Thursday, February 12, 2015

Indo-Pak Non-Tariff Barriers: Real and Perceived



Majyd Aziz

Presented at ICRIER’s 3rd Annual Conference on
“Normalizing India-Pakistan Trade”
New Delhi, India, February 02-03, 2015

Preamble:

Stakeholders, economists, researchers and people with eyes towards the future consider facilitation of trade and investment as the catalyst for global peace. The acronyms, MFN, WTO, FTA, and NTB, are some of the global trade facilitation and rationalization tools. In the South Asian context, all these acronyms have a different connotation. They are confrontational tools meant to score nationalistic, political, and brinkmanship points. These factors take on an exasperating position when normalization of trade process zeroes into the India Pakistan perspective.

Pakistan grants MFN to India, Pakistan does not grant MFN to India status is akin to plucking the petals of a flower by minors playing their childish games. But, in the environment of today’s regional trade, this ensues into disconcerting implications. The issue is further compounded by resorting to another tool that is universally referred to as Non-Tariff Trade Barriers. This, too, is another roadblock in facilitating smooth and fair trade.

The Pakistani exporters as well as the government strongly accuse New Delhi of negative usage of various rules, regulations and procedures while the Indian government maintains its oft-repeated mantra that these are not Pakistani-specific. The on-going accusations and denials impede the trade process and have deterred Pakistani exporters from taking rewarding advantage of the potential available in the Indian marketplace.

Trade organizations as well as pragmatic think tanks and researchers have been very vociferous and forthright in their contention that there exists a deep-rooted bias against the entry of products from Pakistan into India. Research studies and empirical evidence further strengthen this viewpoint. There is nothing new in protecting domestic industry against external competition or foreign goods that have a relatively lower selling price. Thus, Non-Tariff Trade Barriers are conceived in this respect. NTBs are structured by all countries on a regular basis and it is the prescribed right of countries to protect and promote their local industry.

The question than arises is whether there are country-specific NTBs and whether they are apparently real or whether these are perceived as NTBs, In the Indo-Pak context, NTBs fall under three main categories. These are Commercial, Consular and Combative.

Commercial:

It is the concerted opinion of Pakistani exporters that India has the most protective tariff regime against Pakistan within the SAARC region. India has Free Trade Agreements with Nepal, Bhutan and Sri Lanka, and a Preferential Trade Agreement with Afghanistan. Being an LDC, Bangladesh also gets favorable preferential treatment under SAFTA. Pakistan only has a FTA with Sri Lanka among SAARC countries and therefore relatively isolated in the SAARC region. At HS‐6 level, 30 % of the items on India’s Sensitive List are agricultural while 34 % are textile products. The corresponding figures on Pakistan’s Sensitive List are 4% and 24% respectively. Pakistan’s Sensitive List restricts only 17% of imports into the country, whereas the Sensitive List of India restricts about 40% of imports.

Karachi Chamber of Commerce and Industry (KCCI) routinely seeks feedback from members and Associations regarding the difficulties faced by those who export to India.  Arbitrary custom valuation is a major concern for exporters. Indian Custom Valuation Rules 2007 allows Customs Officers substantial discretion to reject declared value and:
a)  Reclassify goods as those having high duty
b) In case of valuation as per international prices, value the goods at the prevalent price on arrival rather than at the time of sale, if the international price has risen during the transit period
c)  Value the goods based on prices of similar products from much more expensive markets such as the EU thus raising the Customs value for valuing the imported goods

KCCI also received anecdotal evidence from members regarding arbitrary treatment of goods from Pakistan. A few anecdotal examples are mentioned to justify the contention of KCCI members. Pakistan Fruits and Vegetable Association complained that agricultural produce (e.g. onions) is at times valued as ‘similar’ or ‘identical’ products imported from EU, thus raising the value by 200% or more. A large cross section of textiles exporters complained of an arbitrary increase in value of up to 30%. Hence, certain exporters of bed linen export to India via Dubai mainly to avoid Customs valuation issues. For participants of a trade fair at Ludhiana, while the shipment was exempted from otherwise required certifications, the entire consignment of goods to be exhibited was valued at up to 50% more than that declared. It was reported by one fan exporter that mist fans priced at US $80 were evaluated at approximately US $300. As a result, the Indian importer did not place a follow up order. A SAFTA certificate is required if the product receives a concession under the SAFTA regime. In some instances a SAFTA certificate of origin was not accepted at land borders as the relevant SROs had not been communicated to the Customs authorities.

