The business route to South Asian integration

By Saroj Mohanty, IANS,

In line with Prime Minister Manmohan Singh’s vision of a transformed and prosperous South Asia, India and Pakistan take another incremental step towards normalisation of relations, operationalising a liberal visa regime this week that would pave the way for greater people-to-people contact and deepening of two-way trade and investment.

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Visas are a viable policy instrument used by states in international diplomacy, and as globalisation entails greater importance on the so-called “low politics” of trade, tourism and movement of skilled manpower, countries are resorting to such an option for furthering their national interests.

The implementation of the visa agreement during Pakistan Interior Minister Rehman Malik’s three-day visit from Dec 14 and India’s unilateral decision to grant six-month multi-city visas to Bangladeshi businessmen are seen to further integrate the regional economies of the subcontinent.

The visa agreement, signed by the foreign ministers of the two countries in Islamabad in September, seeks to ease decades-old stringent travel restrictions on cross-border movement. It allows issuing visas to eight categories of people, including the elderly, tourists and pilgrims.

The regime mandates a time-frame for issuing visas. From the indefinite time taken to issue a visa earlier, it has been fixed to a 45-day period. Also, under the new regime, one can visit five places, instead of three at present and those above 65 years of age and children below 12 years and eminent businessmen are exempted from reporting to the police.

Observers say that a liberal visa regime, besides helping divided families across the border, would lead to better understanding of the two societies. But what is more significant is the facilitation of business visas of one-year multiple city and multiple visits.

At a time of growing uncertainties in world economies, the people-friendly move in a way stresses the need for increasing intra-regional trade. While the SAARC countries have been integrating with the global economy, they remain far less integrated among themselves.

Data shows that South Asia is the least integrated region in the world with a very low trade volume of about five percent.

By contrast, the percentage is much higher in other regional groupings such as the Association of Southeast Asian nations (ASEAN), North American Free Trade Agreement (NAFTA) and European Union (EU) where it is 22, 52 and 65 percent respectively. Trade there has grown faster within the region than with the rest of the world.

Another awaited decision that would significantly facilitate the integration process is Pakistan carrying out its commitment to phase out the negative list governing trade with India by the end of this month. This implies conferring the Most Favoured Nation (MFN) status on India.

Pakistan has committed to remove 1,209 items from the “negative list” by the year-end, which itself means the grant of MFN status to India.

In March, Pakistan replaced its ‘positive list’ comprising 1,974 items that could be exported by India to the neighbouring country with a ‘negative list’ of 1,209 products. This means that India can export all other except the 1,209 items.

India had bestowed MFN status on Pakistan in 1996.

Meanwhile, India has told Pakistan it wants more land trade routes. Land routes are needed to facilitate trade connectivity to Central Asia and the Middle East.

As many as 800 trucks pass through the Attari-Wagha border daily, reflecting the sharp growth in commercial activities between the two countries. The two countries have now agreed to keep open the trade point for seven days a week instead of six.

“When goods move and investments move, that develops a large constituency for peace and greater integration,” said an Indian official.

For India, the decisions to go in for a liberal visa regime and allowing investment from Pakistan are important parts in the “configuration” of a grand strategy. The people-centric measures incentivise bilateral cooperation, raising the costs of a conflict or war, and open up space for regional diplomacy.

Business experts say once the MFN agreement takes effect, existing trade arrangements between the two countries would improve and new opportunities like export of petroleum products and trading in electricity would emerge.

A great deal of bilateral trade that now takes place via Dubai and Singapore would come down, and official annual trade would rise to $10 billion from a little over $2 billion at present. Intra-industry trade would also increase and multinational corporations could set up facilities to serve both the markets.

As the biggest and the fastest growing economy in South Asia, India offers opportunities of an expanding market, investments, technology and entrepreneurial resources for its neighbours.

In fact, a report of a panel of economists appointed by the Pakistan Planning Commission talks of several advantages of normalising trade with India.

The panel said the fear of the Pakistani manufacturing sector being rendered uncompetitive by Indian goods was highly exaggerated. Import tariffs have been substantially lowered and the Pakistani industry is already standing up to the competition of cheap imports from China.

(Saroj Mohanty is a senior business journalist. He can be contacted to [email protected])