Monday, June 8, 2015

Businessmen’s Perspective on AfPak Bilateral Dynamics


Majyd Aziz

The post-2014 Afghan scenario is the outcome of two interrelated trends: reduced attention to Afghanistan by world powers, and as a consequence, its transition into a regional channel. The vacuum formed after the withdrawal of the main US/NATO coalition forces is giving impetus to regional states, China, India, Pakistan, Iran and the Central Asian Republics, to speed up their exposure in that country. This, in turn, increases competition between them for spheres of influence in Kabul, with each side seeking to advance its own national interests.

The narrative is quite clear. Stability in Afghanistan will also be very significant for stabilization and enrichment of the whole region. Afghanistan has huge potential, rich resources and has location advantages. The past years have reflected the courage and determination of the Afghan people. Post-2014, Afghanistan is facing and will face monumental internal and external challenges, such as security, political and economic. Moreover, it is an onerous task for Afghanistan’s future business development, attempting to integrate the economy in the region and harnessing her inherent potential.

The post-Karzai government set-up has ensued into a new cooperation matrix where Pakistan is attempting to bring about a fresh and positive approach in the bilateral relationship with Afghanistan. The encouraging response by President Ashraf Gani, especially during his historic visit across the Durand Line in November, further emboldened this relationship. The highly publicized role of Pakistan Army COAS General Raheel Sharif and the frequent visits of DG ISI Lt. Gen Rizwan Akhtar are manifestations of this new thinking. Recently, Prime Minister Nawaz Sharif took a high-powered delegation to Kabul that has further reinforced the relationship.

The feel-good signals emanating out of these interactions, although reflecting hope, are still dependant on the future course of actions of both the governments and should be planned in view of the events, policies and strategies of other regional countries that are eagerly in a rush to enhance their connections in Afghanistan. Hence, Pakistan-Afghanistan bilateral relations now encompass various regional and global factors that must be judiciously addressed by both countries.

To ensure a win-win situation, to facilitate extensive and favorable cooperation, and to take maximum advantage of the new regional dynamics, it is imperative that Kabul and Islamabad develop a broad-based strategy and trust so that both nations and their citizens enjoy the dividends of political, diplomatic, military, energy, trade, investment and, most importantly, peace initiatives. Therefore, for Pakistan, the new paradigm entails a holistic approach rather than addressing these from an individualistic neighbor-to-neighbor position. Thus relations with Afghanistan are now at a crucial stage because this paradigm would be the catalyst for regional cooperation, trade facilitation and national security.

Pakistan and Afghanistan have to tackle the issue of terrorism and extremism. The launching of the Zarb-e-Azb operation by Pakistan Army and the huge success of this operation has also improved the trust factor that haunts both the countries. Consequently, it has given impetus to Kabul to intensify its own efforts to deal with terrorists and extremists in Afghanistan. However, these terrorists are well-entrenched and continue to have a powerful presence in many areas of Afghanistan. In fact, terrorism on both sides has been a millstone around the necks of the two governments.

Moreover, the economies of both the countries are feeling the negative impact of fighting the war against terrorists. Both countries are dependent on massive injection of considerable foreign financial resources for their budgetary support, more so at the cost of allocation of funds for the welfare of the populace. The macro-economic fundamentals of Afghanistan are fragile, and Kabul would need in excess of $15 billion annually for implementation of its various programs. All in all, both countries have to strategize their survival policies through prudent utilization of financial resources.

Ashraf Gani is a respected economist and his foremost plan is focused on maintaining and improving the status of the country through an economy-led strategy. His first foreign visit was to China before he landed in Pakistan and then India. The easy access accorded by him to Pakistani businessmen and his standing invitation to businessmen to visit Kabul and interact with their counterparts as well as government personalities, including him, is proof positive that he has his priorities chalked out.

