ajpirzada
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ISLAMABAD (April 21 2010): The Panel of Economists has recommended to the government to consider granting India the status of 'Most Favourite Nation' (MFN) to exploit huge trade potential, as free trade relations with India would enable Pakistan to achieve a higher and more equitable GDP growth. The panel, constituted by the Planning Commission, in its final report has also urged the government to allow import of raw material from India (which is not available locally) by expanding the negative list.
The panel has also recommended opening the Attari/Wagah border to allow transportation of goods by road, at the earliest, as the road link for movement of passengers is already operational. "Currently, there are no India-Pakistan joint ventures. As several Indian companies are showing interest in having joint ventures in Pakistan, it is important to understand the nature of such investments and provide timely facilitation," the report adds.
"The current DTRE scheme whereby quotas are fixed for raw material imports from India meant specifically for exports suffers from redtapism and graft. A better solution is to open up raw material imports across the board," the report said.
The report says that the sequencing of policy implementation as a first step trade relations between the two countries should be normalised by trading on the 'most favoured nation' (MFN) basis. As a second step, policymakers should address problems related to information exchange, trade facilitation, banking, non-tariff barriers, visas and communication. As a third step, an enabling environment for investment has to be created so that India and Pakistan can enter into joint ventures.
"It is essential to move from a positive list approach to a negative list approach. It is important for the two countries to have a common Harmonised System of Codes and greater transparency," the panel says in the report.
As there is evidence of anonymous transactions between trading partners, payments through formal channels assume a greater role. Currently, the payments system is formalised through the Asian Clearing Union, which is inefficient as payments are often delayed. The two countries need to have an institutional arrangement so that state, private and foreign banks can participate freely in banking transactions.
The Panel of Economists has said that there needs to be greater transparency to address problems related to confirmation of L/Cs and to payments. As there are only two operational routes, Mumbai-Karachi sea route, and the Attari/Wagah rail link on the land border, new routes should be opened up. Opening the Attari/Wagah border to allow transportation of goods by road should be done at the earliest as the road link for movement of passengers is already operational.
The Panel has recommend to amend the rail protocol to remove restriction on wagon balancing and improve wagon availability. Measures such as simplified border procedures should be introduced at the land borders. The shipping protocol should be amended so that third country and non-national flagships can ply on the Mumbai-Dubai sea route which would help in lowering shipping costs.
"As new firms enter into Indo-Pak trading, trade needs to be facilitated through superior information exchange on commodities and quantities to be traded. Establishing web portals towards this end would perhaps be the quickest in terms of implementation," the Panel of Economists said.
There is a need to quickly reduce non-tariff barriers which are more pernicious on Pakistan's exports to India. Moreover, there is also a need for a simplified and harmonised system of Technical Barriers to Trade (TBTs) and sanitary and phyto-sanitary standards (SPS). In the latter case, the protocols will have to be negotiated under Safta. According to the report, uninterrupted telecommunication links between the two countries would facilitate trade between the two countries and thus there is a need to enhance communication channels between the two economies.
Although the bilateral trade between Pakistan and India in 2007-08 valued $2.3 billion, representing approximately 2 percent and 5 percent of Pakistan's total exports and imports respectively. Comprehensive analysis of trade data shows that the two countries are important partners in trade. Pakistan's exports to India are almost half its exports to South Asia, while its imports from India are in excess of 70 percent of its imports from South Asia, which in value terms are more than its imports from France, Canada, the Netherlands, Turkey, Iran and Thailand. Nevertheless, trade between the two countries is lower than its potential.
Recent estimates on trade potential suggest that trade could be in the range of $3 billion to $10 billion compared with the annual official trade flows over the last six years of less than $400 million. In other words, only 4 percent to 13 percent of the potential bilateral trade is being exploited. Since Pakistan and India account for almost 90 percent of South Asia's GDP, low bilateral trade is an important constraint for growth of South Asian exports to the rest of the world, as well as for expansion of interregional trade, the report added.
Business Recorder [Pakistan's First Financial Daily]
The panel has also recommended opening the Attari/Wagah border to allow transportation of goods by road, at the earliest, as the road link for movement of passengers is already operational. "Currently, there are no India-Pakistan joint ventures. As several Indian companies are showing interest in having joint ventures in Pakistan, it is important to understand the nature of such investments and provide timely facilitation," the report adds.
"The current DTRE scheme whereby quotas are fixed for raw material imports from India meant specifically for exports suffers from redtapism and graft. A better solution is to open up raw material imports across the board," the report said.
The report says that the sequencing of policy implementation as a first step trade relations between the two countries should be normalised by trading on the 'most favoured nation' (MFN) basis. As a second step, policymakers should address problems related to information exchange, trade facilitation, banking, non-tariff barriers, visas and communication. As a third step, an enabling environment for investment has to be created so that India and Pakistan can enter into joint ventures.
"It is essential to move from a positive list approach to a negative list approach. It is important for the two countries to have a common Harmonised System of Codes and greater transparency," the panel says in the report.
As there is evidence of anonymous transactions between trading partners, payments through formal channels assume a greater role. Currently, the payments system is formalised through the Asian Clearing Union, which is inefficient as payments are often delayed. The two countries need to have an institutional arrangement so that state, private and foreign banks can participate freely in banking transactions.
The Panel of Economists has said that there needs to be greater transparency to address problems related to confirmation of L/Cs and to payments. As there are only two operational routes, Mumbai-Karachi sea route, and the Attari/Wagah rail link on the land border, new routes should be opened up. Opening the Attari/Wagah border to allow transportation of goods by road should be done at the earliest as the road link for movement of passengers is already operational.
The Panel has recommend to amend the rail protocol to remove restriction on wagon balancing and improve wagon availability. Measures such as simplified border procedures should be introduced at the land borders. The shipping protocol should be amended so that third country and non-national flagships can ply on the Mumbai-Dubai sea route which would help in lowering shipping costs.
"As new firms enter into Indo-Pak trading, trade needs to be facilitated through superior information exchange on commodities and quantities to be traded. Establishing web portals towards this end would perhaps be the quickest in terms of implementation," the Panel of Economists said.
There is a need to quickly reduce non-tariff barriers which are more pernicious on Pakistan's exports to India. Moreover, there is also a need for a simplified and harmonised system of Technical Barriers to Trade (TBTs) and sanitary and phyto-sanitary standards (SPS). In the latter case, the protocols will have to be negotiated under Safta. According to the report, uninterrupted telecommunication links between the two countries would facilitate trade between the two countries and thus there is a need to enhance communication channels between the two economies.
Although the bilateral trade between Pakistan and India in 2007-08 valued $2.3 billion, representing approximately 2 percent and 5 percent of Pakistan's total exports and imports respectively. Comprehensive analysis of trade data shows that the two countries are important partners in trade. Pakistan's exports to India are almost half its exports to South Asia, while its imports from India are in excess of 70 percent of its imports from South Asia, which in value terms are more than its imports from France, Canada, the Netherlands, Turkey, Iran and Thailand. Nevertheless, trade between the two countries is lower than its potential.
Recent estimates on trade potential suggest that trade could be in the range of $3 billion to $10 billion compared with the annual official trade flows over the last six years of less than $400 million. In other words, only 4 percent to 13 percent of the potential bilateral trade is being exploited. Since Pakistan and India account for almost 90 percent of South Asia's GDP, low bilateral trade is an important constraint for growth of South Asian exports to the rest of the world, as well as for expansion of interregional trade, the report added.
Business Recorder [Pakistan's First Financial Daily]
