, the two apex bodies representing trade and industry of their respective countries. A fast-paced agenda was chalked out so that significant progress could be made.

The way forward was to highlight, deliberate, and find amicable and mutually beneficial solutions to trade and investment related areas with the desired optimism that these would transcend contentious issues and that trade and investment would not be hostage to these concerns and misunderstandings.

Evening in Mumbai:

It was late in the evening by the time the delegation completed the Hotel formalities and got down to business. Some delegates had pre-arranged meetings and were engrossed in what they do best. Doing business. However, the TDAP official incharge of logistics suddenly announced that a high level Roundtable meeting had been arranged with CEOs of various Indian and multinational banks and finance companies and that we had to accompany the Minister. The Indian side was coordinated by Ms Meera Sanyal, Country Executive (India) of Royal Bank of Scotland. Both sides articulated their opinions in a professional manner and there was a consensus that it was high time both countries allowed banks to open branches across the border.

The Pakistani delegation advocated the removal of Pakistan from the Reserve Bank of India’s negative list of countries where Indian investment was not allowed. Both sides agreed that the restricted visa system was a major impediment and must be addressed on a fast track. In my short speech, I emphasized the need for India to remove more cobwebs than Pakistan if there was to be an enhancement in bilateral trade. I also asked the CEOs what the Indian businessman wants from Pakistan. They had only one demand – Most Favored Nation status! After the meeting, I remarked half in jest to Ms Sanyal and others that even though India has officially given Pakistan MFN about 15 years ago, Pakistan has accorded an unofficial MFN status so many moons ago thanks to those involved in undocumented trade.

At night, FICCI President Harsh Mariwala hosted a well-attended dinner in honor of the Pakistani Commerce Minister and the delegation. This provided businessmen a wonderful opportunity to interact and discuss trade, cricket, and the health of Pakistan’s top singer Mehdi Hasan. Before dinner the host and Chief Guest made the usual speeches and then we were served a lavish dinner.

Exploring Business Between Neighbors (Mumbai Conclave):

The second day in Mumbai began with a filling breakfast where I was fortunate to have the company of the charming and energetic Deputy Secretary General of FICCI, Ms Ambika Sharma, who was deputing for Secretary General Dr Rajiv Kumar who was in Washington and was scheduled to meet us in New Delhi.

The prime program of the day was the India Pakistan Business Conclave and the theme was Exploring Business Between Neighbors. The FICCI President, Mr Harsh Mariwala, in his Welcome Address highlighted the wish list of Indian businessmen regarding more trade between both the nations. He dwelt upon the need for MFN, bank branches, raw cotton exports to Pakistan, etc. He informed that FICCI would be sponsoring a document identifying the relevant issues and offer practical solutions. He also disclosed that FICCI would soon send a large business delegation to Pakistan. He was also very optimistic about the outcome of the November meeting in New Delhi between the two Commerce Secretaries.

Senator Haji Ghulam Ali, the FPCCI President, in his very inimitable style very forcefully stated that the 21st Century is the Century of trade and not war. In a speech laced with touching observations, he stated that there are ample opportunities in both the nations for investment, human resources, and natural resources but leaders of both the countries have their fingers on the nuclear button and are pre-occupied with defense matters rather than trade and investment. He very emphatically declared that “Indian and Pakistani businessmen must take the lead and break all barriers and then both governments will have to accede to the wishes of the business community.” He lamented the fact that even though Pakistan and India had 20% of the world’s population, the trade between the neighbors was less than $ 2 billion. He wondered why businessmen were not allowed to drive across the border in their own vehicles. He very poetically added that it is time that the businessmen broke the shackles of distrust and forgot the past as there was a desire for love, peace, and progress.

Business leader S M Muneer, popularly known by his moniker ‘Bhai Jan’ is at present the President of India Pakistan Chamber of Commerce and Industry. He stated that when today globalization dominates the world, over 45 million people in India and Pakistan are living below the poverty level and in the last sixty five years, serious efforts have never been made to eliminate poverty, disease, and unemployment. It is the opportune time to think trade, trade, and trade. He advocated the opening of trade facilities thru Munabao and Khokrapar instead of concentrating total land trade through Wagah. He wondered why Indian private airlines do not have any strategy to tap the Indo-Pak air passenger traffic.