KCCI members also lamented the arbitrary method for the calculation of import duties, and at the same time, the administration of tariffs through numerous notifications making the tariff structure complicated and non‐transparent. Calculation of all charges applied to imports, including landing charges, the effective Customs duty, the additional Customs duty, the special additional Customs duty, and the education Cess show an average protection of 25.6% compared to the average applied MFN rate of 12%. KCCI members also report that although Indian importers of Pakistani goods may file an appeal against Customs decisions on valuation matters, the appeal process is lengthy and cumbersome, and thus importers have no option but to accept the re‐classification, over‐valuation and other disputes in order to avoid detention and eventually other business consequences.

Pakistani cement has substantial demand in India. Exports to India have surged recently despite facing NTBs, and it is mainly due to improvement in logistic services and acceptable transportation of cement through Wagah. This is convenient for cement units located in Punjab and KPK since the major volume of cement exports is primarily through this route. Pakistan is producing high quality cement and even Bureau of Indian Standards and other accredited Indian labs have confirmed this. Nevertheless, the procedure for obtaining quality assurance certificate is still complicated and it is imperative that the procedure be simplified and arbitrary decisions be discouraged.

It is the shared opinion of many exporters that there is an intentional bias against Pakistani products at Mumbai Customs compared to other points of entry. It is suggested that a comparative study should be initiated to determine the differences based on clearance time, arbitrary valuation, and other bureaucratic red-tape. This would provide a clear picture whether NTBs are real or misguidedly perceived by Pakistani exporters.

As a means to overcoming India’s NTB, the two countries signed the following three agreements in September of 2012. Unfortunately, these have not been formally implemented:
·   Cooperation and Mutual Assistance in Customs Matters
·   Bilateral Cooperation Agreement between Bureau of Indian Standards and Pakistan Standards & Quality Control Authority
·   Agreement on the Redressal of Trade Grievances

Both India and Pakistan had also announced to facilitate the financial sector, mainly through allowing the setting up of bank branches of designated banks of both countries. Since there are no bank branches in each other’s country, the correspondent banks impose their own rules and procedures that hamper instead of facilitate financial transactions. In the Indo-Pak case, the Pakistani banks open Letter of Credit through foreign banks and vice versa. There is also no NOSTRO arrangement between Indian and Pakistani banks. There is no Test Arrangement used within the banking channels for Indo-Pak trade. Moreover, additional expenses are incurred due to procedural delays and payments made through Asian Clearing Union. There are many other deterrents that impact negatively on the cost of doing business by businessmen on both sides of the border.

Consular:

Is it a sagacious business decision to do trade or make investments in a country where the trader or investor can be denied visa for whatever reason or where there is inordinate delay in granting of visa? This is often the case at both the Indian and Pakistani High Commissions. On the one hand, Ministers and diplomats assure businessmen that fast track visas would be the norm for them, but on the negative side, whenever tension heats up over contentious issues, the mood changes in the Consular offices. Genuine Pakistani businessmen had hailed the issuance of one-year, ten-cities, non-police reporting, and multiple-entry visas. However, when matters flared up at the border in the last some months, both High Commissions changed course and left a large number of businessmen of both countries in a frustrated environment.

The point to make is that this liberal process should not be abandoned or put in a slow gear. Liberalization of visa regime is the highlight of the normalization process and has ensued into an enhancement in bilateral trade. Nowadays, KCCI has been inundated by businessmen demanding the Chamber hierarchy to agitate with the Indian High Commission regarding delays in granting or outright refusal of visas. Today, visas have become a serious NTB.

Combative:

Although many would not consider militaristic skirmishes at the borders or heightened calls for retributive action over touchy issues, the fact is that all these have evolved into a disturbing scenario that has gradually become a NTB. The scenario at the border, whether by provocation, by design or even by embedded hatred, has aggravated the distrust factor. Fanning of extremist sentiments by religious or nationalistic fundamentalists or retired members of the Armed Forces have added fuel to the fire. Jingoism and emotions are on a crescendo. These retired service personnel are obnoxiously vocal on the print and electronic media and both the governments must rein in these personalities. US General Omar Bradley very wisely stated that I am convinced that the best service a retired General can perform is to turn in his tongue along with his suit and to mothball his opinions.

