Prospects for India-Pakistan trade not considered rosy

By Khalid Hasan

WASHINGTON: There is no sign that India and Pakistan have managed to develop the political will necessary to get the current normalisation process to reach fruition, a one-day conference on economic diplomacy in South Asia was told Thursday.

Stephen Cohen of the Brookings Institution and author of a number of books on the region told the conference orgranised by the Centre for Strategic and International Studies (CSIS) and the Johns Hopkins University’s School of International Studies that he had seen no signs so far that would lead him to conclude that “political negativity” in South Asia had diminished to a point where normal economic ties were a possibility. He said international engagement in South Asia had not been able to pave the way for a stable long-term solution of the problems that had dogged the relationship between the two countries. According to him India and Pakistan are in a situation where they cannot make peace but after having acquired nuclear weapons, they cannot make war either.

Ms Teresita Schaffer, head of the CSIS South Asia programme, brought it to the attention of the conference that in the first few years after 1947, trade between India and Pakistan accounted for 56 percent of Pakistani exports and 32 percent of the country’s imports. Today, she added, trade between South Asian countries was no more than one percent of their total world trade. This decline, she argued, had been caused by “systematic isolation”. She said the only “success story” in India-Pakistan relations so far was the Indus Basin Waters Treaty where the two neighbours divided the rivers of the Indus basin river system. “It was a case of divorce rather than joint custody,” she added, borrowing a simile from a settlement between a divorcing couple fighting over their children. She said the business community in India and Pakistan was in favour of mutual trade but not in its own sector. A textiles manufacturer would advocate mutual India-Pakistan trade but not in textiles. “There is a serious sequencing problem here, namely what will precede what. Should Kashmir precede closer trade relations or should it follow,” she added.

Hussain Haqqani, a senior scholar at the Carnegie Endowment for International Peace, said that the political crisis that was keeping India and Pakistan apart outweighed any argument made periodically in favour of trade. He said it was ironic that the 16 items being traded between India and Pakistan were not on the permitted list. This thriving trade was being carried out between smuggling rings in the two countries. The Pakistani smugglers had neutralised any possible opposition from Hindutva groups through an elaborate system of bribes and payoffs and the Indian smugglers had done likewise to meet any possible challenge from extremist groups in Pakistan. Also on the payoff list were concerned officials from the two states. “How can legitimate trade even begin to take place under these circumstances?” he asked. He said the psychological environment in India and Pakistan was not conducive to normal business relations. India and Pakistan, he argued, had serious issues of identity that had kept them apart from one another. He said South Asian politics was not driven by economic but ideological considerations.

Michael Clark, executive director of US-India Business Council and the US Chamber of Commerce, said the biggest problem in South Asia was that neither of the countries was fully embedded in modern capitalism. The profit incentive had not yet been fully taken hold of the business community. Lots of schemes that were talked about in regional terms were unrealistic from a strictly business point of view. There was much talk of a gas pipeline from Central Asia to India over Pakistan. There was also another scheme that envisaged piping Bangladeshi gas to India. He said the commitment of both Indian and Pakistani government to the honouring of international commercial commitments left a great deal to be desired. He mentioned in this context the Enron case in India and the HUBCO case in Pakistan. There is a “tremendous amount of statism” in the two countries, he pointed out, which does not encourage foreign investors to bring their money here. Per capita, there was far less investment in the states of South Asia, than there was in much smaller countries. He said it was crucial that India and Pakistan establish rule of law, ensure prosperity and have a clear position on property rights.

The conference was also addressed by Ms Lisa Curtis of the State Department, Ms Poonam Barua, a Ford Fellow, and Ram Babu Dhakal of the Nepalese mission to the United Nations.

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