Minister Makhdoom in his remarks said that “regional trade is most important and is more effective in bringing progress in any country.” He compared SAARC with EU, NAFTA, and ASEAN. He advocated a non-restrictive trade regime and advised the two Commerce Secretaries to prepare a comprehensive road map to encourage trade and investment. He requested the Indians to support Pakistan’s case of EU benefits at present stuck up at the WTO. He said he has brought a large delegation representing 28 to 30 sectors and each one of them means business.
There were four prime presentations after the formal speeches and then there was animated interaction between the businessmen from both the countries. Adil Malia, Group President of Essar Group showed a five minute video on the Essar Group. He disclosed that Essar Power was the first private sector power plant set up in India with a capacity of 1600 mw. He gave some relevant take-home quotes that are very pertinent in how companies grow and prosper. He stated that “every achievement is not an end but the beginning of a journey.” He added that “crucial difference in his Group and others lies in our people.” And then he ended his presentation by stating that “of over 70,000 employees worldwide, only those who will risk going far will realize how far to go.”

The next speaker was Ramesh Natarajan who is the VP (South Asia) DHL Express. He is a regular visitor to Pakistan and he moaned that for him, visa was the main issue and due to various visa restrictions, the cost of doing business and the cost of logistics increase. He brought up the real issues at hand and questioned how trade would increase if four issues were not tackled. This point of his was echoed at all meetings by businessmen from both countries. He said that the four issues are visa, communication (cell phones and Blackberry do not work in each other’s country), road network, and a reduced negative list. He ended his comments by stating that “let’s move beyond the rhetoric.”

Rizwan Shaffi, CEO Crescent Bahuman, a leading denim manufacturer of Pakistan, gave an analytical comparison of India’s trade with various SAARC nations and highlighted the scope of potential in enhancing trade. He enumerated various sectors and products that should be focused on for improving Pakistan’s export figures to India.

Farid Fazal is the Director of Marketing and Sales DG Cement owned by the Nishat Group. He had a very detailed and pertinent presentation with latest figures about the cement industry. He criticized the attitude of officers of Bureau of Indian Standards who were not willing to come to Pakistan to certify atleast four cement mills on the pretext of volatile conditions in Pakistan. He said that his company had offered to fly the officials direct from the airport to the mills in their personal aircraft but still these officials refused to come. He termed it as a blatant and obvious non-tariff trade barrier. He also advised the Indian cement importers to increase their imports from Pakistan since the cement mills in Pakistan had ample production capacity and India was facing a cement shortage due to massive construction activity going on in India. He said that Pakistan had 29 cement mills producing over 45 million tons per annum and this would rise to nearly 52 million tons in this fiscal year. Most of the mills have the latest dried technology and Pakistan is a major player in global exports of cement.

There was a lively interactive session after the presentations. Prominent business leader Tariq Sayeed initiated the session with his comments that SAARC visa stickers are only limited to 100 people from Pakistan for only one year and for some reason, this facility has been reduced to three months. He remarked that when institutions and organizations are created, these should be allowed to function and the facilities or privileges given to them must be honored.

In my remarks, I brought up the issue of cement exports by trucks thru the Wagah border. In this context, I proposed that since there would be a heavy demand for Pakistani cement, and since the Pakistani cement is accepted and utilized by building contractors, and since Indian cement industry is unable to cope up with domestic demand, it is imperative that both the countries should allow movement of cement cargo by trucks so that the objectives mentioned above are achieved. I added that 5 to 7% less Pakistani cement is required as compared to Indian cement. I also highlighted the importance of including minerals in bilateral trade as both countries can meet their needs from each other’s mineral base. I also echoed the contention of most of the businessmen that both the governments must allow roaming facility of mobile phones in each other’s countries.
Commerce Secretary Zafar Mahmood disclosed that a Working Group has been formed to ascertain the feasibility of an oil pipeline across the border. He also said that warehousing facilities at the Wagah border are being upgraded. He also did not appreciate the clause in Indian visa application forms where Pakistani businessmen are asked an irrelevant question, “When did Indian businessman open the L/C in your company’s favor?”

At the conclusion of the first session, Manojj Patodia of FICCI presented the Vote of Thanks and ended with a comment that “a small step taken by Indian and Pakistani businessmen would be a giant leap for other Southeast Asian countries.”

After a superb lunch, the B2B meetings commenced. A large number of Indian businessmen gathered in the hall and waited to interact with the Pakistani businessmen. I was one of those very few Pakistani businessmen with whom most of the Indians wanted to meet. In fact, I was the first to take my position and the last to leave the hall. I was able to sign a few MOUs under which my company would represent some Indian companies and vice versa. I was able to conclude in principal three deals that would be operative from November 2011. These related to chickpeas, millet, soybean meal, etc from India while chrome ore and rice for third countries from Pakistan by Indian businessmen were also agreed.