Conclusion:

NTBs are not just confined to Indo-Pak trade. NTBs are protectionist tools developed and used by nearly all countries. New NTBs crop up all the time. However, they are major impediments in the global trade and against the spirit of WTO. Although disregarding arbitrary or discretionary reliance on NTBs or even eliminating them in an urgent mode is unlikely, efforts should be made to agree on commitments to address these through meaningful negotiations. Allowing political expediencies or military conflicts or even diplomatic brinkmanship to intrude into the normalization process would obstruct any developments or breakthroughs that have been made in confidence building measures. The business community is the premier stakeholder in this process and it is incumbent upon both the governments to involve them in all such negotiations or dialogues so that sanity is introduced in bilateral trade and investment. The other course of action is to let the process get derailed and continue with informal cross border, third country, or undocumented trade.

Shakti Gawain, an American New Age author has given a poignant message to organizations such as ICRIER and the business community. She states that When we consistently suppress and distrust our intuitive knowingness, looking instead for authority, validation, and approval from others, we give our personal power away.


Friday, December 12, 2014

So, Why Pakistan?



Majyd Aziz

 “While US companies have been committed to Pakistan for over six decades, the opportunity presented by the country is finally maturing. Pakistan is a young, growing nation with an increasingly large and sophisticated domestic consumer market. So, why Pakistan? Because the time to start is now.” ~ Miles Young, Chairman, US-Pakistan Business Council, US Chamber of Commerce.

The statement emanating out of the prestigious organization manifests in clear terms the motivating message that should warm the hearts of Pakistan’s policymakers as well as trade and industry. It also demonstrates pragmatism and reflects a sense of urgency. Moreover, despite apprehensions, constraints and negativity, the fact is that business prospects are substantial for the American investor. Pakistan welcomes latter-day Daniel Boones. Undoubtedly, the profit potential, the charm of growth, and the geo-strategic location of Pakistan are alluring.
It is pertinent to mention here that there are four prime areas that an American investor could consider placing financial, technological, and entrepreneurial resources as these are vast fields of opportunities. These relate to inland transportation, livestock and dairy farming, agriculture and mining.

Pakistan has developed and continues to build an excellent road network. The planned Pakistan China Economic Corridor and the Motorways are vivid examples of present and future traffic facilitation. At this moment, Pakistan has an estimated shortage of about 100,000 trucks of various sizes. Trucking has been a perennial impediment in the economic progress. The Pakistan Railways is in shambles and there is no inland waterway. Goods arriving at the Karachi Port, Port Qasim, and to some extent, Gwadar Port are handicapped by the lack of fast track movement either for domestic destinations as well as for Afghanistan. The ensuing hurdle is the higher freight outlays that impact cost of transportation.

American trucking companies, such as Ryder, Schneider or Landstar, could set up mega trucking companies. Taking advantage of the facilities offered by US Ex-Im Bank or OPIC, these companies could transfer their used vehicles to Pakistan and ply these on the Ports-to-Afghanistan route or even to Northern stations of Pakistan. The utilization of tracking system, proven efficiency and systems, and the employment of graduates rather than the traditional drivers would make the desired difference. Furthermore, strategically situated self-owned service stations along the routes would ensure transparency, would control expenditure, and would be time-saving.

Livestock and dairy farming is another formidable investment possibility. Whitewater Dairy Supply Co of Wisconsin took the bold step and invested in a modern livestock farm in Punjab. The American dairy industry has a remarkable track record and this is crucial for Pakistan where milk supply is much less than requirements, where the production of cheese and butter is hopelessly insufficient, and where animals are in huge demand, more so during the Eid-ul-Azha period.

Agriculture, especially Corporate Farming, is sorely needed. The productivity of the farms is very low, mainly due to division of landholdings as per traditional inheritance customs, as well as the absentee landlord syndrome, and as well as the reluctance of feudal sector to invest in modern methods, in employing latest farming equipment, and in non-development of seeds and other inputs. A corporate culture is highly missing and the large agriculture corporations in USA can study, plan and implement investment in this sector.

Another area of blatant neglect has been the minerals sector. Obsolete mining methods, untrained workforce, low productivity and production per miner, inability to make the paradigm shift to latest technology, and non-availability of functional access roads from mine mouth to highways are impediments. Moreover, transportation cost is comparatively higher due to location, due to shortages of vehicles, and due to nature of the cargo.

