Indo-Pak Trade: Fragility amid Hostility

Majyd Aziz

Tuesday, August 6, 2013 was not expected to be any special day for the troops or village folk living on the western side of the 740 km Line of Control (LoC) that divides Kashmir. Most of them were observing Ramadan, the month of fasting and special prayers, when clashes flared up due to firing from both the nuclear neighbors. Who fired the first shot and what provoked the firing remains a moot point as the usual accusations and counter-accusations from state players were made and the blame game commenced. The tense environment was further vitiated when the hawkish minority on both sides further aggravated the situation. The brouhaha created by retired uniformed personnel, who are termed ‘defense analysts’ and by the Indian media anchors reached a crescendo and it seemed that they would prevail and goad the weak New Delhi government to go whole hog and give the troops the fighting order.

There are, however, doves on both sides of the border too who, in realizing the imperative need to co-exist, urged restraint and reason since a continued series of violations and provocations would jeopardize the easing of tensions, the movement of people, and more importantly, the liberalization of trade and investment. The skirmishes have not ended completely since indiscriminate and unprovoked firing on forward posts along LoC occurs on a daily basis and the collateral damage has become a matter of serious concern.

Prime Minister Nawaz Sharif and his Indian counterpart Manmohan Singh were singing a pleasant duet even before the former took oath of office. A new Track II initiative was agreed with Islamabad nominating veteran diplomat Shahrayar Khan while Premier Singh sent his trusted man, the former High Commissioner to Pakistan, S K Lambah. Saner elements in India and Pakistan are cautiously optimistic that the meeting of the two Prime Ministers on the sidelines of the United Nations General Assembly in September would proceed as planned and there is this hope that the meeting would be a game changer in a real time mode.

The above narrative is a reflection of the blow hot, blow cold relationship as far as trade and industry is concerned. Whenever the businessmen are able to lobby successfully with both governments to ease up on restrictions, the anti-bilateral elements ensure that the progressive movement slows down to a snail’s speed. Ironically, the informal trade, whether through cross-border, or through third-country, or through personal baggage, continues unhindered, increases exponentially, and becomes more profitable. While documented bilateral trade is US$ 2.35 billion, Indian exports around $ 1.85 billion while Pakistan has managed to cross the $ 500 million threshold, the informal trade is estimated between $ 3 billion to $ 4 billion. Thus, the vested interests cannot afford at any cost to upset the apple cart. It is a sad commentary for SAARC that border tensions and hostilities on LoC affect the overall regional cumulative integration that is crucial for the economic deliverance of the denizens inhabiting in this dynamic region. 

 The concerned Ministers and officials tell the business community that they envisage bilateral trade of $ 15 billion by end 2015 and that they are sanguine that the potential for Pakistani goods is atleast $ 5 billion. That is easier said than done. Notwithstanding these optimistic forecasts, the fact is that words need to be sincerely put into action. Pakistan and India have to determine the route and their leaders have a choice, either move on a positive or progressive path or continue to maintain their vulnerability to jingoistic outbursts of the hardliners and the vested interests.  Both countries are at this moment in the throes of an economic crisis. The deterioration in the value of their currency, the hardships faced by the burgeoning population, the economic fall-out on their industries and business establishments, their ever-increasing budgetary allocations for their defence requirements, and the perennial energy and other infrastructure shortages, etc, demand that efforts should be focused on regional cooperation for setting up a development agenda that is inclusive and sustainable. The present imperatives should be common policies that are welfare-oriented rather than militaristic-focused, the emphasis should be directed towards food security and cooperation in agriculture, the planning should be initiated to tackle the energy poverty and energy deficits, there should be a synergistic approach towards reduction of risks whenever and wherever natural disasters affect the region, and concerted efforts and decisions must be undertaken to streamline regional connectivity, liberalize regional mobility of workers, allow regional access of vehicles to transit, and be in agreement on a futuristic approach to take advantage of the youth bulge, the demographic dividend that would be the game changer for the region if pragmatically and properly  harnessed in the years to come. 

Recently, the World Bank issued a 293-page document, “Pakistan the Transformative Path” that lists twelve most urgent transformational reforms required to be taken by the Nawaz Sharif government. The World Bank insists that despite the tensions and other complexities that are affecting the normalization process, it is incumbent upon both the democratic governments to complete the liberalization and normalization of the trade and investment process. The report also stated that “Conservative estimates suggest that bilateral trade flows could multiply at least three times, and most observers agree that the growth-enhancing dynamics that this process would unleash would be even more significant for foreign direct investment (especially information technology and manufacturing), services (including financial and tourism), integrated value chains in manufacturing, and power projects.”

 

Pakistan and India must embark upon a new generation of a thinking process. The people’s aspirations must become more vociferous in calling for a paradigm shift towards social, economic, and regional stability. The social benefits of economic progress must benefit the people and must trickle down to the region’s population. The governments must endeavor to create the environment that promotes trade and investment. It is time to remove most of the Non-Tariff Trade Barriers, it is time to leverage the private sector’s knowhow, capital, entrepreneurship, and efficiency to drive the region’s economic growth, and it is time to dilute the nexus of belligerent hardliners that includes retired and redundant defence analysts, unscrupulous advocates and facilitators of undocumented trade, extremist nationalists, bigoted politico-religious parties and organizations, and confrontational media anchors, etc. 

This year when the United States celebrates the 50^th Anniversary of the iconic “I have a dream” speech of Rev Martin Luther King, Jr, his words take on a significant meaning when echoed in the Pakistan-India context: “We must learn to live together as brothers or perish together as fools.”