By Saad Hafiz:
The majority of news items that link India and Pakistan report something negative such as tensions along the border, bickering over Kashmir, Balochistan or Afghanistan, concerns about terrorism, or, at its most benign, a eruption of nationalistic sentiment and flag-waving when the two nations meet on the sporting field. It is welcome, therefore, that a visible thaw in consular and economic relations between the two countries has made the headlines recently.
The just-concluded Pakistan-India foreign ministers’ talks in Islamabad announced a liberalised and relatively relaxed visa regime, which benefits certain selected categories of visitors. The Reserve Bank of India has also permitted Indians to invest in Pakistan and for Pakistanis to invest in India, a move that will help enhance bilateral trade and investment. Pakistan’s stated goal of normalising trade with India by the end of the year also seems to be on track with government planning to phase out major restrictions on Indian imports by January 1, 2013. The decision has great significance, both as an opportunity and a challenge, for the struggling Pakistani economy, and many Pakistani newspapers voiced fears that local industry would be jolted by a flood of cheap Indian imports.
Trade between the two countries, with a combined population that is one-fourth of that of the world, stands currently at a paltry three billion dollars as political exigencies have prevented business relations from reaching their full potential. However, trade is expected to touch a high of six billion dollars by 2014 and could reach ten billion dollars by 2015 after restrictions are removed. A World Bank study in 2007 on the prospects of bilateral trade as a growth driver for both countries noted that current volumes of India-Pakistan trade amount to “only nine percent of the trade that occurs between Argentina and Brazil, two countries of comparable size and proximity.”
One can only be glad that the folly of entrenched positions on both sides of the border is giving way to common interest. Mr Manmohan Singh’s policy of engaging Islamabad despite the lack of progress in bringing the plotters of the November 2008 terror attack on Mumbai to justice has paid dividends. The Indians have also shown maturity and intelligence by not taking advantage of the deep internal challenges faced by Pakistan. Despite some residual opposition, the ‘weak’ civilian government in Pakistan led by the much-vilified Mr Zardari has delivered on normalising commercial relations with India. Pakistan can be commended for managing to separate the Kashmir issue from trade, thus moving away from pressing ‘core’ issues and ‘composite’ dialogue. For decades, the two have been linked, and the Pakistani government had been maintaining that it could give India the ‘Most Favoured Nation’ (MFN) treatment only when the Kashmir problem was satisfactorily resolved.
India can do a lot more to foster and expand the emerging economic engagement with Pakistan. For one, it must be politically sensitive to the current imbalance in bilateral trade, which is likely to further widen in India’s favour as Pakistan opens up. India’s current exports to Pakistan are nearly eight times the value of imports. Just as Delhi grumbles about the unequal trade with Beijing, the trade deficit is bound to emerge as a political issue in Pakistan in the not-too-distant future. India must consciously facilitate more imports from Pakistan. Demonstrating that trade with India can be both free and fair would be a confidence builder in fostering trading relations with Pakistan.
The recent thaw in bilateral relations offers renewed hope that India and Pakistan could find ways to perceive their situation as one that was slowing economic and social progress through wasteful defence costs and lost opportunities. Pakistan cannot afford a security policy any longer based on high levels of threat perception and other elements of traditional geopolitical thinking in South Asia. It cannot afford either a heavy defence budget or a foreign policy that rejected an active policy of seeking not only détente with neighbouring countries but real friendship. The political trajectories of the two states have so significantly diverged that it seems inconceivable that they had common roots. Today, despite a plethora of domestic problems that are sandbagging its growth, India is increasingly a significant global actor. Pakistan, in contrast, is caught in a vortex of economic, political and social problems, which have no possible panacea in the foreseeable future.
India and Pakistan have an opportunity to build relationships in areas such as trade, commerce, etc, which will hopefully dilute the jingoistic feeling among the people from both states. This could lead to cooperation on subjects like nuclear security, energy shortages and transit trade. If Europe can enter into an economic union after fighting two horrific wars in the 20th century and bitter regional rivals like Brazil and Argentina can trade their way to co-existence, there is no reason that trade and economic cooperation cannot have the same salutary effect in South Asia.