Can peace dividends from business pull back India and Pakistan from the brink?

S. N. M. Abdi

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Bilateral trade can check the slide in India-Pakistan relations, according to Pakistan’s new Prime Minister Imran Khan, even as the current stand-off is turning out to be one of the longest in the nuclear twin’s troubled history.

Meanwhile, experts told Al Arabiya that India and Pakistan can reap rich dividends by tapping the market across the border. And if Pakistan were to grant India transit rights through its territory for trade with Afghanistan and Central Asia, then the economies of both countries would be transformed beyond recognition in a short span of time.

Bilateral trade in 2017-18 stands at a measly $2.40 billion down from $2.70 billion in 2013-2014. India enjoys a sizeable trade surplus but these figures pertain to only the direct trade between South Asia’s warring nations whose mutual hostility is a major cause of concern for the United Nations.

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“But indirect trade routed through a third country like United Arab Emirates”, says Afaq Hussain, Director of the Bureau of Research on Industry and Economic Fundamentals (BRIEF) in New Delhi, “is 10 times more, exemplifying the existence of a huge bilateral trade potential, provided tariff and non-tariff barriers are addressed and steps taken towards increasing awareness and building confidence among trading communities.”

The latest BRIEF study has identified sectors like textiles and clothing, sports goods and surgical equipment for developing bilateral, product specific regional value chains.

Raw materials

“There is potential for raw materials (raw cotton, fabric dye), grey fabric (polyester, chiffon, nylon), blended fabric (cotton-polyester-viscose blend for denim) and stitched clothes (track suits and sportswear) from Indian hubs in Gujarat and Tamil Nadu to Pakistan’s major production center in Faisalabad and its Lahore and Karachi markets.

“Similarly, there is a huge demand for salwar-kameez-dupatta made of lawn fabric and wedding attire (shararas). Given Pakistan’s expertise, the demand in India for Pakistani fabric and designs as well as cost benefits attached with trading between India and Pakistan, there is significant scope for collaboration. The market opportunity for these products alone is about $2.3 billion.”

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The potential of overland transit trade is huge if India can allay Islamabad’s fears about New Delhi using Pakistani territory for running intelligence or strategic operations. Pakistan will demand ironclad guarantees of good behavior before lowering its guard.

“One of the steps, Imran Khan can take to boost Pakistani economy”, says C. Raja Mohan, Director of Institute of South Asian Studies at Singapore’s National University, “is to let India export its goods to Afghanistan and central Asia through Pakistan.”

Transit trade

“This could bring hard currency earnings through transit fees and boost the Pakistani trucking and other industries. Even Pakistani experts like former Finance Minister Shahid Javed Burki hope that transit trade with India - in association with China Pakistan Economic Corridor infrastructure - could help make Pakistan into a commercial hub between South and Central Asia, including China’s western region.”

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“The United States has been urging Pakistan to open up its land routes to India. But the administration of George W Bush and Barrack Obama had little success, however, in persuading the Pakistani army to end its resistance to overland transit trade with India.”

Khan is saying again and again that he wants to build a “new Pakistan”. And his Indian counterpart, Narendra Modi, has espied the potential of “fresh start” in India-Pakistan relations with the remarkable rise of a cricketer-turned-politician across the border. They can jointly use commerce and business to lay the foundations of friendly relations.