Peculiar mindset, political mayhem serious hurdles in intra-Saarc economic co-operation: Secy General, Saarc CCI

Iqbal Tabish is the Secretary General Saarc Chamber of Commerce & Industry. Formerly, he has been associated with the Trade Development Authority of Pakistan as Senior Economist, besides working as the Director (R&D) for the Federation of Pakistan Chambers of Commerce & Industry. Following are some excerpts from BR Research's recent sit-down with him in Islamabad:
BR Research: Please tell us about the idea behind the formation of Saarc Chamber of Commerce and Industry, and also its mandate?
Iqbal Tabish: Established in 1985, the South Asian Association for Regional Co-operation (Saarc) had hitherto, avoided including core economic issues in its programme, but in the wake of the desire for creating a regional organisation to promote economic co-operation, the Saarc Secretariat commissioned a study on Trade, Manufactures and Services in 1988. The study, completed in 1991, strongly supported to establish Saarc Chamber of Commerce and Industry to bring about improvement in the business environment, disseminate information about potential tradable goods, and identify joint ventures in the Saarc region.
Pursuant to the directive of the Saarc Secretariat, the Saarc CCI, assisted by the National Federations, submitted its draft constitution to the Saarc Secretariat, which after endorsement of the Councils of Ministers, was followed by MoU between Ministry of Foreign Affairs, Government of Pakistan and Saarc Secretariat at Kathmandu. This signified the official recognition of the Saarc CCI by all the national governments of Saarc. This is how the Saarc CCI came into being in December 1992.
The Saarc CCI enjoys the status of an apex organisation of Saarc, mandated to promote economic co-operation in the region. The Saarc CCI operates under a regional mechanism, wherein, National Chambers/Federations work closely to voice the concerns of the private sector about economic issues and challenged faced with the region. Saarc CCI regularly holds conferences, workshops, seminars, stakeholders' dialogues and meetings to deliberate upon various important socio-economic issues and on various regional issues. As a consultative body to Saarc, the Chamber has proposed policy recommendations, which are considered at secretary level meetings, councils of ministers and are adopted in consensus.
Saarc CCI has been instrumental to promoting economic liberalisation in the regions and it was on its persistent demands that motivated the governments of South Asian countries to open trade by signing Sapta, Safta and inclusion of services sectors in Safta. We are now demanding for comprehensive economic framework agreement in Saarc to further deepen the integration process.
BRR: Why has the intra-regional trade remained low in the Saarc region?
IT: The intra-Saarc trade was estimated at $20 billion in 2012, which was around five percent of the total trade of South Asian nations with the rest of the world. In comparison to other economic groupings like Nafta (60 percent), EU (62 percent), Asean (30 percent) and Comesa (22 percent), the intra-Saarc trade is quite insignificant, which is unfortunate, despite the availability of enormous potential. Unlike other regional blocs as mentioned previously, the intra-regional economic co-operation in South Asia unfortunately remains a less priority area. It is influenced by political relations, clash of ideologies, disinterest in cohesion, economic disparities, etc, which lead to creating environment of mistrust and adoption of business restrictive measures like incidence of NTBs and NTMs.
Furthermore, regional trade is also hostage to non-business issues. There is a need to shield regional trade from territorial and ideological disputes. While the non-state actors may have no role in policy formulation, they do impact policy implementation. To defuse that, we should have a mechanism to resolve core issues in addition to increase the momentum of business, which would keep region on the move. The South Asian nations under Safta mechanism have the required potential to add greater social welfare on both sides.
Although bilateral mechanism in the region is a more useful tool to deepen economic co-operation amongst Saarc member countries, it has raised parallel structures instead of supplementing the regional platforms which Saarc has built over the years. For instance, the validity of intra-regional visa protocol ie Saarc Visa Exemption Sticker, has been reduced to only three months, while India's bilateral visa regime allows one-year multiple Visas for Bangladesh and Pakistan. Such initiatives hurt the spirit of regionalism. South Asia lacks regional thinking. The roughly $20 billion of intra-regional trade owes itself to bilateral agreements, as only $2.6 billion is on account of Safta rules of origin, which came into effect in 2006.