Ashraf Gani has to ensure that his government continues depending upon support from Washington, albeit a substantially reduced amount. The over-arching concern is that the withdrawal of NATO/ISAF forces would drastically reduce financial inflows hence depending on foreign loans and assistance would be a tall order.  It is therefore, in his scheme of things to look for external sources to run his government. He is looking for heavy investments from China, India, Japan and Turkey to rebuild his nation. Pakistani construction companies lack the critical mass to undertake such projects as well as arrange financing. It would be a pragmatic approach to dovetail on Turkish construction companies as sub-contractors. This is the prime reason why Gani has embarked upon a process to attract massive Chinese and Indian investment in the minerals sector. Chinese companies have a $4.4 billion contract to mine the Aynak copper mines and would be investing around half a billion dollars in the oil sector. Kabul has awarded India mining rights for the country’s biggest iron deposits. Afghanistan expects $25 billion in foreign investment over 30 years in mining and energy with over $10 billion from India. An Indian investment consortium is negotiating the building of Afghanistan’s first steel mill costing $8 billion, plus a power plant and facilities for ore extraction and processing. Once the process is put in motion, Afghanistan is placed to receive huge investments and the accruing royalties. Afghanistan is loaded with minerals such as lithium, chrome ore, iron ore, coal, soapstone, copper, and gold, to name a few. China has a huge appetite for such minerals. The Japanese battery industry requires lithium and is keen to invest in this field.

A worrying factor is the lucrative narcotics sector. Afghanistan cultivates 95% of the total opium poppy crop and is a major producer of narcotics where illegal profits run into billions of dollars annually. The influence of the militias of the warlords cannot be easily discounted. The margin of profit is enormous and it is for this reason that many are demanding the legalization of narcotics. Another detrimental factor is the shortage of educational institutions. Thousands of schools and colleges are immediately required to bring about an education revolution. The youth bulge is intimidating too, especially when there is scarcity of meaningful employment. Denial of job opportunities could lead the youth into camps of terrorists and extremists. A fact of immediate consternation is food security since Afghanistan is importing most of its food requirements such as rice, wheat and tea. Notwithstanding the challenges, the Gani government has already won kudos for handling the affairs of the state. An air of optimism for a better future is pervasive despite the arduous task at hand. As Chairman Mao Zedong once said, “There is great disorder under the heavens, but the situation is interesting.”

In the past, Afghanistan stressed the distrust viewpoint but is today cautiously warming up to Pakistan’s overtures. Pakistan has suffered the blowback of a long, devastating Global War on Terror. The motivating factor that can play a vital role to achieve a huge peace dividend is if trade relations are strengthened. When 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.

While people in the corridors of power are involved in enhancing the efforts on the diplomatic front, the business community is making its own strides. A game changer has been Pakistan Afghanistan Joint Chamber of Commerce and Industry, comprising of Chambers of Karachi, Sarhad, Chaman and all the Afghanistan Chambers. The personal rapport developed between PAJCCI and President Ashraf Gani has been very encouraging.

The priority accorded by Ashraf Gani to Pakistan over India is a manifestation of the new thinking in Kabul. Ashraf Ghani very confidently remarked after his visit to Pakistan: “We have a shared vision to serve as the heart of Asia, ensuring economic integration by enhancing connectivity between South and Central Asia through energy, gas and oil pipelines becoming a reality, and not remaining a dream. The narrative for the future must include the most neglected of our people to become stakeholders in a prosperous economy in stable and peaceful countries as our faiths are linked because terror knows no boundaries. We have overcome obstacles of thirteen years in three days and we will not permit the past to destroy the future.” Both countries must realize that and move beyond the negativity towards a promising future that is crucial and important for their citizens.

Monday, April 27, 2015

Faith, Hope and $50 Billion

Majyd Aziz

Pakistan’s 200 million denizens, atleast nowadays, are convinced that they live in an unique country and, in their opinion, they are the Almighty’s Chosen Few. It is this conviction that has enabled the huge majority of citizens to bear the disparities in their livelihood, to sustain the impact of natural calamities, to tolerate the perennial shortages of water, power, gas and gasoline, to endure the deteriorating law and order situation, and to put up with the false promises made by politicians. 