Late in the evening the delegation got into the buses for the long trip to the airport for our flight to New Delhi. The sore point in the stay in Mumbai was that delegation members like me were not able to see anything in Mumbai except for the Gateway to India Memorial and that too since it was opposite the Hotel.

Doings in Delhi Darbar:

Morning in Delhi on a warm Wednesday morning began at ITC Maurya Hotel in the cantonment and secured area of New Delhi. The organizers had planned a B2B event during the day. I was being assisted by Dr Mandip Sharma, Founder President of Association of Women Entrepreneurs and Career Women of India (AWECWI) that I helped set up in 2007 when I was KCCI President and of which I am the Global Patron. Here too my plate of appointments was chock-a-full and here too I was the first to be in the Hall ready for action. I had meetings with some of the Indian businessmen with whom my company already does bilateral trade. I was also able to get new reliable and well known future contacts as they fit into our company’s scheme of things.

Later I attended a meeting where CEOs of different Indian organizations met the Minister and a group among the delegation. Various points were brought up and discussed. There was plenty of camaraderie and the CEOs also displayed lot of enthusiasm and sincerity.

Mr Anand Sharma had arranged a sumptuous dinner and a scintillating cultural show for the delegation. Among the distinguished guests were Chief Minister of New Delhi, Mrs Sheila Dikshit, and Minister of State for External Affairs, Mrs Preteen Kaur, who is also the Maharani of Patiala.

Exploring Business Between Neighbors (New Delhi Conclave):

The fourth day of the program was superb. The format of the conclave was changed after mutual discussions. The conclave was conducted by Mr Arvind Mehta, the Joint Secretary, Indian Ministry of Commerce and Industry. To answer the various issues, especially the Non-Tariff Trade Barriers, that were hampering Pakistan’s exports to India, FICCI had asked certain government officials to be present at the conclave. Mr C K Maheswari, Chief (Certification) Bureau of Indian Standards, and his colleague Mr U K Kher, Mr S K Reddy, Director Department of Revenue, Ministry of Finance, and E Reddy, ADCI, Central Drug Standards Control, Department of Health, were present.

Mr Arvind Mehta, in his opening remarks stated that NTBs are more of a perception than reality since the exporters compare the standards of their own country with standards in vogue in the importing country. Thus it leads them to consider these standards as NTBs. He challenged the Pakistani delegation to highlight even one Pakistan-specific NTB and said “this is the mental mindset” of the exporters from Pakistan. He referred to the BIS certification for Pakistan’s cement mills and said that BIS usually gives one or two year certification to Pakistani cement mills after fulfillment of the mandatory procedures.

Moving ahead, he said that “our objective is not just trade normalization but also to move forward. We have lost the opportunity of SAARC intra-trade and thus we are late with SAPTA and SAFTA.” He added that India has accorded duty free access to all the other SAARC countries and if relations between India and Pakistan were normal, India would also consider the same facility for Pakistan but he complained that it is Pakistan that has not moved forward in normalization of trade relations. He disclosed that India would bring down peak tariffs to 8% and by December 2012 to 5% on over 90% of the items. He further said that India will continue the liberalization policy even if Pakistan is slow to reciprocate. He rejected the fear that Indian goods will swamp the Pakistani markets if MFN is given to India.

Mr Tariq Puri, CEO TDAP, had a very focused and well-prepared presentation for the benefit of the Indian businessmen. He said that “preferential treatment in Indo-Pak trade is imperative and not just the process of liberalization of trade.” He commended the decision announced by Mr Anand Sharma that India would withdraw its opposition in WTO against the EU decision of providing preferential treatment to 75 textile items from Pakistan. He appreciated the fact that promotion of Indo-Pak trade will now become “official in tandem with FICCI/FPCCI/SAARC-CCI. He offered the facilities of Expo Centers of Karachi and Lahore for Indian businessmen. He said that the target of US$ 6 billion set by the two Ministers would become a reality and he hoped that multiple-entry, one-year, many-cities visas to businessmen would give a tremendous boost to enhancing trade and investment.

Mr Tariq Puri also presented some relevant facts and figures. He said Pakistan’s exports of 426 tariff lines (6 digit level HS Code) amounted to $ 275 million in 2010; however India imports $ 37 billion worth of these 426 items from other countries and these make up 17% of India’s total imports. Pakistan’s share comes to a meager 0.75%. He wondered whether Pakistan could capture 5% of the market since that would be around $ 2 billion. The potential is there and requires Pakistani exporters to gear up and capture their share of the Indian market. He lamented the fact that Pakistani businessmen were not aware of the prospects. He added that on the other hand, India exports 943 items to Pakistan (6 digit level HS Code) worth $ 1.60 billion. These 943 items make up over 50% of Pakistan’s total imports and India’s share is about 10%.

