Pak panel asks to grant India `Most Favoured Nation` status

Pakistan government should consider granting India the `Most Favoured Nation` status to exploit the huge trade potential, an official panel has recommended.

Updated: Apr 21, 2010, 20:01 PM IST

Islamabad: Pakistan government should
consider granting India the `Most Favoured Nation` status to
exploit the huge trade potential as free trade relations with
it will enable the country to achieve higher and more
equitable GDP growth, an official panel has recommended.

The recommendation was made by the Panel of
Economists, constituted by the Planning Commission, in its
final report.

The report said as a first step, trade relations
between the two countries should be normalised by trading on
the Most Favoured Nation (MFN) status.
As a second step, policymakers should address problems
related to information exchange, trade facilitation, banking,
non-tariff barriers, visas and communication.

The third step is to enable environment for investment
has to be created so that India and Pakistan can enter into
joint ventures, the Business Recorder daily reported today.

The panel asked the government to allow the import
from India of raw materials not available locally.

"It is essential to move from a positive list approach
to a negative list approach. It is important for the two
countries to have a common Harmonised System of Codes and
greater transparency," the panel`s report said.

"The current DTRE scheme whereby quotas are fixed for
raw material imports from India meant specifically for exports
suffers from red-tapism and graft. A better solution is to
open up raw material imports across the board," the report

The panel also recommended the opening the
Attari-Wagah border to allow transportation of goods by road
at the earliest as this link is already operational for
movement of passengers and asked the government to consider
allowing India-Pakistan joint ventures.

"Currently, there are no India-Pakistan joint
ventures. As several Indian companies are showing interest in
having joint ventures in Pakistan, it is important to
understand the nature of such investments and provide timely
facilitation," the report said.
The report noted that payments through formal channels
assume a greater role as there is evidence of anonymous
transactions between trading partners. Currently, the payments
system is formalised through the Asian Clearing Union, which
is inefficient as payments are often delayed.

Pakistan and India need to have an institutional
arrangement so that state, private and foreign banks can
participate freely in banking transactions, the report said.

The Panel of Economists also said there is a need for
greater transparency to address problems related to
confirmation of letter of credit and to payments.

As there are only two operational routes ? the
Mumbai-Karachi sea route and the Attari-Wagah rail link ? new
routes should be opened up.

The panel recommended the rail protocol should be
amended to remove restrictions on wagon balancing and to
improve wagon availability.

Measures such as simplified border procedures should
be introduced at land borders. The shipping protocol should be
amended so that third country and non-national flagships can
ply on the Mumbai-Dubai sea route as this will help in
lowering shipping costs, the report said.

"As new firms enter into Indo-Pak trading, trade needs
to be facilitated through superior information exchange on
commodities and quantities to be traded. Establishing web
portals towards this end would perhaps be the quickest in
terms of implementation," the Panel of Economists said.

There is also a need to quickly reduce non-tariff
barriers that are "more pernicious" on Pakistan`s exports to
India, the report said.

Bilateral trade between Pakistan and India in 2007-08
was valued at USD 2.3 billion, representing approximately two
per cent and five per cent of Pakistan`s total exports and
imports respectively.

Pakistan`s exports to India are almost half its
exports to South Asia, while its imports from India are in
excess of 70 per cent of its imports from South Asia, which in
value terms are more than its imports from France, Canada, the
Netherlands, Turkey, Iran and Thailand.

Nevertheless, trade between the two countries is lower
than its potential. Recent estimates on trade potential
suggest that trade could be in the range of USD 3 billion to
USD 10 billion compared with the annual official trade flows
over the last six years of less than 400 million dollars.