BRR: What is India's role in the regional trade and investment platforms?
IT: India shares borders with all South Asian countries except Afghanistan and Maldives. Being the largest economy and having added advantage of regional proximity, India has been playing important role both in terms of trade and investment. India is the largest contributor to regional trade and investment; however, it can further promote trade and investment in Saarc member nations. India can provide both technical and financial assistance to many projects of mutual interest and can relocate small industries to neighbouring countries. India should take the lead and play greater role in regional harmony through addressing core issues with its neighbours, which will give it further economic edge.
BRR: What is the potential for Pakistan in regional trade and investment?
IT: Despite the fact that India has both comparative and absolute advantage, many of Pakistani products can penetrate into the vast market of India. The current statistics indicate 66 percent increase in Pakistan's exports to India, which show great potential for Pakistani goods. It is, however, unfortunate that both countries could tap only 20 percent of the trade potential calculated on ITC data base in 2012, and could only have trade of $2.5 billion against the available potential of $12.5 billion. Pakistan can save $1.5 billion to $2 billion per annum by importing such goods and products, which are being imported from other countries and are not manufactured locally.
In addition to trade, investment in mutually-interested areas can have multiplier effect on bilateral economic co-operation between two major economies of South Asia. However, investment promotion will require sovereign guarantees to the investors on reciprocal basis. There is an opportunity through which Pakistan can become a vital part of regional trade and investment. The trade corridor via Pakistan, which runs through Afghanistan to the Central Asian Republics, can be used for the enhancement of regional trade.
However, the issues Pakistani businesses are facing, particularly the energy crisis, would be a challenge to opening up trade, especially with India. In the past four years, about quarter million power looms have been shifted to Bangladesh due to shortage of energy supply, cost competitiveness due to security and law and order issues in Pakistan. So, opening up trade and investment in this condition may affect the industries in central Punjab and elsewhere. They may get relocated to Indian Punjab cities like Amritsar, Ludhiana, Chandigarh and Delhi if the government fails to address energy issues on perpetual basis.
BRR: How do you propose the countries should go about addressing non-tariff barriers?
IT: While tariffs are coming down, they are rapidly replaced by Non-tariff Barriers and Measures as protectionist measures by member countries of Saarc. India in particular is accused of introducing country-specific NTBs by the member countries. One of the possible solutions to address NTBs issue is to undertake in-depth studies based on the consultative process with the enterprises involved in business within the region. Sector specific analyses can be done, which could identify not only the issues but also quantify real impact of NTBs which are said to have sizeable negative impact on trade.
BRR: What is the investment scenario for Indian investors in Pakistan?
IT: Pakistan's investment policies are more open than those in India. The rate of profit in Pakistan is higher in addition to cheap labour. The installation of manufacturing units under joint ventures in mutually interested areas can provide access to Indian products in central Asian market, which is one of the prime objectives of Indian's trade vision for Pakistan. However, due to the uncertain security situation in the country, bringing Indian investment in Pakistan is a challenging task.
BRR: What are your thoughts on Indo-Pak trade normalisation following Nawaz Sharif becoming the Prime Minister?
IT: After the elections in Pakistan, and the rise of Pakistan Muslim League-N to power, the hopes for improvements in bilateral relations between India and Pakistan are quite higher. The exchange of best wishes from both sides and clear-cut message by Mian Nawaza Sharif for improving ties with India is a positive gesture, which will help create a lot of good will, required to tap the economic potential.
However, there is a need to take appropriate and wise decisions by the newly-elected government. Following Mumbai incident, India has remained suspicious as to who is really in charge of negotiations from the Pakistani side, civilians or military. It is good to see that many political parties in Pakistan, particularly the ruling party, have expressed keen desire for enhanced economic co-operation with India, which needs to be warmly welcomed by India as well. It was unfortunate, however, to witness delay in MFN announcement to India despite cabinet approval for the same last government. It is the need of the hour to interpret MFN as economic obligation instead of interpreting most favoured nation as 'most favourite nation'.