Mr Tariq Puri also disclosed that TDAP would organize Pakistan Lifestyle exhibition in India in March 2012. The night before, at the Sharma dinner, I had introduced Mr Puri to Ms Neelam Kapur, Principal Director General, Press Information Bureau, Ministry of Information and Broadcasting. It was decided there and then that at the Lifestyle, Pakistani movies would be shown continuously for the duration of the exhibition.

After his presentation, the Pakistani delegation raised the anecdotal and procedural issues related to NTBs. Mr Maheswari justified the process of certification by stating that BIS is not a regulator but its mandate is to grant licenses. With regards to cement, he said that it takes four months to grant license to a domestic cement mill and about six months for foreign cement mill. He added that policies are made by the government and his Bureau just implements it. On a complaint that renewal takes a longer time, he maintained that renewal was based on past performance, quality assurance, and on-time payment of prescribed fees. He disclosed that 14 Pakistani cement mills have been certified and that one more was certified just 24 hours ago.

Mr Reddy informed the conclave that every two months a joint meeting would be held at Wagah border to discuss and decide issues related to cross-border trade. On a complaint regarding the discriminatory attitude of Indian Customs, especially for those who participate in exhibitions in India, he assured that he himself would be the focal person and facilitator for Pakistani exhibitors for all matters concerning Customs.

There was a spirited interaction with business representatives from both the countries taking active part. I explained the difficulties faced by Pakistan’s cement manufacturers and proposed that India allow cement to be transported by trucks. I called for opening up all four channels of transportation. i.e. land, air, sea, and train for movement of goods, especially cement, minerals, and other bulk products. I also criticized the
Regulatory Duty on Pakistani cement. I also advocated the idea that all SAARC countries should have a unified stance when negotiations for EU’s GSP Plus is decided in 2014. I also asked for suggestions on how to reduce freight cost for Pakistani mineral exports to India.

The second session was attended by both the Ministers and relevant office bearers of FICCI and FPCCI. In his Welcome Address, Dr Rajiv Kumar, the affable and knowledgeable Secretary General of FICCI, said at the outset that the joint decision of the two Ministers on the Indo-Pak trade was “uninterruptible and irreversible” and that the avenue of bilateral trade is now easily navigable. He presented, on behalf of FICCI, a “Green Certificate” to those on the stage and said that FICCI would plant a tree in the name of the recipients of this certificate.

Mr Arvind Mehta presented a summary of the morning session and termed the visit as a “game changer” and said that all relevant issues were thoroughly discussed and debated. Rajan Bharti Mittal, Chairman of Airtel and a former FICCI President said that India’s exports to Pakistan rose from $ 300 million to nearly $ 2 billion in the past decade. He said that “the political hierarchies of both the countries must provide the facilitation and that the concerned officials must also understand that the trade relationship has to be moved into a different trajectory.”

Senator Haji Ghulam Ali again made a highly convincing speech and it was a thrill to hear his observations and opinions. He said that “the balance of scales has tilted towards more trade and that the Pakistani business community is overwhelmingly in favor of granting MFN to India.” He hoped that the two governments would soon abolish the policy of issuing city-specific visas and instead country-specific visas would become a routine very soon. He also demanded that the condition of Police Reporting should also end since businessmen are not criminals or felons. He invited Mr Anand Sharma to lead a 200-member strong delegation to Pakistan soon as guests of FPCCI.

Mr Anand Sharma stated that the visit of the Pakistani delegation is truly a “defining one and that we have talked in an environment of freshness and frankness. Let us resolve to change the paradigm. Our relations are historic with centuries of partnership in food, culture, arts, and even Sufism.” He further added that “ASEAN has become a region of vibrant economic activity and growth and is emerging as the largest integrated economic force. My question then is, why not then SAARC?” He very frankly said that “India and Pakistan’s relationship has been turbulent and marked by events that should never have happened. We are neighbors and we have to co-exist in peace, love, and harmony. We have not overcome the baggage of history, of deprivation, of poverty, etc. The benefits of progress should percolate down to all citizens, especially the youth. This is the guiding and motivating principle. The world is watching what is happening in New Delhi and Islamabad and whatever happens would resonant not only here but in capitals in many countries of the world.”

Mr Sharma moreover said that “we would ensure that Indian GDP would grow at a substantial rate and that we have the largest middle-class population. India desires that the entire region should grow with us and there should be no delay. The time lines must be made shorter just like we desire a much shorter negative list in our bilateral trade. I am sanguine that a time will come soon when we would not have the need to talk of any negative list.” He assured the delegation that India will address the visa issue very soon and would also undertake an early review of the investment policy regarding Indian investment in Pakistan. He disclosed that “some of the largest mergers and investments made today in USA and Europe are by Indian companies.” He ended his speech by stating that “we have been patient too long and now we are impatient.”