There are other areas such as the service sector, information technology, oil and gas exploration and so many more. The pie is large for investors from all over the world. Yes, the nation’s non-positive image, the political instability, and the risk factors are deterrents that have to be surmounted. But the US investor has taken bold steps in much serious situations. Pakistan is no exception. Francis Bacon, the English philosopher very aptly stated that “In all negotiations of difficulty, a man may not look to sow and reap at once; but must prepare business, and so ripen it by degrees.”

“Let’s do business in Pakistan”

Majyd Aziz
(Exclusive for Pakistan German Trade and Investment {GPti} Booklet)
 
In 1969, a struggling factory in Karachi, producing value-added fabrics, made a calculated decision to make its fabrics a benchmark product. It imported textile processing machinery from Famatex, Then, and others from Germany. The second step was to concentrate its dyes and chemicals procurement from German dyes and chemical manufacturers such as Hoechst, BASF, etc. In 1985, a domestic apparel manufacturing unit in Karachi introduced ready-to-wear Men’s Dress Suits and thus approached Kufner for interlining material and the required technology. The pioneering effort paid off and the brand became the leader in this field.

The above narrative reflects how these medium-sized enterprises brought about a paradigm shift in their manufacturing and their market share. I should know. My family’s business group owns these factories. This narrative also manifests the crucial need for Pakistani industries to shoot for the moon rather than being undistinguished players in the domestic and global marketplace. This narrative also offers an insight into the critical mass that companies from Europe, especially Germany, can provide to Pakistan’s industrial base.

What does all this mean for German trade and industry, more so from the medium-sized sector, to undertake bilateral trade and investment with counterparts from a nation that, despite certain negative factors, offers a remarkable potential, today and tomorrow? Rather than highlighting just the statistics in glowing detail, the emphasis should be on the track record of past ventures by German enterprises and those who took the proverbial first step towards investing in one of Asia’s growing economy.

Pakistan is the most strategically placed nation on the world map. It has always been and will be the linchpin within the region. China desires a direct route through the warm waters of Gwadar in Balochistan. India covets land access to Afghanistan and Central Asian Republics. Iran too itches for a shorter route to China. Pakistan has three working Ports that can cater to all types of sea traffic. Pakistan has mineral potential, a traditional agriculture regime, and most importantly, human capital, especially the youth bulge. All these are essential ingredients for a potent combo that is an envy of most of the countries. Then, what should be the attraction for the new German investor?

The future potential for investors is comprehensive. It is imperative that the investor focuses on the right formula so that the return on investment is beneficial and there is ample scope for enhancing the business or industry. Pakistan’s Foreign Direct Investment priorities are manifold. Energy is the burning topic. A leap in employment, in manufacturing, in revenue generation, and in improving the social sector requirements can only be made if economic activities are at a maximum swing. The successive governments have placed energy as the integral vision of their manifesto. The opportunities are plentiful but these require a massive dose of external support through financing, through direct investment and through acquiring cost-effective latest technology. The options have been laid down in a broad-based energy framework. This should be one area of priority for Germany.

A serious bottleneck impeding economic progress and affecting fast track movement of goods and essential raw material is the shortage of transportation. After decades of neglect, Pakistan Railways faced an obsolescence syndrome, a factor that retarded movement of goods, and even people. The trucking industry was, and is, mainly an owner-operator venture. Air cargo is an expensive option. Pakistan has a continuously developing road network and the conceptualized Pakistan China Trade Corridor would open up new vistas for economic development. Hence, trucking would become a very profitable and formidable investment attraction. At this moment, Pakistan has an estimated shortage of 100,000 trucks of all sizes and classifications. German transportation companies can study the future prospects since huge volumes of goods would be transported from, and to, the three Ports for China, Central Asia, Afghanistan and India whenever economic regional integration becomes a reality.

Agriculture productivity, efficiency and wastage are endemic in Pakistan. The ancestral ownership mechanism that results in bifurcation of land to descendants has impacted seriously on the output and production. Moreover, non-development of new seeds, reliance on traditional farming methods, infrastructure deficiency, feudal mindset and negative economies of scale combine into an ominous bearing on the future of agriculture. Thus, a vast field is open for German investors to enter into Corporate Farming as well as setting up livestock and poultry enterprises.