At the same time, the nation’s exporters who trot the globe to market their excellent products and services have to, more often than not, stomach the negative image of their motherland. Even before they are able to make their sales pitch, they have to answer about Pakistan’s heavy load of international allegations. Even delegates attending exhibitions, conferences and forums in different countries have to patiently deal with these accusations and brickbats. Terrorism. Extremism. Sectarianism. Human Smuggling. Money Laundering. Narcotics. Environment.  Nuclear Proliferation.

On the diplomatic front, Pakistani officials debate in a manner that is, to say the least, not encouraging and definitely not inspirational. Politicians are still in a juvenile mode, and thanks to TV talk shows, the citizens get their daily dose of hilarity and oral wrestling. Lawyers and jurists have taken to streets or frequently boycott the courts. State-owned enterprises are in a race to hemorrhage scarce financial resources faster than the FBR tax collection. The defenders of the faith have involved themselves in acrimonious demagoguery, confrontational fanaticism, blatant bigotry and organized militancy. For the hapless members of trade and industry, the government officials have become their invisible partners who extract their flesh of blood in advance. It is a rare government employee or a politician who does not roll over with a derisive laughter whenever the term Good Governance is talked about.

What is the future of Pakistan and the way forward? This is an everyday topic of intensive debate between those who manifest optimism and those who are either compulsive doomsday theorists or are sitting in their cozy cubicles at various think-tanks around the world. If there is a Dr Strangelove in the guise of Ajit Duval across the Line of Control, then there is a Karzai mentality west side of the Durand Line. If there is a pseudo human rights activist in Lahore, then there is a misguided liberal fascist in Islamabad. If there is a Baloch separatist safely ensconced in the environs of London or Geneva, then there is a so-called socialist Sindhi nationalist hedonistically enjoying the pleasures of life financed through bullying landlords or traders. They regularly regurgitate venom against the country, against her traditions, and against her importance in the comity of nations. Sadly, they manage to generate detrimental media hype resulting in emboldening their stance against Pakistan.

Pakistan will be a failed state. Pakistan will default on its financial obligations. Pakistan will let the strategic national assets fall into the hands of terrorists and extremists. Balderdash. These scenarios are not going to happen because of the determination and resilience of two prime stakeholders in the country. The Armed Forces of Pakistan and the entrepreneurial spirit and exuberance of the industrial and commercial community of Pakistan. The rallying cry is “When no one can do it, Pakistan can.”

In this chaotic state of affairs, there is a comforting presence of sanity. This is emanating out of the citadels of the guardians of the borders, seas, and the skies. Pakistan is said to be the most geo-strategically situated nation on earth. But this status imposes an onerous burden on the nation’s defenders to deploy personnel in each and every area of the borders. Seldom has any country continuously faced such a sensitive and a tense situation of keeping armed forces on alert at the borders. The highly-touted Global War On Terror has catapulted Pakistan into a frontline state and the ensuing ramifications have created havoc on the fragile threads of the nation’s fabric. Knowingly, Pakistan also suffers enormously as a powerless victim of the proxy war between two large Middle Eastern countries representing the two major sects of Islam. From death of thousands of precious civilian and military lives, to billions spent on this war instead of development of civic facilities, to the creation of local and alien hardcore terrorists, and to the damaging dissemination of anti-Pakistan propaganda by forces inimical to the country’s sovereignty and influence, Pakistan survived, survives, and will survive. This is what makes this nation so great. Oh yes, Pakistan is a nuclear country too. Make no mistake about it.

