Pakistani businessmen want trade liberalisation with India

BY Javed Mahmood
For CentralAsiaOnline.com
2010-02-03

Pakistan’s textile business has had to rely on distant countries for machinery and spare parts. The industry wants trade with India liberalized so they can save money and time. [Javed Mahmood]

KARACHI, Pakistan – Time – and distance – is money. Tired of paying more for equipment, parts and supplies to arrive from far away, Pakistani businessmen are seeking trade liberalisation with India.

“The textile industry wants to import machinery and spare parts from a neighbouring country that is famous for producing superior-quality machinery”, Akbar Sheikh, former chairman of the All-Pakistan Textile Mills Association, Punjab, told Central Asia Online. “The Pakistani government had promised us to allow the import of these items from India from July 2009, but it did not happen till January 2010”.

At present, the textile industry is importing machinery and spare parts from China, Germany and elsewhere at higher prices and is paying more for freight, he said. Shipping takes about two months, whereas importing from India would take two to three weeks, Sheikh said.

“Indian textile machinery and spare parts are much cheaper than Chinese and German, but we cannot take advantage of this reduction in cost, since the government has yet to allow imports from (this) neighbouring country”, Sheikh added.

In the past four years, Pakistan’s textile industry spent more than $4.5 billion on importing machinery and spare parts. If the government allows imports from India, the industry could save up to 20 percent, he said.

“Trade liberalisation with India would end dependence on indirect trade through Dubai and would benefit the businessmen and people of the two countries,” Abdul Majid, president of the Karachi Chamber of Commerce and Industry, who has been trading with India for years, told Central Asia Online.

Pakistan allows the import of 773 items from India. Other goods have to be imported through Dubai. Direct import by sea from India costs US$7 to $8 per tonne, versus US$18- to $20-per-tonne cost from Dubai. He said Pakistan and India trade more than US$1 billion worth of goods through Dubai yearly.

Trade between Pakistan and India, which suffered a blow after the Mumbai terrorist attacks in November 2008, gradually improved in 2009 as the two countries strengthened their diplomatic and political ties, he said.

However, “Pakistan and India are carrying out only ‘incidental’ trade”, economist Ashfaque H. Khan, who served previous governments for 14 years as an economic adviser, told Central Asia Online from Islamabad.

Explaining incidental trade, Khan said Pakistan and India trade mostly when domestic production of a food item falls short of the population's needs. For example, if Pakistan faces a shortage of any food item, the country imports it from India and vice versa.

Currently, the countries trade about US$1.5 billion worth of goods a year. They could be trading about US$5 billion annually, he said.

Khan said that in 2004 Pakistan liberalised trade by expanding the list of importable categories from 400 to 773, but that the policy has remained unchanged since.

“India and Pakistan are among the biggest consumer markets in the world, and open trade (would) benefit the people of both countries”, Majid said.

Most trade officials agreed both countries should move beyond emergency trading in food commodities.

“The SAARC (South Asian Association for Regional Co-operation) chamber of commerce and industry has urged Pakistan and India to hold a dialogue to promote their trade and to defuse tension,” said Iqbal Tabish, secretary-general of the SAARC chamber. “The chamber is also motivating the businessmen of the two countries to promote trade”.

He said his organisation has played an important role in the expansion of trade between Pakistan and India over the past few years. By expanding their trade, the countries could trade about US$5 billion worth of goods a year, he said, agreeing with Khan.

“Trade between India and Pakistan grew by 550 percent between the years 2003-04 and 2007-08 and amounted to US$2.23 billion in 2007-08, up from US $344m in 2003-04,” Rahul Chhabra, the press, information and culture minister of the Indian Embassy in Washington, told Central Asia Online. “In 2008-09, Indian exports to Pakistan declined by 22.76 percent over the previous year to US$1.42 billion, while Indian imports from Pakistan increased by 26.02 percent to (US) $362 million”.

In 2009-09 overall bilateral trade decreased by 16.9 percent largely because of the global slowdown and the damage the Mumbai attacks caused to bilateral relations, he said.

Among the hindrances to increased trade, is the cross-border terrorism from Pakistan that is adversely affecting overall Indian-Pakistani relations, including trade. Bilateral trade cannot reach its potential in an environment of terror, Chhabra said.

Chhabra also said the free, unfettered movement of goods, such as that sought by Afghanistan for its products to the large Indian market through Pakistan’s territory, will go a long way to promote trade within SAARC.

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