Makhdoom Amin Fahim began his speech by stating that “I am finding it difficult to differentiate between the Indian and Pakistani businessmen sitting here.” He said that in his opinion, “composite dialogue has resumed and that trade will influence politics as trade flourishes in times of peace and cooperation.” He further stated that “we lost the semi-final in Mohali but we won the friendship match since the atmosphere of fear and distrust has reduced considerably.”

Vikranjit Singh Sahney, the FICCI Vice President, who had regaled us with Bulley Shah’s poetry the night before at the Sharma dinner, presented the Vote of Thanx and invited all to join the Ministers at lunch.

Visiting the Associations:

The afternoon program was visits to strong and effective trade Associations. The first stop was at the Shangri-la Hotel where a jam-packed hall consisting of members of ASSOCHAM INDIA (The Associated Chambers of Commerce and Industry of India) welcomed the Minister and the delegation. Mr Dilip Modi, the young and energetic President, in his Welcome Address expressed satisfaction at the momentum of confidence building measures undertaken by both the countries. He raised the issue of MFN and disclosed that he would be leading a delegation of ASSOCHAM members to Pakistan soon.

Mr Ravi Wig, who was the President of PHD Chamber and who is actively involved in FICCI and is now the Chairman of SAARC Committee of ASSOCHAM was the person who had invited the delegation by calling me in Pakistan and was adamant that we accept their invitation. He is a great friend of Pakistan and wants to bring the businessmen of both the neighbors together. He started off his speech by stating that “if we want to talk among ourselves, in confidence, then we should talk in our own language.” He added that “both the flags of India and Pakistan have green and white, so atleast there is 67% similarity.” He advocated joint ventures and exchange of lists of products that could easily be imported or exported among both the countries. Subash Aggarwal, a senior ASSOCHAM member then gave a short speech on the potential of trade and investment in the future.

The highlight of the interactive session was the presence of Mr Arun Jaitley, the leader of the Opposition in Rajya Sabha and former Commerce and Industry Minister, who had shown exemplary courage and strong negotiation skills and had played a pivotal role at the WTO conference in Cancun in 2003. He gave the keynote address and it was a treat to listen to him. He said that “no country in the world produces or can produce every product and the search is always for availability at competitive rates. Trade is done all the time and we do it in the midst of many barriers.” He called for “accelerated efforts by India and Pakistan to export the potential of trade and investment because at present the potential of trade and investment between both the countries cannot be realized due to certain factors.” He said that “one of the strength of India is its large number of entrepreneurs and this has given an edge and the result has been over 8% growth in GDP.” He complained that WTO is not functioning at the pace it should and that due to the inadequate movement of the WTO Doha Round, emphasis is now on regional or bilateral trade agreements. He proposed that developing countries should also concentrate on low-cost products and services because these are more in demand.

Mr Jaitley also griped about the volume of indirect trade between the two countries and said that it is more than direct trade and adds to the cost and inefficiencies. He hoped that the land route for trade would soon commence once the infrastructure is in place and was of the view that it would be cost effective and would result in increased trade. He ended his speech by advising businessmen to “reform and be competitive and play the role of sheet anchor in ushering peace and prosperity in the region.”

Makhdoom Amin Fahim in his impromptu remarks said that “Indians are very reciprocal to the views of the Pakistani delegation. We are taking one forward step while the Indians are taking two forward steps. This is a good augury. I would also mention that on the issue of common interests, all politicians are on the same page.”

The meeting ended with Vote of Thanx by Mr P K Jain and then a short meeting was held in an adjacent room between the Minister, Mr Jaitley, and some of us over a cup of coffee.

The next stop was again at the Taj Palace Hotel where the members of Confederation of Indian Industry were waiting for us. We were escorted by Ms Supriya Banerji, Deputy Director General with a smile and a Namaste.

In the absence of Director General Mr Chandrajit Banerjee who was on an official trip to Japan, the Co-Chairman CII Agriculture Counsel Mr Salil Singhal presented the Welcome Address. He dwelt at length on the wish list that would enhance bilateral trade. He mentioned, MFN, the negative list, the land route facility, the problems related to visas, communication, NTBs, etc and proposed that efforts must be initiated for a Free Trade Agreement like the India-Sri Lankan FTA. He advocated the need for “promoting confidence building measures especially through the effective use of media and that a platform be created for economic media to interact on a regular basis.” He offered the services of Indians for sharing technical and managerial skills and developing the IT industry in Pakistan. He also offered the services of Indian experts in fields such as medical, agri-chemicals, and skill development. More importantly, he proposed the setting up of a Trade Facilitation Center at the Wagah border.