Mining is another sector that needs massive investment in nearly all its components. Although the mining areas are in difficult terrains and many are not comfortably accessible, the fact is that full development of this sector from mining to exports is brimming with opportunities. Chrome Ore, Iron Ore, Manganese, Barite, Granite, Coal and even Gems and Jewels, to name a few, are in desperate need of a paradigm shift.

Pakistan is open for business. German influence has always been positive and profitable in the past. It is time to revisit the strategy of involvement in trade and investment in Pakistan. The indicators are favorable. The Pakistani trade and industry have stretched out their hands through a visionary initiative known as German Pakistan Trade and Investment. The GPti logo is a manifestation of the desire to join forces with Germany to propel Pakistan into a higher economic echelon. So, the rallying cry for German trade and industry should definitely be “Let’s do business in Pakistan”

Pakistan-Afghanistan Trade: Business Perspective on Trade Policies: What Businesses Need?

Majyd Aziz
Former President Karachi Chamber of Commerce and Industry
Presented at
“Afghanistan Reconnected: Businesses Take Action to Unlock Trade in the Region”
Meeting in Istanbul, Turkey, November 26-27, 2014
Organized by EastWest Institute, (EWI), Brussels, Belgium
In cooperation with
The Union of Chambers and Commodity Exchanges of Turkey (TOBB)

Preamble:

PAKISTAN has a very limited export trade base. Exporters usually are content with addressing the North American or European markets where, to some extent, the Pakistani exports are in a focused framework. The decades of reliance on textiles has narrowed this trade base. Although leather, surgical goods, sports equipment as well as rice, cement and other sundry items do have a share of the pie, the fact is that a surge in export figures is something that is a matter of consternation. Export figures move in a leisurely manner instead of a desired leap. Regional trade has never been a prominent factor on the export radar. The potential is formidable but the impetus is lacking. This is the prime reason why Pakistan’s vision of hitting the $50 billion export target continues to be a blur instead of a clear horizon.

PAKISTAN is always touted as being in an ideal geo-strategic location, endowed with abundant natural resources and possessing potent human capital. The ingredients are an envy of many countries and thus sincere and forceful efforts should justify encashment of these bounties. Four countries, Afghanistan, China, India and Iran border with Pakistan. Despite volatility, despite belligerence, despite distrust, despite national exigencies, and despite accusations, the fact is that trade, and at times investment, does find its way in a mutually favorable manner. This then is the narrative that requires contemplation and understanding, especially with reference to Afghanistan-Pakistan bilateral trade relations.

PAKISTAN and AFGHANISTAN bilateral relationship is like that of twin brothers who are fighting who is the eldest among them. The relationship evolved into a distrust scenario, especially during the Global War on Terrorism. This disconnect continued all through the Karzai regime despite frequent interaction between the key decision makers. The advent of the new government in Kabul under President Ashraf Ghani promises a revisit of the animosity and egregious emphasizing that had clouded the neighborly relationship. The pronouncements coming out of his office are comforting and encouraging. The withdrawal of USAF forces, the Zarb-e-Azb Operation conducted by Pakistan Army against foreign and local terrorists in North Waziristan Agency, the recent visit of Pakistan Army Chief, General Raheel Sharif to Kabul and his offer of training Afghan soldiers, the high profile visit of President Ghani to Pakistan, are all positive elements that would bring a paradigm shift in the relationship.

PAKISTAN and AFGHANISTAN must now restructure the bilateral trade and investment regime in order to take mutual advantages, benefits, and opportunities so that, besides political, diplomatic and military issues, the economic sector is pragmatically addressed while pending or future issues are decided and resolved.

AFGHANISTAN is one of the 48 landlocked countries in the world, including partially recognized states. The access to sea is either through Pakistan or Iran. Pakistan is a more pragmatic option and therefore, even though there have been major ups and downs between the two neighbors, Afghanistan has been accorded the transit facility unhindered. Pakistan has accepted and applied the United Nations Convention on the Law of the Sea that gives a landlocked country a right of access to and from the sea without taxation of traffic through transit states. More importantly, Pakistan has provided priority to goods destined for Afghanistan even when detrimental to domestic commerce and industry.  Afghanistan has been in a win-win situation through the Afghanistan Pakistan Transit Trade Agreement since the conditionalities of this Agreement has many advantages and there is a need to optimize its execution. APTTA enables Afghanistan to utilize the Pakistan-based facilities and at the same time, the country has access through Iran to the Chabahar Port. Although many safeguards to protect Pakistan’s industry have been incorporated in the APTTA, the fact is that most of these have not been implemented, much to the chagrin of Pakistan’s domestic trade and industry.

