To Stop LoC Trade Misuse, Omar Calls For Proper Banking System

8 October 2009
The Indian Express


Srinagar: Jammu and Kashmir Chief Minister Omar Abdullah has said that there is an immediate need to set up a proper banking system and communication link to prevent the misuse of the cross-LoC trade by militants. The trade was initiated a year ago as a major India-Pakistan confidence building measure aimed at re-establishing business connection between the two Kashmirs. “It is a fact that money is being channeled to militants by misusing the barter system. There is a small number of traders, who have been found misusing this trade. They are getting the goods and money isn’t going back. Instead, it is channeled to militants through their OGWs (over ground workers),” Abdullah told The Indian Express. “The continued absence of banking system and communications (between the two Kashmirs) has created a lacuna that is being exploited. Trade function is not the villain.” Abdullah said the cross-LoC trade is a huge CBM. “Apart from its business potential, this trade has a tremendous emotional value attached to it. It is very important to be treated in that fashion,” he said. He insisted that the banking system and proper communication is essential if we want this trade to turn into a real confidence building measure, which is its aim. “From the day our government took over, we have taken up this issue with the Central government. We have made this point very clear before the (Union) Home Minister and other officials,” he said. “The central government is aware of the serious security implications raised by this lacuna and we have been promised that the concerned departments are already framing guidelines for setting up a banking system and communication to avoid any such misuse of the trade.” The Indian Express first reported that the J-K police have busted a hawala racket where few individual traders were funneling money to militants in lieu of the goods imported from across the LoC. The reason, J-K Police investigations reveal, is the misuse of the barter system in which there is no mechanism to value goods or check the exact volume of the goods bartered between the traders. India and Pakistan have already approved a list of 23 items from Kashmir and 26 items from the Pakistan that are being traded through the two crossing points of the state. Noted Economist and J-K Bank Chairman Dr Haseeb Drabu, who was advising the government on the issue as the state’s Economic Advisor, had insisted last year that the government needs to put five basic networks in place to make the cross-LoC trade a viable and sustaining economic process. Apart from setting up a banking relationship, including mutual acceptance of letters of credit, Drabu suggested that a communication network to help traders monitor prevailing rates on either side, a transport network, a regulatory network and legal framework were necessary to turn this symbolic gesture into a real business between the two Kashmirs. “The lack of banking facilities and the absence of an institutionalized financial services mechanism to monitor the transactions is already choking the cross-LoC trade and is preventing it from reaching any meaningful size,” Drabu told The Indian Express.