It's the economy...
9 July 2001
New Delhi: Prime Minister Atal Bihari Vajpayee announced the initial steps to set the mood for the Agra summit, relaxing the belligerent
reactions that India and Pakistan fall into in most of their interactions. Scholarships to students, visas to academics and artistes,
more humane treatment to what are called "civilian prisoners", and better trade facilities. The Indian Coast Guard will no longer
capture Pakistani fishermen who stray into Indian waters while fishing or indulging in a bit of quiet smuggling. The fishermen
would be sent back to Pakistani waters instead of cramming them into overflowing Indian prisons.
It is in such small gestures that India-Pakistan relations are measured. The Delhi-Lahore bus service was a small gesture that led
to the Lahore process, which was, however, cut short by the hawkish strains in the Pakistani establishment. Trade and
people-to-people contact can be the first steps to remove the years' old mistrust and suspicion.
Among the summit eve concessions announced is the reduction/elimination of tariff on 50 tariff lines, which would make them
cheaper and more attractive to Indian importers. The hardline groups in Pakistan disapprove of increased trade with India, but
several types of Indian goods are freely available in Pakistan. Most of the India-Pakistan trade is on an "unofficial basis", that is,
smuggled from India directly or channelised through other ports like Dubai. Smuggling is a viable business in Pakistan, whether
it is from Afghanistan, India or Iran. Afghanistan imports a vast variety of goods through the transit facility provided by
Pakistan, and most of them find their way back to Pakistan. Many influential sections in Pakistan are involved in the large scale
smuggling into the country. To these important people, opening up trade with India would wipe out the profits of their "unofficial
trade" business. The estimated illegal trade between India and Pakistan is said to run to over US $1 billion. Official figures for
India-Pakistan two-way trade is Rs 700 crore.
India imports textile yarn, salt, fruit and nuts, sugar, leather, and metal scrap. Low transportation costs from across the border
would make possible the import of list of items, including marble, knotted carpets and light manufactured goods. In their
meetings with the Indian counterparts, Pakistani businessmen have shown interest in importing raw and semi-finished products
that would help in reducing costs and increasing their exports to India and other countries. Indian businessmen are also keen to
expand their export markets to Pakistan. An Indo-Pakistan Chamber of Commerce and Industry has been set up.
The question of Most Favoured Nation status (MFN) has become a sticking point in India-Pakistan trade relations. India
accorded Pakistan MFN status, an obligation under the WTO, to Pakistan several years ago. However, Pakistan is still to
reciprocate by extending MFN status to India. Under the WTO charter, each member-country is obliged to extend the same
tariffs and concessions to all member countries without discrimination, on a reciprocal basis. New Delhi has refrained from
complaining to the WTO on the matter as in Pakistan, the MFN status has become an important political issue, with the
Jamait-e-Islami opposing it vehemently. Meetings of the Indian and Pakistani businessmen have discussed the matter, and
despite the obvious advantages to Pakistani businessmen no definite assurances have been forthcoming from the government.
Sugar had been an important item of export between India and Pakistan, during times of glut in Pakistan and when high prices
prevail in India. India has purchased sugar from Pakistan, the last time during Mr Nawaz Sharif's regime. Early this year,
Pakistan banned the import of sugar from India.
Other South Asian nations are keen to see an improvement in trade ties between India and Pakistan. The SAARC nations have
much to gain with greater regional trade and investment flows. In January 1998, Bangladesh Prime Minister Sheikh Hasina
Wajed had convened a trilateral "business sans politics" summit in Dhaka by inviting the Indian and Pakistani prime ministers.
But trade ties between India and Pakistan still remain tied to politics. The Pakistani establishment has heard the "Kashmir first"
slogan for far too long to be able to change its views without a great deal of preparation. Gen. Musharraf has tried to project a
moderate stance for over a year by repeatedly expressing his willingness to talk to India at any place and at any time. However,
this moderation was accompanied by hardline statements from his Foreign Minister and others in the government. Pakistan's
Finance Minister Shaukat Aziz said in a recent pre-summit interview that talks with India would always be "first Kashmir and
When Pakistan had signed up about half-a-dozen power projects with foreign companies, the World Bank had suggested that
Islamabad could sell surplus power to India. Several of the projects did not materialise, but Pakistan currently has a power
surplus, partly because of economic stagnation in the country. However, no serious negotiations on the sale of power have
taken place. Islamabad had signed a gas pipeline agreement with Turkmenistan through Afghanistan. It had been touted as an
economic coup by Pakistan, for providing access to the sea. But no discussions were held to prepare the obvious market for
natural gas in India. Pakistan needs to make some hard economic decisions which it is unable to do as it has boxed itself into a
Kashmir fixation that transcends every other consideration and need.
On the Indo-Iran gas pipeline proposal, New Delhi has conveyed its serious concerns to Iran at the transportation of its vital
energy requirement through Pakistan. In the recent meetings, both Iran and India have agreed to conduct pre-feasibility studies
on the overland and undersea routes for transportation of natural gas. But, Teheran has also assured New Delhi that it is
Teheran's responsibility to transport the gas to Indian borders. Pakistani newspapers have quoted official sources as saying that
the Indo-Iranian gas pipeline would come up for discussion during the summit.
Islamabad's economic difficulties may have forced it to begin talking of the benefits that the gas pipeline transit fees would
provide, but it is too sudden a change, which has not had time to percolate to the fundamentalist groups that spout hate-India
slogans. While it prepares to talk on the gas pipeline issue, Islamabad needs to take a closer look at the need to create the right
environment for the proposal to go through. To continue blocking other types of trade between the two neighbours would
reinforce the mistrust on both sides.
The opinions on the outcome of the Agra Summit between President Musharraf and Prime Minister Vajpayee range from
changing history to cautious optimism to futile effort. The Pakistani insistence on Kashmir as the only cause of the strained
relations has clouded the main issue of improving bilateral ties between two neighbours. Forward movement on India-Pakistan
bilateral matters has been glacially slow for the past decade. In effective terms it has boiled downed to easing visa rules,
providing better facilities for people intending to visit friends and relatives across the border. The two leaders will need to make
a determined bid to improve ties without getting diverted into grandiose gestures and statements.