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7/27/2019 Economic Integ

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Economic integration in South Asia: Pakistans perspective

Col Muhammad Hanif (Retd)

Introduction

As is evident from progress achieved by other free trading areas (FTAs) like EU,

NAFTA and ASEAN it is quite clear that implementing free trading agreement (SAFTA)

already signed in South Asia and advancement of further economic integration involving

mutual investments, joint ventures, trading energy and improving connectivity will be

beneficial for all South Asian countries. Since formation of SAARC in 1985, signing of

SAPTA in 1993 and SAFTA in 2004, Pakistan has always endeavoured to make use of

regional cooperation and trade agreements to draw economic benefits. However due to

Pakistan- India lingering disputes and Indias lukewarm attitude to resolve disputes with

all smaller South Asian countries and also its rigidity in removing tariff and non tariff

trade barriers true trade potential in the region could not be realized. However after

becoming nuclear powers and realizing that disputes cannot be resolved by use of force

and also after witnessing other regions and countries enjoying trade and economic

relations despite having political disputes, since last few years Pakistan and India have

gone positive on building mutual trade and economic relations which will largely

contribute towards enhancing progress of regional economic integration in South Asia.

It is also good thing that while India has shown flexibility in easing non tariff barriers on

trade with regional countries, Pakistan has also almost accorded MFN status to India. It


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is expected that this evolving cordiality between Pakistan and India will prove better for

South Asian economic cooperation. Therefore under the improving environment

Pakistan wants to make positive contribution towards hastening South Asian economic

integration with particular attention to overcoming main challenges to it such as

enhancing regional trade and investments, meeting energy shortages and improving

mutual connectivity. In this context Pakistans perspective on meeting these challenges

is discussed in the ensuing paragraphs.

Increasing Trade and Investment

Pakistan considers that implementing SAFTA will benefit all countries in the long run by

increasing growth rates, technological diffusion, and foreign investment although initially

some concessions accorded to LDCs under the agreement are necessary which non

LDCs should adhere to. Greater trade between Pakistan and India also offers an

immediate and rich possibility of economic growth for both countries. It will be beneficial

for Pakistani investors to carry out joint ventures with the Indian investors in

petrochemicals, automobiles, agro processing, technology transfer arrangements

among IT firms and joint infrastructure and gas pipeline projects. On according MFN

status to India, some Pakistani industrialists and agriculture stakeholders have shown

reservations and requested for protection for next five years which Pakistan will have to

consider. However in this regard if India reduces its tariffs on agriculture commodities,

textiles, and other goods of potential value to Pakistan, it will be good for Pakistani

stakeholders. Both India and Pakistan should also quickly phase out the negative list

and rationalize and simplify the technical barriers to trade. Both should open bank

branches in other country and replace domestic tax, tariff and subsidy policies that

distort incentives for production and trade. It is also necessary to harmonize trade

integration policies such as standards, quality control, technical regulations and material

testing.

South Asian countries should harmonize legal regulations for investor protection and

simplify rules of origin of trade able goods. For durable mutual trade and sustainable

economic integration in South Asia it is imperative that India and Pakistan agree on an


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interim solution of Kashmir dispute with the consent of people of Kashmir to alleviate

their existing political, economic and human rights concerns. This could comprise

giving self rule to the Kashmiris on both sides of LOC, withdrawal of security forces on

both sides of LOC and opening up of LOC for Kashmiris to freely meet and trade goods.

As part of the self rule Kashmiris should be given freedom to choose their own

representatives and governments on both sides of LOC and run their administration

comprising all subjects except defence, foreign and financial policies. This kind of

concrete progress in Indo-Pakistan relations will also make it easier for Pakistans

Government to meet Indias request for granting it the facility of transit trade to

Afghanistan and beyond. After self rule in J ammu and Kashmir for about ten years it will

become easier to find a permanent solution to the dispute under the spirit of UNSC

resolutions and according to wishes of the Kashmiri people.

Meeting Energy Shortages

As the South Asian economies grow at faster rates it increases the demand of energy

resources for domestic, commercial, industrial and transportation sectors. To meet

energy shortages Pakistan favours mutual trade of energy with in South Asia and also

through imports from neighbouring regions and countries such as Central Asia, Gulf

region, Iran and Myanmar. In this context Pakistan wants that oil and gas pipelines and

electricity transmission lines and connected installations are mutually planned and

constructed by investments by South Asian countries and also attracting foreign

investments. For this purpose Pakistan is ready to provide guarantees for secure and

uninterrupted flow of oil, gas and electricity through pipelines and transmission lines

passing through its territory. Since Indias state owned oil and Gas Company GAIL

wants to provide liquefied natural gas (LNG) to Pakistan it might now be possible as

Pakistan-India relations have started warming up. This can be done through an

extension of gas pipeline to Lahore from Indian Punjab to which a pipeline is planned to

be laid from Indian Gujrat state. Pakistan is also considering importing 500 Mega Watts

of electricity from India through Kasur border since Indian Prime Minister has already

offered that to Pakistan. India and Pakistan have already signed Turkmenistan-

Afghanistan-Pakistan-India (TAPI) Gas pipeline for which Russia is ready to invest.


