ECONOMIC ANALYSIS SUGGESTS EMPLOYMENT AND ECONOMIC GROWTH FOR PAKISTAN IF TRADE WITH INDIA IS LIBERALIZED

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PR No.7
PRESS RELEASE
ECONOMIC ANALYSIS SUGGESTS EMPLOYMENT AND ECONOMIC GROWTH FOR PAKISTAN IF TRADE WITH INDIA IS LIBERALIZED
Islamabad: July 2, 2013

Ministry of Commerce held in Islamabad, the first of a series of a seminars to engage stakeholders in a dialogue on the way forward for trade normalization with India. Secretary Commerce delivered the key note address. Pakistan’s former Ambassador to the WTO, Dr. Manzoor Ahmed and former President of the Rawalpindi Chambers of Commerce and Industries, Mr. Kashif Shabbir and Ms. Robina Ather, Joint Secretary, Commerce also addressed the gathering. The panel discussion was presided over by the former Commerce Minister, Dr. Zubair Khan. The event was attended by senior diplomats from SAARC countries and representatives from academia and industry.

Secretary, Commerce was of the view that liberalizing the existing trade regime with India will spur development in both the countries. Renowned economist, Dr. Manzoor Ahmed highlighted the increase in Pakistan’s exports to India and the revenue gained by the Government of Pakistan since Pakistan and India initiated the process of normalizing bilateral trade since March 2012.

Dr. Manzoor Ahmed, former Ambassador to WTO explained the current status of Pakistan’s trade policy towards India and outlined major steps which both countries need to take to move the process forward. These include opening new trade routes, trade facilitation and modernizing infrastructure. He also suggested that Pakistan needed to eliminate its negative list, allow import of all goods through Wagah and build capacity of National Tariff Commission to deal with any problem to our industry resulting from any increase in imports. With the help of trade data over the last three years, he explained how the process of normalization of trade had greatly benefited the economy of Pakistan. He said that Pakistan’s exports through Wagah had gone up from almost zero,  just Rs. 3 million in 2007-2008 to almost Rs.3 billion or an increase of 1000 percent. These are exceptional growths that Pakistan has not achieved with any other county. If Pakistan wants to achieve high GDP growth, he recommended that trade normalization with India will be the best route.

During the Seminar, the Ministry of Commerce disseminated a set of research conducted by the Institute of Public Policy (IPP) of the Beacon House National University on the dynamics and impact of liberalizing trade between Pakistan and India. IPP’s research was led by renowned economist Dr. Hafiz Pasha.

The research conducted by IPP revealed that conservative estimates indicate that the opening of trade with India will predominantly benefit Pakistan. IPP’s economic model predicts that if trade with India is fully normalized. Pakistan’s Gross Domestic Product (DGP) could increase by at least 1.5% in 2014-15. The research also indicates that normalized trade with India could create approximately 169,000 jobs over a three years period. The estimated gain for consumers in terms of lower cost of goods purchased could be at least USD 72 Million (PKR 70 billion) per year.

According to the IPP research disseminated during the seminar, benefits would accrue as Pakistan is able to substitute more costly imports from current import destinations with less costly imports from India. The savings in logistics costs of imports from India are expected to be significant. Dr. Pasha’s research shows that Pakistan’s total annual import bill could decline by USD 721 Million (PKR70 billion) if costlier imports are substituted by imports from India. Cheaper imports of intermediary goods that are used by Pakistan’s local production sectors will not only help in reducing inflationary pressures in the country, but will also help make Pakistani exports more competitive globally and thus contribute to an increase in Pakistan’s exports overall.

Non-Tariff barriers (NTBs) hampering bilateral trade between Pakistan and India were discussed. It was determined that both countries will need to work consistently to alleviate these barriers to realize full potential benefits from trade with India. Both countries have shown a willingness to remove the barriers: India has recently allowed investment from Pakistan and both Pakistan and India have signed a new visa agreement to facilitate business visits across the border. Both India and Pakistan acknowledged the need to remove NTBs and make operational the three agreements signed to reduce NTBs related to differences in standards and standard certification; delays in customs clearance; and to introduce mechanism to resolve dispute due to NTBs.

Lastly, the seminar participants concluded that no maximize benefits from normalized trade with India, Pakistan should improve trade infrastructure including warehousing facilities and railway wagon capacity for land trade at Wagah, and open more land trade borders to reduce the cost of imports from India. It should also harmonize product classification codes to prevent disagreements during clearance of Pakistani exports by India Customs. Both India and Pakistan should implement customs agreement to simply customs procedures. Furthermore, both countries should facilitate the establishment of branches of banks from the counterpart country to remove barriers to trade related to the payment and repatriation of profits across the border.

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