Customs Challenges:

PAKISTAN and AFGHANISTAN bilateral trade still faces numerous challenges. The blatant misuse of APTTA, the deficiency of multiple infrastructure facilities, the ever-increasing and non-institutionalized mode of business transactions, the non-availability of banking and insurance facilities within proximity, the dangerous law and order situation, and the Afghanistan-Iran-India nexus are some disturbing factors. This combination has dampened the formal trade statistics and frequency, thus ensuing into a precarious direction. Hence, there is a need to highlight these complexities and reflect on the solutions and positive progress of the trade regime.

The objectives of APTTA can best be summarized as follows:
o    Safeguarding the strategic national interests of Pakistan
o    Ensuring compliance of prescribed International Protocols
o    Protecting the concerns of Pakistan’s commerce and industry
o    Discouraging undocumented trade
o    Guaranteeing optimum revenue for government
o    Facilitating efficient traffic of goods

The formal trade and industry in Pakistan has appropriate reservations as well as apprehensions about APTTA. The prime reservation is that this Agreement is not being enforced in letter and spirit since the ground realities are neither conducive nor is there a streamlined periodic review of the various facets of APTTA. Some relevant points include the non-availability of tracking devices in the transportation vehicles. This gives rise to concerns about the goods crossing into Afghanistan or not. A case in point is the “missing containers” issue that even Supreme Court of Pakistan took notice. Although there have been denials and accusations, the fact remains that containers went missing. The intensity of the misuse of APTTA can also be gauged from the fact that a large number of containers destined for Afghanistan have been missing after clearance from the two Ports of Karachi. So much so, even containers for NATO/ISAF lost their way and never crossed the Durand Line. According to FBR official data, a total of 157,736 containers of United States destined for Afghanistan before November 26, 2011 never reached there and disappeared inside Pakistan. Even Pakistan’s Customs does not have any record of 77,884 containers from the above missing figures. Pakistan’s Treasury reportedly lost over Rs 55 billion in revenue due to this chicanery.

Another issue is that until the end of 2013 there was no system of Customs-to-Customs sharing of data and information in place. This is the loophole that was grossly violated by unscrupulous traders and forwarders of goods. The Electronic Data Interchange (EDI) is being implemented in stages and hopefully the entire process of releasing financial security will shift from manual documentation to EDI messaging system. EDI also will be used for entire bilateral trade in order to expedite the clearance process at the customs stage.  One more reason why there is undocumented trade is that there is need for encashable financial guarantees of an equivalent of Pakistan duties and taxes that would be refunded after arrival of goods in Afghanistan.

The trade and industry community proposes that to in order to ensure national interests,  especially from revenue point of view, and to provide a level playing field, it is imperative that the quantities importable under APTTA should be based on qualified  determination of consumption rather than unrestricted imports. In fact, the agreed quantities and their movement should be determined by seasonal factors. It is also being suggested that a Customs Union be formed between the two countries so that all complications in APTTA could be avoided and formal trade is encouraged and facilitated.  

Recently, the Pakistani government has decreed that all Letters of Credit would be open in US Dollars. It is, therefore, suggested that even freight and forwarding expenses should also be remitted in US Dollars instead of payment in Pakistani Rupees. The Pakistani trade and industry, being major stakeholders, should be consulted in order to prepare a comprehensive list of goods allowed under APTTA.

Business Facilitation:
It is a good augury that the Afghan government has taken cognizance of the demand of Pakistan Afghanistan Joint Chamber of Commerce and Industry and has agreed to provide six-months, multiple entry visas to Pakistani businessmen on a reciprocal basis. It is ironic that the thousands of Pakistanis cross over to Afghanistan on a daily basis and return back to their homes at night. Predominantly, no one checks their documents and they have unhindered access across the border. Genuine business people, unfortunately, are subject to formal travel documentation. There is an Indian proposal to introduce a SAARC card in the future in order to allow easy and convenient mobility within SAARC countries. Till the SAARC card becomes a practical reality, it is proposed that some such arrangement should be considered for members of trade and industry of both countries.