Commerce Secretary Mr Zafar Mahmood began his comments by mentioning that “trade, investment, and economic cooperation between Pakistan and India have had a chequered history.” He said that “Pakistani consignments to India are thoroughly checked and this is the prime reason why many Indian importers are reluctant to do trade with Pakistan.” He appreciated the decision of India to support the EU initiatives for Pakistan that India had previously challenged in WTO. He informed the audience that “Pakistan is not a protective economy and even though we have a FTA with China, we have nothing to be afraid of.”

Mr Tariq Puri commented that “I am the most excited person in this whole exercise as events are moving in the right direction and I see a strong role for TDAP as a trade facilitator, supporter, and hand-holder for businessmen of both the countries.”

Later, Makhdoom Amin Fahim performed the launching of the CII Study Report “India-Pakistan Partnering For Prosperity” which is an excellent study consisting of facts, figures, strategies, and pictures of various events related to Indo-Pak trade. I took the opportunity of requesting all those on the stage to autograph my copy of this Report.
An enthusiastic interaction then ensued with representatives from both sides taking keen interest and participating with their opinions. I commented on the need for a Pan-Asia approach with linkages between SAARC and ASEAN and the need for a common strategy for trade and investment with EU and North America. On my remarks on SME sector and the need to promote SMEs, Mr Singhal informed us that out of 9300 CII members, over 6000 members are SMEs. Ms Neesha Taneja, a well known research specialist who has conducted a detailed study on Indo-Pak trade, said that “breaking the wall is easier while building it is a tedious process.” Nazir Vaid and Khalil Sattar of K&N proposed the setting up of a food processing zone in Munabao as it would be of great help in getting food items from both the countries processed there. Vaid also called for sub-contracting software to Pakistan’s IT firms. Mr Zafar Mahmood made a very arousing final comment. He said, “Yes, we will definitely do more.”

At night, the Chief Minister of New Delhi, Mrs Sheila Dikshit, hosted a gala dinner at her residence. The cultural program was fabulously managed and the coordinator was a Sindhi lady whose family had migrated from Shikarpur Sindh. I introduced her to Makhdoom Sahib and it was pleasing to the ears to hear Sindhi being spoken in New Delhi. The food was so excellent that every guest probably over ate. This, being the last official event, there were good-byes with the pledges of Phir Milainge.

Taking A Break:

The Indian High Commission had given eight-cities, ten-days, non-police-reporting visa to the delegates. I took the opportunity to do some sightseeing in Delhi and then taking the train to see for myself what Emperor Shahjehan had done with state resources by building the Taj Mahal. It was a fabulous experience travelling by train to Agra. Kudos to national political leaders like Laloo Prasad Yadav, the erstwhile Railways Minister, who had provided leadership and vision with the result that today Indian Railways makes oodles of money and has huge monetary reserves while Pakistan Railways is ready to be scrapped and sent to the junkyard.

On Monday October 03, Makhdoom Amin Fahim met the Indian Prime Minister Mr Manmohan Singh where he was assured by the Indian leader that all obstacles to trade would be removed, India would honor the Indus Water Treaty, and that India desires a strong and stable Pakistan. The journey back home from New Delhi to Karachi by PIA was smooth and comfortable and the mood of the delegates was upbeat, because after all, the business community had smoked the first peace pipe.

Pragmatism Desired In The Roadmap:

The success of the delegation, the announcement of Foreign Minister Hina Rabbani Khar that MFN would be accorded to India, the flurry of activities at the Ministry of Commerce, and the feeling of anxiety among some sectors has led to a debate on the merits and challenges of granting MFN. The pharmaceutical industry led the opposition and their apprehensions were echoed by the automotive vendors, the farmers’ representatives, and now the rice people have joined the chorus. Each sector and industry has its genuine complaints and is not comfortable with the composition of the negative list. However, now that the MFN would be granted and the negative list prepared and finalized, there is this imperative need to understand the dynamics of Indo-Pak bilateral trade scenario. What has been done and what must be done requires serious consideration.

Opening the Routes:

Although there are four means of transportation of goods, there are still prescribed restrictions in the movement of such goods and products. Trade by air is one mode while movements by trains, by trucks, and by sea are more effective and competitive. However, even in this respect, there are barriers that impact on the freight cost, on timely delivery, and on the quantum of the goods that could be traded.