Commerce and Industry are the precious jewels in any nation’s crown. The crown is not worth its value if these two jewels are not genuine but instead are ersatz replicas placed haphazardly on the crown. Commerce and industry has to flourish in order for the country to earn foreign exchange, have a strong presence in the global marketplace, provide huge opportunities for employment, and contribute to the social welfare of the citizens. Thus it is incumbent upon the government to ensure that commerce and industry are shielded from infrastructure shortages, protected from corrupt, conspiratorial and lethargic bureaucracy, safeguarded from criminals and extremists, and provided facilitation, whether in the financial, taxation, diplomatic, or political domains.

Notwithstanding all such deficiencies, shortages, blockades and other negative influences, the fact is that there is surely a way out. There are many less fortunate countries that are coping with difficult conditions and are managing to come out of their precarious position. There are many less fortunate countries that lack the entrepreneurial spirit and business acumen of the Pakistani businessmen. There are many less fortunate countries that envy the skills, talent and ingenuity of the Pakistani worker and professional. There are many less fortunate countries that are not endowed with a wide array of natural resources that Pakistan has.

The recent announcement emanating out of Chiniot in Punjab is that substantial resources of iron ore, copper, and even gold have been discovered. Massive reservoirs of coal in Thar still need to be extracted and turned into energy. Alternate renewable energy, wind or solar, has gigantic potential. Operation Zarb-e-Azb is showing spectacular results while military courts are being set up to decide the fate of hardened criminals. Politicians are gradually coming to terms with protection of democracy instead of exercising radical adventures. For the first time after a gap of five years, bank financing to the private sector has shown a positive figure. The privatization process is gradually gaining momentum. The local bourses are showing spectacular optimism and foreign portfolio investors are making a bee-line to mop up blue chip scripts. Inflation has been controlled while the deep dip in world oil prices has been a source of relief for the citizens as well as the government. Findings coming out of various studies highlight a bright economic future for the country.

Can Pakistan make it? IMF, World Bank, Asian Development Bank, etc are cautiously giving a rosy prognosis. Relations with Afghanistan have made a U-turn after President Ashraf Ghani made a memorable visit to Islamabad. Iran and Saudi Arabia are in a race to be on favorable terms with Pakistan. Turkey has renewed her close fraternal ties too. Russia is making overtures to forget the past and instead wok with Pakistan. China is willing to open her coffers to encourage economic prosperity. India under Narendra Modi has, with obvious traditional reservation, sending out feel-good indications. Yes, Pakistan can make it.

Pakistan is once more in the center of the geo-political environment. The world knows that peace in South Asia, in fact even in Middle East, can never be a reality unless Pakistan is stable and prospering. This is the plus point. The world knows that the Pakistanis are resilient and have strong Islamic values. The world knows that Pakistan urgently needs financial outlays to make that paradigm shift towards a better, secure, and vibrant society. There is faith in Pakistan’s capabilities while Pakistanis have faith in their religion and their country. There is hope that Pakistan is the key player in the global arena while Pakistanis have profound hope about themselves and their country. There is global money to lend or aid while Pakistan is struggling with her financial resources. Hence, Pakistanis must sincerely heed the advice of Quaid-e-Azam Muhammad Ali Jinnah who said, “You will have to make up for the smallness of your size by your courage and selfless devotion to duty for it is not life that matters, but the courage, fortitude and determination you bring to it.” The message to the international community is that to make Pakistan zoom up on a fast track, all that Pakistan needs is Faith, Hope, and $ 50 billion.

(Exclusive for Special Supplement of 50 years of Business Recorder newspaper)

Saturday, April 4, 2015

Investing across the Border

Majyd Aziz

I am confident that India–Pakistan economic relations will touch newer heights . . . . CII will continue its efforts to strengthen economic engagement with Pakistan and work closely with all the stakeholders.” ~ Adi Godrej, Former President CII, in an exclusive for The News, May 22, 2013

