Pakistan?s granting the Most Favoured Nation (MFN) status to India is truly momentous news, which should be welcomed by all those who desire stability, peace and prosperity in South Asia. The clearance by the Pakistan Cabinet of giving India the MFN status will ensure that the secretary-level talks scheduled for later this month in Delhi can focus on the way forward and on removing the constraints in expanding bilateral trade. The announcement will surely also help to roll back the pessimism that currently characterises bilateral relations. This could be one of those news that could help lift investment sentiments not only in India but in the entire region.
I have a personal satisfaction from hearing this news, having visited Karachi in July, against general advice from well wishers, thereby helping to break the impasse in commercial relations that had set in after the tragic events of November 2008. Not many in India believed in my optimism, which I expressed on my return from Karachi. My optimism was, however, based on substantial evidence in the form of an exceptionally large and high level participation not only from Pakistani industrialists but from officials as well.
I am beholden to Mr Zafar Mahmood, the commerce secretary of Pakistan, who is reported to have briefed the Pakistani Cabinet this week, and played a major role in achieving this breakthrough. He did me the honour of flying down from Islamabad to participate in the seminar at Karachi. It is the leadership of people like him and his minister, Mr Makhdoom Muhammad Amin Fahim, which has helped to achieve this outcome.
On our side, the commerce secretary Mr Rahul Khullar, who found all the needed support from the commerce and industry minister Mr Anand Sharma, showed the foresight and courage to pull this off. The fears that the normalisation of trade will somehow damage and negatively impact Pakistan?s domestic industry are completely misplaced. As we have seen in our case, trade liberalisation has a strong positive impact on economic growth. Private entrepreneurs in both countries are dynamic enough to make the necessary adjustments to export the new opportunities that will be opened up now. I expect a huge expansion in intra-industry trade between the two countries. This will be facilitated by foreign MNCs who will now have the opportunity to establish full scale plants in either country and take the components across the borders for final assembly.
The normalisation of India-Pakistan trade will open two other tantalising possibilities. One, that with greater trade facilitation in South Asia, production networks will now be established in the region bringing down costs, generating employment and expanding regional trade. Two, connecting South Asia to Central Asia and marking the beginning of a new Silk Route that will see goods going westwards and energy supplies flowing eastwards. The prospects of connecting Istanbul to Dhaka by train now look possible!
We should, therefore, not make the mistake of underestimating the importance of this announcement. By paving the way for a sharp increase in bilateral trade and economic activity, the announcement would result in the normalisation of economic and commercial relations between South Asia?s two largest neighbours. The potential is enormous. From expanding bilateral trade to initiating investments in each other economies and finally connecting South Asia to Central Asia, the normalisation of Indo-Pakistan trade could have a positive impact even outside the region. The step will also facilitate the completion of another major project, viz the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline, which will start the process of bringing hydrocarbon supplies from Central Asia to South Asia. The completion of this project would again be a matter of great personal satisfaction as I had initiated it in 2000 working in the ADB as the principal economist for Central Asia. Projects like TAPI and the fuller exploitation of bilateral trade and economic possibilities, have the potential to alter the course and nature of political relations between the two countries. This will provide the counterbalance to those forces who benefit from a continued climate of hostility between India and Pakistan.
India should now do whatever is needed to facilitate and promote greater trade and investments. This includes a review of and minimising non-tariff barriers against imports from Pakistan, significant liberalisation of the visa regimes, and a greater effort at people to people contacts. I am convinced that the people of Pakistan and India, after six decades and more of unnecessary and costly rivalry, now strongly desire the creation of an era of shared peace and prosperity. We at Ficci will do our utmost to maintain the momentum in bilateral economic and commercial ties and ensure that this positive development has its expected impact on furthering the process of regional economic integration in South Asia. I am sure that we could see a massive increase in intra-regional trade, which at present is a measly 4% of total trade, in the coming year as a result of this announcement from Islamabad.
The author is secretary general, Ficci