The Joint Statement appreciated the “significant progress made in developing physical infrastructure for trade through the Wagah-Attari land route.” At the same time efforts would be made to increase the trading hours, fast-mode clearance of goods, and facilitating large vehicles and containerized traffic.
There is substantial demand for imported chrome ore by ferro-chrome plants based in the eastern provinces of India. Feedback received at various international conferences and seminars indicate a demand between 100,000 to 125,000 tons of chrome ore per annum. This is inspite of domestic mining as well as exports of chrome ore by India. The biggest deterrent in Pakistan’s exports to India is the exorbitant freight cost by sea amounting to $ 22 to 25 per ton while the freight cost to China is around $5 per ton only.

There is a need to develop a mechanism under which both the countries can facilitate bilateral trade if the product or commodity is beneficial both to the supplier as well as to the buyer. This would encourage healthy competition and would enable businessmen to deal in products that would otherwise be not feasible.

Non-Tariff Trade Barriers:

A major deterrent in global trade has been the imposition of non-tariff trade barriers apparently to protect domestic industry, especially the low end product. Apart from industrial products or raw material, the NTBs are also biased in favor of the country’s agriculture sector. At the same time, NTBs shield inefficiency as well as providing indirect incentives to these products.

There is one school of thought that maintains that even though NTBs are meant to protect local sectors, the fact is that indirectly they affect the cost of production as foreign inputs get front-loaded and become expensive. The facility of high protection to inefficient domestic producers also enables them to earn higher profits and thus investment in essential exporting sectors is diverted to the protected sectors.

Once again, the example of cement can be mentioned here. There is a formidable demand for Pakistani cement in India as Pakistani cement is of superior quality and meets the various rigorous quality specifications and requirements. Moreover, this enables the Indian customers to use less cement than the Indian cement. There is a potential demand for atleast six million tons of cement from Pakistan every year. Unfortunately, Pakistani cement mills have never been able to supply even 800,000 tons in any given year. One prime reason is that Bureau of Indian Standards issues licenses to Pakistani cement exporters after its officials come to Pakistan to inspect plants and then certifying that cement being produced conforms to BIS quality standards. The licenses are issued for one or two years and then renewal takes place after another mandatory inspection of the factory premises by BIS representatives. This is a tedious and long process and it impacts negatively on the production plans of the cement mills.

It is proposed that the BIS license should have a validity of five years and the conditionality of visiting the mills to ascertain whether the mills is functioning or not must be removed. BIS can also use the services of international inspection and certification companies to take on this responsibility. In fact, Pakistani commercial exporters should also be allowed to export cement to the buyers in India under their own brand name with the stipulation that the name of the manufacturing cement mills must be mentioned on the packing.

SAARC countries have to make a paradigm shift if there has to be substantial enhancement in intra-SAARC trade. The lead will have to be provided by India followed by Pakistan. NTBs would thwart even long-term investment within SAARC countries as the investors would face an uphill task exporting to even their country of origin.

Infrastructure Collaboration:

Electricity, gas, and water are essential utilities for any country to prosper. Today, SAARC countries are suffering from endemic shortage of these utilities. It is time that SAARC nations plan out a comprehensive arrangement of becoming self-sufficient in these utilities. A commonality of views and realistic decision making would enable them to channelize resources towards this objective. India and Pakistan should spearhead this process. Indian investment in Thar Coal, for example, could be attracted. At the same time, India must rejoin Pakistan and Iran so that the gas pipeline from Iran becomes a tripartite reality soon.

India is strategically placed to cater to Pakistan’s petroleum needs and it could supply these from the refineries based near Pakistan. Of course, once a pipeline from Bhatinda Refinery all the way through Wagah is laid between the two countries, Pakistan would save fabulous amount of foreign exchange in transportation costs alone. There may be an argument in opposition to this deal that it would substantially increase the balance of trade in favor of India, but the plain reality is that Pakistan would correspondingly procure less from the present suppliers in the Middle East.

Cooperation Galore:

The feel-good factor present between the businessmen of both the countries could be the stimulus for further cooperation in other critical sectors too. Information Technology, especially software development and call centers, can be a solid start with Indian entrepreneurs and technical wizards taking advantage of the pool of excellent graduates in Pakistan. Agriculture, livestock, dairy farming, and induction of new processes, better seed development, enhancing yield per acre, and agri-based industries are another sector that could make this sub-continent the world’s bread basket.

One area of very close cooperation between India and Pakistan should be at international arena. At times, some countries or some trading blocs change the rules and regulation, or withdraw incentives, such as GSP+, or bracket certain countries together and discriminate against their products or goods. In times like these, it is imperative that both countries should have a joint strategy to counter these moves. If other SAARC members are affected or could face the same situation, then these countries should also be part of the joint strategy.

