Pak panel asks to grant India `Most Favoured Nation` status
Last Updated: Wednesday, April 21, 2010, 20:01
  
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 added.

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.

PTI


First Published: Wednesday, April 21, 2010, 20:01


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