Skirmishes between India and Pakistan have been escalated to international borders from the Line of Control (LoC). Rising tension between the two neighbors is a major threat to peace in South Asia. Cease fire agreement in 2003 had calmed the disputed border territory and gave way to Track-I dialogue between these countries. Over the years governments on both sides had tried to open trade corridors for each other, building confidence of the investors and worked on the Non-Tariff Barriers (NTBs) especially on visa issues.
The dream of regional integration in South Asia is highly dependent on political and economic relations between India and Pakistan. Only trade and investment could bring prosperity in the entire region. Everyday disputes between two regional powers could deprive the over one fifth of the world’s population from their right of development.
Notwithstanding, trading relations between these countries have significantly improved over the years. India is the biggest trading partner of Pakistan in the South Asian region, it is, therefore, evident that increase in volume of trade will benefit Pakistan. According to the Federal Bureau of Statistics, data, Pakistan’s total exports to India form July, 2012 to November, 2012 was Rs12,360.59million which is 1.31 percent of the total exports of the country. Imports in the same period from India amounts to Rs56,016.56million which is 3.23 percent of the total Imports.
Moreover, India has awarded Pakistan with the status of Most Favored Nation (MFN) in 1996. Pakistan was supposed to grant MFN status to India last year but the bureaucratic procedures and pressures from various quarters lingered on the process. For many of us MFN would certainly means like granting India the more favored importing country, for clarity: “This only implies that Pakistan will give the same treatment to Imports from India as it does to imports from any other WTO member states with which Pakistan doesn’t have Free Trade Agreement (FTA) or Preferential Agreement (PTA). (Source: Ministry of Commerce, Pakistan).”
According to a recent study conducted by Sustainable Development Policy Institute (SDPI), informal trade between India and Pakistan is around US $4.2 billion, which is way above the formal trade. A study by Dr. Hafiz Pasha for Ministry of Commerce, Pakistan shows that if Pakistan grants MFN status to India and mutual relaxation in NTBs, then the volume of formal trade can rise from US $2.7 billion to US $7.1 billion. Same study also took into account macro-economic impacts of trade liberalization with India; here is brief summary of those: Gross Domestic Product (GDP) of Pakistan could be 1.5 % higher, net increase in employment in the medium term is about 169,000, consumer welfare gain estimated to be Rs 70 billion and likely improvement in the global trade balance for Pakistan. Other important point that is worth mentioning here is the rising interest of entrepreneurs from both sides of the border for the investment opportunities. The recent trade liberalization efforts paved the way for consolidated foreign direct investment (FDI) policy and many other areas of economic corporation.
Pakistan really needs to think out of box, where this conflict will lead us to. Hostile environment between both nations have some serious repercussions for the people living on both sides of LoC and border. All the efforts made so far for Track-I and Track-II dialogue are put aside when a single bullet is fired on LoC. There is very important role that comes in here which rests with civil society, media and business community on both sides of the border. Media can act as a catalyst for exaggerating this conflict or they can exert pressure on both the governments to normalize relationships in favor of the citizens of these countries. Business community on both sides of the border have huge stake in normalizing relationships with India, so sitting quietly won’t help them now, same is the case with all the big chambers of the countries.
This article was originally published at: Economic Affairs
The opinions expressed in this article are the author's own and do not necessarily reflect the viewpoint or stance of SDPI.