Iran-Pakistan-India (IPI) gas pipeline is still a live project. As per author’s information, the work on connectivity on both Iranian and Indian sides is complete. It is only a patch of around 300km passing through Pakistan that has to be built. The fast-changing diplomatic situation and resumption of relationship between Iran and Saudi Arabia are some apparent signs to the effect that economics of energy will not remain the same in this area. This is the real game changer for the economics of Pakistan.
Colonialism and their successors’ divide-and-rule policy for economic benefits, which used religious sentiments and other such considerations are being exposed. It is to be noted that even as per their system policies are made for a century and that period is almost ending, which underscores the need for redrawing the picture.
Furthermore, it is neither the imperialists’ objective nor is it possible for them and their successors to manage the upcoming economies specially India, Saudi Arabia, Iran and Bangladesh in a manner that they employed in the past. Pakistan is the only big country in the region that has not been able to meet the pace of growth.
Criticality of regional economic cooperation-II
However, Pakistan can play a very important role in accelerating the growth of the region by providing a conduit to supplement the energy supply and demand respectively and obtaining residual results.
The discussion in the aforesaid paragraph may look novel if we continue to look through the prism which was provided to us after the World War II. However, in author’s view, a new prism will emerge in very short span of time.
Is there a real trade closure of trade with India?
After the Pulwama attack there is an effective closure of trade (except for medicine and its ingredients) between India and Pakistan. However, the question in reality is whether or not there is a real closure or it is only a perception. This aspect can be well appreciated by the reproduction of the following comments made in a report on trade with India by the State Bank of Pakistan.
Rerouting the products
“Trade through third countries or circular trade (technically official trade) is mainly conducted through agents operating in free ports like Dubai or Singapore. Circular trade is also taking place through the Central Asian Republics. According to unofficial estimates, the total size of illegal and circular trade is estimated at around $1 billion, which is much larger than the official trade between the two countries.
Exports from India to Pakistan through third country routes include capital goods, textile machinery, dyes and chemicals, iron and ore, spices, tannery equipments, machine tools and equipment/spares, cotton fabrics, tires, chemical products, medicines, videotapes, alcoholic beverages, viscose fibre and tea. Informal exports from Pakistan to India cover items such as plastic goods, melamine dinner sets, food items such as edible oil and vegetable ghee, synthetic fibres and some chemical products.8
Criticality of regional economic cooperation-II
“Trade between Pakistan and India via Dubai has the advantage that consignments are not scrutinised as much as those coming directly from either country. The size of circular trade through third countries underlines the potential of flourishing bilateral trade between the two countries. Indian tires, textile machinery, tea, coffee, chemicals and drugs are favoured by Pakistanis; however they have to pay inflated prices for these goods coming through indirect routes.”
This description is limited to goods only. There is a huge trade in services between Pakistan and India, which is mostly handled through the UAE. There is a big establishment in Pakistan which provides services apparently to UAE however the ultimate beneficiary is India.
Smuggling and Afghan Transit Trade
The smugglers/traders mainly carry out the informal trade between Pakistan and India through the exchange of goods at the Indo-Pakistan border as well as through the misuse of the personal baggage scheme through the “green channel” facilities at international airports or railway stations.
Informal trade is also taking place through Afghanistan whereby goods are exported officially from India to Afghanistan and later on smuggled into Pakistan through Peshawar, which lies close to the Pakistan-Afghan border.
Indian-made goods which are being smuggled into Pakistan include cosmetics, alcoholic beverages, stainless steel utensils, ayurvedic medicines (30 percent cheaper in India), videotapes, cassettes, confectioneries and cashew nuts, tea and coffee, live animals and spices.
The actual volume of informal trade is unknown, but there are different ‘guess estimates’ of informal trade between India and Pakistan which vary between $250 million to $2.0 billion annually. The Sustainable Policy and Development Institute (SPDI), Islamabad, estimate the informal trade between Pakistan and India at $545 million in 2005.Total informal exports from Pakistan to India is no more than $10.5 million, consisting mostly of textiles (cloth, bed sheets and prayer mats comprise 90 percent of informal agricultural products.
Informal imports from India amounted to $534.5 million in 2005.Six items constitute 80 percent of the total import value, covering, in order of priority, cloth, tires, pharmaceutical and textiles machinery, cosmetics, livestock and medicines.
India seems to have lost a share of its informal trade market to China. The extent of informal trade is often used as an indicator of the latent potential that thrives between the two countries. Informal traders in both the countries have developed efficient mechanisms for information flow, risk sharing and risk mitigation.
The three important factors viz. Quick realisation of payments, zero documentation and no procedural delays are contributing to lower transaction costs in the informal channel. The principal implication of this informal trade is that unless the environment of the formal trade improves, informal trade will not only continue to coexist with formal trade, but it will also impact its potential magnitude in the coming years.”
(To be continued)
Copyright Business Recorder, 2024