Pakistan and Afghanistan political hierarchy must endeavor to promote enhanced economic cooperation, both in the context of bilateralism but also for the long term objective of regional economic integration.  There is a need to develop cross-border infrastructure projects to facilitate trade and at the same time these would have social benefits for the denizens living and working near the borders. It is, therefore, proposed that the Pakistan China Economic Corridor from Gwadar in Balochistan to Xinjiang, in Northern China should have a route to Afghanistan too. This is crucial because of the Chinese desire to enhance its exposure in Afghanistan and thus there would and should be a Chinese-led trilateral arrangement. Moreover, the Central Trade Corridor is a 705 km-strategic road link to facilitate trade between the two countries. This would be a major booster to revive, directly and indirectly, the local economy in the tribal areas as well as other urban and rural towns of KPK Province.  At the same time, regional cooperation projects have been envisaged that are potentially imperative for developing the advantages such as economies of scale, economic complementarities, as well as economic externalities, such as foreign investment, economic multiplier impacts, forging joint participations, and common approaches at international levels. CASA-1000 and TAPI gas pipeline are two examples of regional cooperation primarily for the economic benefit of the citizens of countries.

A very serious drawback in the bilateral trade relations is the lack of financial establishments in each other’s territory. There are no branches of Afghan banks in Pakistan whereas two Pakistani banks are operating in Afghanistan. Regretfully, HBL has only one branch in Kabul while Bank Al Falah has one each in Kabul and Herat. This is a manifestation of the disinterest exhibited by financial institutions of both nations. On one hand, President Ashraf Ghani in his maiden visit to Pakistan hoped for bilateral trade to cross over $ 5 billion by 2017. However, on the other hand, the Central Banks have not yet worked out a planned business model to enable more direct banking rather than relying on third country banking system. At a recent policy meeting, it was decided that an internal meeting comprising of State Bank of Pakistan, National Bank of Pakistan, Finance Division, FBR, Ministry of Commerce and Banking Association will be convened by the Finance Division in order to ensure that not only the National Bank provides foreign exchange facility at Border Crossing Points but other private commercial banks would also be encouraged to set up foreign exchange desks, particularly at Chaman.

Removing Cobwebs:
There will be a huge peace dividend if trade relations are strengthened. When two countries trade with each other, people develop an interest in maintaining peace, so that the flow of goods and services is not disrupted. When countries are trading with each other, they tend to avoid conflicts. If there are any disputes, as is likely to happen, they use dialogue to resolve them. The Afghan-Pakistan case is at a different plateau. Trade, both official and undocumented, goes on at full steam but at the same time, the distrust factor is over-bearing.

Afghanistan and Pakistan leaders must be candid and pragmatic in their diagnosis of the bilateral issues faced by both the countries. It seems they probably want to continue the futile exercise of obsolete rhetoric ignoring the gravity of its consequences. There should be no strategic policy misunderstanding and both the leaders must take calculated decisions on issues that are not only fundamental to their own national interests but also from the core regional interests too. The incessant fulminations of erstwhile President, Mr Hamid Karzai, were provocative and aggressive and often resulted in repeated denials and reiteration of Pakistan's principled positions by official spokespersons. US Ambassador Richard Olson recently stated that “An increasingly stable Afghanistan that is at peace and enjoys productive relations with its neighbors will be an effective counter-weight against extremism. A stable Afghanistan is also conducive to economic development in South and Central Asia.”  Words of wisdom.

Hence, all eyes and ears are on the approach President Ashraf Ghani initiates to strive for a peaceful environment. The withdrawal of ISAF personnel, while the war against terrorists rages on, gives urgency to the need for improving friendly relations.  It is time to change course and adopt a saner path for a peaceful and prosperous future. Ziad K Abdelnour, an American author and financial entrepreneur, very wisely said that “I wish politicians the world over would stop claiming credit for economic growth that happens despite them, not because of them.” The aspirations of trade and industry of both countries is that if a new beginning is undertaken by the political leadership of Afghanistan and Pakistan, then without any doubt, peace and economic progress would definitely be due to the visionary ingenuity of President Ashraf Ghani and Prime Minister Nawaz Sharif.