The Chairman of the Godrej Group had led an 80-member business delegation to Pakistan in April 2013. The speeches and presentations made by leading business stalwarts of India at the Aman ki Asha Conference in Lahore were extraordinarily bullish and visionary, and there was an urgency of purpose among all participants. The Conference was heralded as a progressive venture, more so because of the pronouncements made by the Indian mega-tycoons. It was a manifestation of their pragmatic business strategy and reflected their understanding of future business potential. They were well aware that dependence just on bilateral trade would not bring about the paradigm shift in normalization of trade nor would it be a rosy path to traverse when the excessive baggage of past animosity, oozing distrust, myopic approach of bureaucracy, rabble-rousing of religious extremists, proliferation of undocumented and informal trade, and national protection of industries and businesses against perceived deluge of Indian goods into Pakistan were back-breaking and burdensome.

These prickly factors were and still continue to be stinging thorns in hampering the liberalization and normalization of trade between the two SAARC neighbors. Despite the bonhomie evident among the business community, the normalization process moves at a snail’s speed and is meekly susceptible to the ramifications of contentious and hostile issues that plague both nations. The common declarations emanating out of various conclaves, seminars and conferences on India-Pakistan trade stress home the need for letting trade and investment find their own dedicated course and should not be entirely subordinate to touchy political, military or territorial disagreements and concerns. However, for the proponents of trade liberalization, the avenue is infested with potholes, blockages, and narrow-minded decision makers zealously guarding their check posts.

Are India and Pakistan missing out on lost opportunities due to all the factors enumerated in the narrative above? Is there a possibility of embarking upon another channel in tandem with the ongoing process of trade normalization? Would the impasse be a normal feature of bilateral relations depending upon the outcome or mood of the environment at any particular moment, be they border skirmishes, be they allegations about interference across the Line of Control, be they political, media or religious demagoguery or accusations, or be they just be wearisome resignation that bilateral trade normalization process is idealistic and that it is a long and winding road.

The dark clouds continue to shadow the lush green terrain. But, this is where entrepreneurial spirit flourishes. The industrialists and businessmen of the sub-continent are known to prosper in adverse conditions. This is their hallmark that is universally acclaimed. Persuasive lobbying by trade organizations and think tanks has convinced the decision makers to shed all inhibitions and delete obsolete country-specific regulations and rules and allow investment across the border. The die has been cast but entrepreneurs still await the favorable policies and guidelines from various Ministries and from the Reserve Bank of India and its counterpart, the State Bank of Pakistan. Thus, it is time for trade organizations to start playing aggressively on the front foot and get the ball rolling since the target is achievable and a win-win situation.

Indian entrepreneurs have been going on the multinational circuit with full force and have become major investors in the global businesses and industries. The aggressive pace of Indian foreign investment has enabled India to rapidly become a formidable source of foreign investment internationally. The composition of Indian investors is not just limited to mega private sector corporations but even many medium-sized companies as well as state-owned enterprises are increasingly establishing their footprints globally through strategic direct investments. Studies undertaken by various consulting firms have projected that by 2030, over 2,500 Indian firms would have set up entities abroad or would have acquired or merged businesses overseas. Indian firms have exhibited prudence and resolution in investing in foreign countries and have targeted and invested initially through mergers and acquisition transactions.

Comparatively speaking, the mega-corporations in India have huge financial resources as well as the critical mass to generate substantial financial support from lending organizations. It is also a fact that the outreach of these Indian entrepreneurs is considerable compared to their Pakistani counterparts. It is also a matter of record that Indian corporations have either made large strategic investments in foreign enterprises or have outright bought them out. Moreover, support and facilitation from New Delhi is very apparent. The Indian government is making efforts to integrate the country's economy with the rest of the world. To help the country's firms raise capital abroad, the government will facilitate unlisted Indian companies to list on foreign markets without having to be publicly traded on domestic exchanges. The advantage of having a large Indian Diaspora is a strong and enabling element in foreign investment by Indians. 