In 2014, European Union would decide on the new GSP+ policy. It is proposed that SAARC countries must institute a joint strategy so that no SAARC nation is discriminated vis-à-vis another SAARC nation.

Pakistani people must understand that trade between the two nations would not dilute Pakistan’s influence nor make it dependent on its big neighbor. On the contrary, Pakistan can rightly benefit from its proximity to India. Pakistan is one of the world’s largest consumers of tea while India is one of the largest growers of tea. Pakistan needs industrial machinery especially to develop its small and medium enterprises and India has tried and tested machinery and equipment that bring about a mini renaissance in SME sector. Pakistan’s rice industry can go value-added once it gets out of the mindset of exporting just the basic staple instead of enhancing value through various processes. Pakistan’s textile industry can remarkably benefit from procurement of raw cotton, from textile machinery, from textile dyes and chemicals, and from designs and technical collaboration in apparel and made-ups.

To enhance trade, it has been decided to allow designated banks to open branches in each other’s country. This should be further liberalized so that Pakistani private banks can open branches in some of the major business-oriented cities of India.

Liberalized Environment:

It is high time both India and Pakistan liberalize their strict visa policy so that there is a favorable people-to-people relationship through unshackled movement from one country to another. In the first instance, multiple, one-year visas for genuine businessmen should be issued in a faster mode and restrictions on visiting more cities must be removed. Furthermore, the limit on issuance of SAARC visas be liberalized and each country should allow upto 500 such visas every year.

Cross-border trade is ideal if there is uninhibited movement of people, goods, and investments. Too much security paraphernalia or even security phobia would retard cross-border trade and would discourage businessmen. Interrogation and undue harassment of genuine businessmen visiting each other’s High Commissions should also be discouraged and relaxed.

If and when Pakistan allows transit trade for Indian goods to Afghanistan, the prudent method would be adequate security and safeguards so that goods destined for Afghanistan do not detour to warehouses in Pakistan.

It is incumbent upon both India and Pakistan to discourage and tackle undocumented or informal trade with a heavy stick. At this moment in time, Pakistan is open market for over $ 2 to 3 billion worth of Indian goods through non-reportable channels. This is a serious blow to Pakistan’s domestic industry, such as value-added suiting and shirting fabrics that come through Dubai. A voluminous amount of consumer goods, such as soap, cosmetics, medicines, tobacco and different concoctions of betel nuts and mixtures also make their way into Pakistan. Some of these are health hazards and people have become addicted to these products.

There is a need to decide on a negative list of imports from one another rather than beefing up the positive list. Both the countries must ensure that a pragmatic list be agreed upon, one that would not seriously affect the viability of an existing industry in any of the two countries. It is proposed that the automotive vending industry, the polyester filament industry, the pharmaceutical industry, the PET industry, etc must have a level playing field since these sectors have a massive investment structure and viability must be maintained for a certain number of years. Most of Pakistan’s industries do not enjoy economies of scale compared to Indian counterparts and the prime reason being the huge market in India than in Pakistan.

India has accorded the Most Favored Nation status to Pakistan over fifteen years ago while Pakistan has been hesitant in responding positively to the Indian demand to reciprocate. Pakistan has successfully countered this by insisting upon India to ease up on NTBs. However, one paramount confidence building measure announced by Pakistan has been an indication that the MFN status would be accorded to India probably in November 2011. The high-profile Foreign Ministers meeting in India recently, which was a debut for Pakistan’s youthful lady Foreign Minister also paved the way for this status to become a reality.

Optimism and Hope:

After over six decades of intense hostility, of wars and incursions, of lack of trust and orchestrated hype of jingoism, of accusations and point-scoring at international forums, of brandishing nuclear superiority and neglecting social responsibilities, and unduly restricting people-to-people contacts, hindering families to be with one another, and holding trade and investment as a pawn in the chess game of brinkmanship, the new thinking is that it is time that the needs and aspirations of the millions who call the Indian sub-continent their home are held paramount and scarce resources are channelized to make life better for them.

It is primarily through trade and investment that the objectives can be achieved. It is for sure that only through a progressive economy that both the countries can bring about peace and prosperity in the whole region. It is definitely a fact that the Pakistani and the Indian businessmen, industrialists, technologists, service providers, and entrepreneurs can and will make the difference. This is the optimism. This is the hope. This is the prayer.

Fasilah-e-shehr mein paida kiye sub darr mein ne
Kisi bhi bab-e-riyaat se mein nahin aya

October 26, 2011