A ‘Wah Taj’ moment for India & Pakistan!

By Rakesh Khar | Updated: Nov 09, 2011, 19:20 PM IST

When Pakistan Commerce Minister Makhdoom Mohammad Amin Fahim rose to speak at the Taj Palace hotel in Mumbai end September this year, lot of eyebrows were raised about the choice of the venue for the bilateral trade conference. But from the rapid turn of developments culminating in Pakistan’s decision to finally grant (never mind the flip flops) Most Favoured Nation (MFN) status to India, it seems, the Taj magic has worked setting the two countries on a new constructive path ahead of the two premiers meeting at SAARC summit in Maldives. <br><br>

The changing landscape portends a gigantic opportunity for India as it engages Pakistan in a relationship that means business. While Taj Palace was brutally defiled by a handful of terrorists from across the border that lay seize to the financial capital three years ago, by hosting Fahim, Taj-the ultimate icon of hospitality-symbolised a new beginning. India has to now take a pro-active lead and soak in the Taj moment to put the relationship on a new high. <br><br>

The two nations have been caught in a political time warp leading to a near vacuum in business. While Indian policy makers have eyed somewhat successfully businesses in Sri Lanka, Bangladesh and Nepal, China has warmed up to Pakistan in a big way in recent years, further cementing their strategic ties. <br><br>

“Beijing has invested billions of dollars in highways, naval ports and energy conduits within Pakistan, all of which serve China’s strategic or economic security needs,” said a Brookings foreign policy paper on US, China and Pakistan in 2010. For Pakistan, China has been everything the U.S. has not, while China has leveraged Pakistan’s volatile relationship with India to maintain a strategic hedge against a close competitor in the region, US China Pakistan: Seeking Convergence report argued. <br><br>
Syed Hasan Javed, High Commissioner of Pakistan in Singapore said during end September that the trade between China and Pakistan had hovered around US$10 billion. China had constructed US$20 billion projects in Pakistan, while US$14 billion are in pipeline and Chinese companies had decided to invest US$15 billion over the next five years in Pakistan’s energy, infrastructure, telecom, mineral exploration and banking sector. <br><br>
This poses a new challenge to India’s strategic interests in the region. Indo-Pak improved trade relations can bear stability and growth in south Asia. India has given the MFN status to Pakistan and Pakistan has now reciprocated marking it as the biggest breakthrough yet in Indo-Pak relationship. <br><br>
A Federation of Indian Chambers of Commerce and Industry (FICCI) background note estimated that the bilateral trade would reach US$ 6 billion if SAFTA was implemented in letter and spirit by Pakistan. The comparison of India’s bilateral trade with Bangladesh and Sri Lanka indicated that in spite of bigger economic size, trade with Pakistan was meagre US $ 1.8 billion. It was $ 2.8 billion for Bangladesh and $ 2.7 billion respectively for Sri Lanka in 2009-10.
The intra-regional trade in south Asia has remained stagnant at less than five percent of the total trade in the last twenty-five years. Neither India nor Pakistan feature in the category of top ten trading partners of each other. Pakistan’s share in India’s total exports increased from 0.45 percent in year 2003-2004 to 0.88 percent in year 2009-2010 and imports from Pakistan as percentage of total imports of India marginally increased from 0.07 percent in 2003-2004 to 0.10 percent in year 2009-2010.
Industry estimates suggested that the formal trade between India and Pakistan increased from US$ 616 million in 2004 to US$ 1.8 billion in 2009-10. The informal trade including third country trade between India and Pakistan was estimated at $10 billion. Trade through third countries or circular trade is mainly conducted through agents operating in free ports like Dubai or Singapore and the Central Asian Republic (CAR) countries. The size of circular trade underlines the potential of flourishing bilateral trade between the two countries.
India now needs to seize the opportunity because the timing is perfect to go beyond the rhetoric and think out of box solution to enable business to firmly drive politics. The commerce secretary talks ahead should completely free imports and exports to ultimately benefit consumers across the borders. It needs to reciprocate immediately the call for import of power from India.
Improved trade would ensure cheaper raw materials and low transportation and insurance cost which would translate into quality goods at competitive prices for both the countries. FICCI, which coordinated the first ever Pak commerce minister’s visit to India in 25 years, has suggested that India and Pakistan use common multinational companies operating in their respective countries as meaningful conduits for trade and investment if they source raw material from each other. It also argued for setting up exclusive economic zones in Pakistan for Indian-based investors to attract export-oriented FDI.
Time for both the premiers to loudly say ‘Wah Taj at Male’!
<i>(The writer is Editor-Zee Research Group)</i>