According to the global consulting firm Grant Thornton, Indian companies announced Merger and Acquisition transactions worth US$ 8.4 billion in July 2014, from 110 deals, an increase of 36 per cent in transaction value and 23 per cent in volume over July 2013.” Reserve Bank of India data states that “Direct investments abroad by Indian companies stood at US$ 1.59 billion in May 2014. The investments in the form of equities, loans and guarantees were US$ 155.69 million, US$ 182.59 million and US$ 1.26 billion, respectively, during the month.” The global advisory firm Kroll Advisory Solutions reported that “in 2012 Corporate India acquired 72 companies abroad worth $11 billion, while in 2011 the figure was around $ 7 billion.” Market intelligence data revealed that “since 2003, USA and UK have ranked as the top two investment destinations for Indian capital. Emerging market economies are also a hot favorite for Indian companies and they are utilizing best practices learnt domestically to acquire assets in markets in Central and Southeast Asia.”

Some significant acquisitions by Indian companies include Corus Group (UK) by Tata Steel for over $ 12 billion, Zain Africa Mobile Telecommunications by Bharti Airtel for $ 9 billion, Novelis, an aluminum company, by Aditya Birla Group for $ 6 billion, Imperial Energy (UK) by Oil and Natural Gas Corp for $ 2 billion, Jaguar Cars and Land Rover (UK), the two iconic British automobile brands by Tata Motors for $ 2.30 billion, Honiton Energy Holdings (China), a wind energy firm, by Tanti group for $ 2 billion, Abbot Point Coal Terminal (Australia) by Adani Enterprises for $ 2 billion, Algoma Steel (Canada) by Essar Steel Global for $ 1.85 billion, Marcellus Shale (US), a natural-gas properties company, by Reliance Industries for $ 1.70 billion, and Minnesota Steel (US) by Essar Steel Holdings for $ 1.65 billion. There are other publicized acquisitions, mergers, and offers to buy by Indian companies since India has rapidly become a major source of foreign investment for the rest of the world.

The above narrative is highlighted to impress upon the fact that while Indian companies are expanding their footprints all over the world, it is imperative that these companies, as well as hundreds of other companies, take advantage of the relaxation of rules for cross border investment as announced by Reserve Bank of India and State Bank of Pakistan. The potential can be gauged from the fact that investment in Pakistan can open up the direct routes for exports to Afghanistan, Central Asian Republics as well as the Middle East. Moreover, these products can be marketed in Pakistan and also exported under the formal trade regime to India too.

In 2008, the Pakistan Japan Business Forum, of which I am one of the Founders, floated the concept of a Special Economic Zone in Karachi for Japanese investors. The Board of Investment spearheaded this concept and in September 2012, then President Asif Ali Zardari inked the Special Economic Zone Act 2012 at a glittering ceremony at the Presidency. This opened new vistas for foreign as well as domestic investors. In early 2013, at a Conference on India-Pakistan Trade held in New Delhi, I proposed that there should be an India Special Economic Zone on the Pakistan side of the Wagah-Attari Border. As Senior Advisor for the Transnational Strategy Group based in Washington, I made a suggestion to Dana Marshall, President, and my other colleagues in TSG that it should initiate a study to determine the feasibility and importance of an India-SEZ. TSG prepared a detailed initial “Study of the Benefits of Establishing a Pakistan-India Cross-Border Special Economic Zone” that has been commended as a pioneering, pragmatic and doable approach.

The focus on cross-border investment helps in underscoring a fundamental point. The field is wide open and attractive. It is upto the private sector who has the determination to reach those goals best by removing the obstacles to growth, and letting things grow by themselves. Two-way investment, unhampered by government protectionism and restrictions, would go a long way towards realizing that potential. To put in a nutshell, private sector leaders are the future architects of ushering in peace in the region through trade and investment. It is time to shed the primordial mindset and strive for regional economic integration in a fast-mode. SAARC, with all its merit, can become a formidable force if Pakistani and Indian trade and industry become sincere game changers. Milton Friedman poignantly stated that “History suggests that capitalism is a necessary condition for political freedom.”

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.