SYYED MANSOOR AGHA records the momentous move of Pakistan in according MFN status to India, and analyses the better bilateral and trade relations between the two neighbours.
It was the end of a long wait. Pakistan’s government took a step forward to de-link trade with India from contentious issues and decided “in principle” to grant most favoured Nation (MFN) status to the country which had been considered the ‘biggest enemy’ for decades. It is now official and there is no ambiguity at the moment.
Clearing the confusion created by some discrepancies in Pakistan’s official statements, Mr. Shahid Malik, High Commissioner of Pakistan, said in Delhi, “The process of normalisation is already underway and the grant of MFN status is part of that normalisation process. There is no question of U-turn about it.”
Malik said the Pakistani Cabinet had mandated the Ministry of Commerce to carry forward the process of normalisation of bilateral trade relations. “Pakistan Commerce Secretary Zafar Mahmood will be visiting India (November 14-18) as part of the ongoing discussion and dialogue. He will take the process (of normalisation trade relations) forward,” Malik said.
In Islamabad, Foreign Office Spokeswoman Tehmina Janjua cleared the apprehension that after announcing the decision of MFN, Pakistan was bowing to certain interests opposed to finalising MFN status. She said, “Pakistan clearly stated that our cabinet gave approval to move forward on MFN status in principle.”
It may be understood that Gilani government is firmly treading forward slowly but firmly on confidences building measures (CBMs). Government is cautious towards politically motivated elements which are not ready to look forward for better future. Imran Khan’s huge rally last week in Lahore, in which he spewed venom in an effort to revive rivalries of the past, is an indicator that public perception, though changed remarkably, has not touched the point of maturity. As was indicated by Hina Rabbani Khar, after she took over as Foreign Minister of Pakistan, one should see in the future, to take lessons from the past is alright but to chain you to the failures is not wisdom.
Politicians like Imran and Ibrahim Khan, who opposed CBMs, have failed to realise that the MFN status to India would help Pakistan’s trade and industry in a big way. Currently, India can export over 1,946 items to Pakistan including farm goods such as grain but in the absence of MFN status, around 20,000 items have to be routed through a third nation — like Dubai. With MFN, Pakistan will levy normal duties on Indian imports and will help end illegal trade and legalise all transactions at much lower costs. This will normalise trade relations by ending heavy restrictions on what India is allowed to export across the border. New Delhi had granted its neighbour such a status long back in 1996.
After a cabinet meeting chaired by Prime Minister Syed Yusuf Raza Gilani, Information Minister Firdous Ashiq Awan informed media on Nov 2, “After a lengthy discussion and a briefing by the commerce secretary, the cabinet unanimously approved the commerce ministry’s summary to grant Most Favoured Nation (MFN) status to India.” She further said, “This was a decision taken in the national interest and all stakeholders, including our military and defence institutions, were on board,” she said.
Awan said during the Cabinet meeting Kashmir issue was also raised but it was cleared that MFN decision will cause no harm to Pakistan’s stand. Pointing out that Pakistan cannot live in regional isolation, Awan cited China’s example, a close ally of Pakistan, and said that despite a territorial dispute with India, Beijing had been working towards strengthening its economic ties with New Delhi.
She further underlined, “Trade (with India) is a separate issue.” The approval of MFN status has been given in the interest of our country, and to make illegal trade legal. “These steps are not against the philosophy of Quaid-e-Azam,” she added.
INDIA HAILS
India hailed much delayed and long awaited step by Pakistan. Commerce and Industry Minister Anand Sharma said, “We deeply appreciate this positive gesture that Pakistan has taken. It underscores with clarity the wish which both countries’ governments have…We are clear that economic engagements, trade, removing barriers to trade and facilitating land transportation would help the region.”
Commerce Secretary Rahul Khullar said, “This is an extremely good confidence-building measure. This shows that the agenda which we had drafted at the April meeting is being followed by both sides.” The Commerce Secretaries in April had agreed on a 20-point agenda. They are meeting again on the agreed agenda.
Indian Inc described the decision as “momentous” and said that this could lead to a multi-fold increase in bilateral trade — the CII estimated that it could jump to $8 billion in the next five years. A meagre bilateral trade of $2.65 billion is carried in a restricted manner. Pakistan allows import of only 1945 items through a ‘positive’ list. India, on the other hand, allows trade in all but 868 items in its ‘sensitive list’.
U.S., CHINA APPLAUD
America and China also praised the move. In Washington, State Department spokeswoman Victoria Nuland told reporters, “This is a very, very big deal, very important, could lead to really great economic opportunities for both India and Pakistan.” She rightly indicated that the Pakistani cabinet had approved a “negotiated path” to reach MFN – a move they still described as a major development.