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Pakistan is still wishing to import Gas from Iran through proposed Iran-Pakistan-India

(IPI) pipeline although as a party to it India has opted out under US pressure. In this

regard Pakistan would suggest India to rejoin the project. Pakistan is also planning to

import electricity from Tajikistan for which Russia has shown interest to invest in this

project which has been named as CASA-1000. In case these three projects are

completed and India becomes part of these then South Asian energy deficiency can be

met to a large extent. This will also facilitate building and using Pakistani route for India

to transport Iron ore from Afghanistan since India wants to do that as it has been

awarded contract worth eleven billion dollars by Afghanistan for Iron ore extraction. This

grand strategy of laying and maintaining pipelines for gas, oil and Iron ore and

transmission lines for electricity from central Asia and Afghanistan to India and beyond

via Pakistan will largely succeed if India addresses Kashmir dispute in line with the

UNSC resolutions and according to the wishes of Kashmiri people and it also does not

bite Pakistans interests in Afghanistan by enhancing its military influence there.

Improving and Expanding Connectivity

For regional economic integration through trade, investments and sharing of energy it is

important that road, rail, air and maritime transport and telephone communication

systems between South Asian countries are well connected. As far as Pakistan is

concerned its road and rail communication are well built which can be used immediately

for intra regional trade from Afghanistan to India and beyond. Pakistan has built

motorway from Lahore to Peshawar and railway line from Lahore to Peshawar also

exists. However there is a need to further expand this facility by laying a dual railway

track. Already Wagha-Lahore and Srinagar-Muzaffarabad trade routes have been

opened for trade between India and Pakistan. Pakistan also suggests that existing trade

routes between J ammu and Mirpur -Mangla, between J ammu and Sialkot and between

Monabao and Khokrapar(Sindh) should also be opened. On these routes there is a

need to further expand the existing road and rail network along with organizing LOC and

border crossings on modern lines to facilitate quick custom and security clearance.

Pakistan would also like to further ease the visa regime with India so that mutual trade

can take place easily. Subsequently the arrangement should also cater for mutual


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tourism. There is also a need that air traffic between Pakistan and India is increased so

that businessmen can visit each others countries more quickly and frequently. Pakistan

would like to carry out trade with other South Asian countries via land routes passing

through India including import of electricity from Nepal and Bhutan and gas from

Myanmar. It is also necessary that maritime facilities for trade between India,

Bangladesh, Srilanka and Pakistan are improved and expanded. At the moment tariff

rates for telephone calls within South Asia are high. This needs consideration by all

SAARC countries for rationalizing the rates and modernizing the calling facilities.

Recommendations

-While widening trade with India Pakistan wants to increase trade with all other South

Asian countries via land routes passing through India.

-After according MFN status to India Pakistan is willing to increase trade with it by

opening various trade routes along the border. While this is being done Pakistan would

like India to also agree on opening additional trade routes along LOC in J ammu and

Kashmir such as J ammu-Mirpur-Mangla and J ammu-Sialkot so that people of J ammu

and Kashmir can also benefit from this trade facility.

-SAFTA may be implemented with speed.

-SARRC countries should work out a comprehensive agreement for intra regional trade

of energy, sign it and take immediate steps for its implementation.

-Similarly SAARC should chart out and sign a detailed plan for enhancing mutual

connectivity.

-To ensure quick success of regional economic integration under sustainable cordial

political environment SAARC countries should now amend its Charter to also allow

discussion of bilateral disputes at its platform to help resolve outstanding issues and

address related tensions quickly as and when these occur.

Conclusion

During the last SAARC Summit it was encouraging to note the strong desire expressed

by all leaders to pursue regional economic integration with the required urgency. Since

Pakistan and India are now both willing to improve their political and mutual trade


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relations, this evolving scenario also largely favours hastening of regional economic

integration. Therefore Pakistan has started taking initiatives to implement SAFTA and

increasing trade relations with India. It is expected that above given recommendations

will positively contribute to the efforts already being made by SAARC countries to

realize the objective of mutual economic integration so that its advantages can be made

use of for alleviating poverty in South Asian thus adding to the welfare of its people.

The writer works for Islamabad Policy Research Institute (IPRI)

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