The truck full of Indian tomatoes that crossed the Attari-Wagah border into Pakistan for the first time in the two nations’ bilateral history should, in time, break more barriers than just the physical checkpoint located in the western state of Punjab. Though pragmatism in both countries is growing, this event merely marks an incremental move and we hope it is followed up with many more measures to improve and grow cross-border trade.
Much of the trade between the two countries is either routed through Dubai and Commonwealth of Independent States countries, or is through informal channels. Not only does this raise transaction costs, but also transport costs along circuitous routes. Traders will be happy to see the facility expand—for instance, Kashmiri fruit traders want access to the Srinagar-Muzaffarabad road across the line of control, so they could reach Pakistani markets within eight hours, as huge amounts of fruit go waste along the choked Jammu-Srinagar highway.
The reason for the Attari move stems from the August agreement between respective commerce secretaries to work on raising the level of trade to $10 billion by 2010. Guesstimates of informal trade vary from $250 million to $2 billion. And official figures place bilateral trade at $1.7 billion. This is quite insignificant, considering the size of the two economies and the known scope for trading in sectors as diverse as textiles, farm produce, engineering, chemicals, electronics, metals and minerals. Opportunities have earlier been identified by industry associations in both countries.
Before the potential is realized, however, both India and Pakistan need to work closely together on making cross-border trade a meaningful exercise. For this, they need to remove several bottlenecks from the Attari-Wagah road route as well as the Mumbai-Karachi sea route, and to expand the initiative at other checkpoints on the border.
The transaction costs through the Attari border are very high due to the number of clearances (and the associated rent-seekers’ fee for speeding the same) as well as problems of logistics such as delays in procurement of wagons (so far, some trade was happening through the train link of Attari/Wagah). Traders also face a huge barrier to business from visas and police reporting requirements. This is on the part of both governments. A survey by a leading research body in India found, for instance, traders in Amritsar pointing out that Pakistani traders have to come to Delhi to meet them as getting visas for Amritsar is very tough. More mutual cooperation is needed to ease such impediments. For easing of transaction costs that arise from the gamut of clearance requirements, Pakistan should accept the need to replace its positive-list approach on imports from India with the less restrictive negative list, which only notifies items that can’t be traded. These are just some of the immediate issues that need addressing for that truck of tomatoes to translate into meaningful traffic.
Not only will acceptance of real economic interdependence help growth and employment creation, and deliver a peace dividend between the two countries, it will also bring larger benefits to the entire South Asian region. This is one of the least integrated regions in the world today, and any improvement on this front now clearly hinges on India’s economic equation with Pakistan.
The significance of facilitating cross-border trade can be seen in the Greater Mekong Subregion—comprising Thailand, Cambodia, Vietnam, Laos, Myanmar and China. An economic cooperation programme aided by the Asian Development Bank there expanded from the initial thrust on physical connectivity and has helped build multiple economic linkages. It began in an environment of fragile peace in 1992 after years of conflict, and has helped foster much mutual understanding.
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