Nuland said, it “sets the kind of example” that other countries in South and Central Asia should follow toward building an integrated regional economy under “New Silk Road” project. She suggested putting Afghanistan at the centre of such a project for peace and prosperity in the region.
China also applauded the move on Nov 3, saying that improved Pakistan-India relations were vital for peace, stability and development in the region. Chinese foreign ministry spokesperson Hong Lei made the remarks at a press briefing in Beijing, adding that as a neighbour and friend of India and Pakistan, China will continue to support the two sides to improve relations through dialogue and cooperation and accomplish collaborative development.
MAJOR STEP: PAK BUISNESS
In Pakistan businessmen and analysts see the development as a major breakthrough that could ultimately pave the way to settle differences over long-running bilateral disputes, including Kashmir. A report said, MFN decision has “cheered up the Pakistani business community.”
“This could be a precursor to normalisation of relations, because when goods move, people move and investment moves,” said Sakib Sherani, a former Principal Economic Adviser to the Pakistan government who is based in Islamabad. “Indian goods are of good quality and cheaper in price; this will develop a huge constituency for peace and deeper integration.”
Mr. Sherani said Pakistan did not make the move before because its “security establishment wanted to use it as a quid pro quo for the Kashmir dispute…. but the government in Islamabad appears to have changed its approach in order to reduce tensions with India.”
Amin Hashwani, President of Pakistan-India CEOs Business Forum, a group comprising Indian and Pakistani business leaders, observed, “From Pakistan point of view we get a market which is eight to nine times bigger than us. So if you look at [it] theoretically, Pakistan should benefit more than India; in terms of exports provided, we get a level-playing field. Pakistan has a great advantage in textiles and India has a huge domestic market, so if we can get access to that market, Pakistanis will be able to export at least a couple of billion dollars worth of exports into that market.”
Hashwani said, “If we can have investments, joint ventures complementing the trade, it could both have a positive effect on each other and we could certainly see billions and billions of dollars, at least [a] four to five times increase in trade volumes.”
The Pakistani economy is not nearly as robust as India’s, with forecast growth of just 3.5 per cent this year, compared with 7.6 per cent in India, according to Citigroup estimates. The Financial Times reported earlier this week, citing the Pakistan’s Finance Minister, Abdul Hafeez Shaikh, that Pakistan would stop drawing on an $11.3 billion International Monetary Fund loan package because it could not meet the I.M.F.’s conditions, leaving $3.7 billion un-borrowed.
INDIAN BUSINESS JOYED
”This is just wonderful,” said Rajiv Kumar, Secretary General of the Federation of Indian Chambers of Commerce in New Delhi. “We should now immediately reciprocate, in more than commensurate manner, on our non-tariff barriers and our visa restrictions.”
Ajay Shah, an economist based in Mumbai, wrote on his blog that Pakistan’s decision will increase direct links between Mumbai and Karachi, as well as shipments from ports in Gujarat to ports in Pakistan. But to ease the increase in bilateral trade, he added, India and Pakistan will have to focus on many other issues like visas, trade financing, cross-border banking transactions, foreign-direct investment regulations and investment flows.
Analysts like Professor Swaran Singh of New Delhi’s Jawaharlal Nehru University believe the two nations could build on this economic relationship to sort out more complicated issues that have strained bilateral ties for decades.
“It will definitely benefit the trade relations, and trade relations in inter-state affairs, whenever there are complications, are seen as most reliable and most dependable pillar of rapprochement between nations,” said Singh. “So I think it is a very important, very timely gesture and it should lead to several other positive initiatives being followed from here.”
APPREHENSIONS DISMISSED
Dismissing the dissenting voices, Tehmina Janjua rightly maintained that recently resumed wide-ranging dialogue between India and Pakistan “clearly indicates that Pakistan and India both agree that friendly ties between Pakistan and India are important and critical for development of the region, for (the) development and prosperity of the people of Pakistan and India.”
One can optimistically hope that the atmosphere in the region is changing. As this contributor, in “Indo-Pak Trust Deficit: Build Trade Bridges for Trust Building” (Radiance Viewsweekly, 6-12 Feb 2011), argued to promote trade and business, Allah has opened the path for materialising the idea at the eve of the tenth anniversary of sour reminders of 9/11. One can appreciate that peace offensive launched by Dr. Manmohan Singh, in spite of all odds, and endorsed by Asif Zardari and Syed Yusuf Raza Gilani is now bearing fruits, earlier than expected.
[The writer is Gen.Sec, Forum for Civil Rights, email: [email protected]]