The visit by 45 Indian Chief Executive Officers to Lahore last week for a two day conference sets the stage for enhancing people to people contacts between the two countries. Policies though remain the domain of the two governments and the Indian businessmen did highlight their ongoing engagement with their government to implement policies designed to enhance trade with Pakistan (goods/services/investment) that would benefit the two countries.
In Pakistan, by and large, politicians across the political divide are supportive of greater economic co-operation with India. They argue that trade would benefit the people of the two countries by providing cheaper products (due to lower transport costs than would be possible between countries that are not contiguous). Higher demand would fuel productive activity which, in turn, would account for more job opportunities. A win-win situation in other words for both countries. There is, however, agreement that the governments of the two countries must ensure that trade rules and regulations (be it trade in goods, services or investment) are on a reciprocal basis and that there are no hidden non-tariff barriers, notably through the need to register with a government agency prior to carrying out trade.
Acceptance of putting historical irritants including Kashmir, Siachen, Sir Creek, on the backburner, as these issues have been festering since 1947, and benefiting the peoples of the two countries through enhanced trade, does not appease some naysayers in either Pakistan or India. The Indian naysayers focus on what they allege is continuing cross-border terrorism and Pakistan's foot dragging in ensuring that the perpetrators of the Mumbai attack are taken to task, a claim that was recently supported by Clinton during her visit to India with particular reference to Hafiz Saeed. The Pakistanis naysayers refer to the very real water issues facing Pakistan as a lower riparian country as a direct outcome of what is regarded as Indian recalcitrance. In this context, the WikiLeaks revelations highlighting US concerns that water would be the major source of future conflict between the two nuclear neighbours needs elaboration.
The first point that needs to be highlighted is that India's stance as an upper riparian country is not Pakistan-specific. Bangladesh has accused India of abusing its geographical location as the upper riparian country by diverting water, through the construction of dams, away from them. Thus Bangladesh laments the construction of the Farrakha barrage that diverts Ganges water to Calcutta in spite of a 1996 30-year agreement not to do so. However, the agreement inexplicably, did not contain any guarantee clause for minimum amounts of water to be supplied to Bangladesh, nor were future hydrological parameters taken into account reflecting the poor negotiating skills of the Bangladesh team. The disastrous results for Bangladesh as a consequence are considerable and range from low levels of soil moisture to rising salinity levels, leading to desertification to contaminated fisheries to hindering navigation, to a threat to water quality and public health.
In contrast to the bilateral treaty between India and Bangladesh, the water treaty between Pakistan and India was brokered by the World Bank in 1960 and clearly gave exclusive use of the eastern rivers - the Sutlej, the Beas and the Ravi - to India and exclusive use of the three Western Rivers - the Indus, the Jhelum and the Chenab - to Pakistan. The treaty referred to as the Indus Water Treaty survived three wars with India. However, Pakistan claims that it has been abused by India twice. First during the construction of the Baglihar dam (a run of the river dam on the Chenab), which was conceived in 1992 and construction began in 1999 with the first phase already completed in 2004. Pakistan went for arbitration in 2005 - a delay perhaps comparable to Bangladesh's decision not to insist on a guarantee clause for minimum amounts to be supplied to Bangladesh. Additionally, the Indians completed the dam in 2008. The World Bank-appointed neutral expert obviously did not argue in favour of rollback of a dam nearing completion. And on June 10 2010 Pakistan agreed not to raise the matter further.
The second Kishanganga dam is a run of the river hydroelectric scheme that is designed to divert water from the Kishanganga river to a power plant in the Jhelum river basin with an installed capacity of 330 MW. Construction on the project began in 2007 and is expected to be completed in 2016. Construction on the dam was halted by the Hague's Permanent Court of Arbitration in October 2011 due to Pakistan's protest of its effect on the flow of the Kishanganga River (called the Neelum River in Pakistan). However a stay order was granted against the construction of the "dam structure" but allowed India to continue work on allied facilities, like the tunnel required to construct the dam. "Except for the sub-surface foundations of the dam, India shall not proceed with the construction of any permanent works on or above the Kishanganga/Neelum riverbed at the Gurez site that may inhibit the restoration of the full flow of that river to its natural channel," reads the interim order. It is no wonder that the two sides claimed victory.
If completed, the dam would result in a 21% drop in the Neelum River's inflow, thereby reducing the prospective energy generation from Pakistan's Neelum-Jhelum Hydroelectric project by 10 percent. Pakistani officials say that India has completed 15% of the construction work on Kishanganga but according to some reports, India has completed about 43% of the work which would again make any neutral expert reluctant to order a roll back. India is also working on 17 power projects on River Chenab and 16 projects on River Jhelum, which is a source of concern to Pakistan.
An obvious solution is for the lower riparian countries to not only engage competent legal experts in the field to fight their case internationally but also to form a tripartite commission that would deal with the situation under SAARC auspices.
But water is not the extent of Pakistan naysayers irritants. The other equally valid irritant is India's focus on what it terms as export of terrorism from Pakistani soil. Pakistan's co-operation is frequently challenged and our claim that only non-state actors are involved is often dismissed. In retaliation the Pakistani Prime Minister as well as the Interior Minister have, periodically, accused India of engagement in the Balochistan unrest. However legitimate requests by India to submit proof have been dealt with in the same way as charges against domestic Opposition are dealt with: through statements that proofs would be made available at an appropriate time. This strategy has convinced few in the international community.
And yet India is undoubtedly interested in enhanced trade with Pakistan. India and Pakistan produce similar products though the range and extent of Indian goods and services is much greater. It is ironical that India understands the capacity of Pakistan to provide a large market for its goods, while the rest of the world remains reluctant to enter our market. This reluctance by the West is because of serious sustained security issues and poor management of our economy, especially during the last two years that account for a steady erosion of all state institutions, an energy bill that is unaffordable for not only the general public but also has rendered many of our exports uncompetitive.
The question, of course, is whether Pakistan would benefit from enhanced trade with India. The standard normal economic response is yes we will as our consumers would have a wider range of cheaper commodities, however would our productive sectors be able to compete with Indian products given our economic woes? Again perhaps not initially, given the fact that our governments have mollycoddled the productive sectors for so long however in the long run there is little doubt that our productive sectors would learn to compete. But then again, they will learn the lesson only if our government can provide a level playing field, which simply does not seem to be possible given today's levels of corruption and across-the-board economic mismanagement leading to energy shortages and rising inflation.