January 28, 2006	Saturday	Zilhaj 27, 1426

KARACHI, Jan 27: The researchers at the State Bank are hopeful that the investment flow from non-resident Indians (NRI) in India would trickle down to Pakistan as well. Specific areas for joint ventures have been identified and the SBP researchers want Pakistan to sign a bilateral investment agreement with India and explore possibilities of setting up exclusive export zones for Indian investors.

“Pakistan’s recent economic reforms offer unprecedented business opportunities conducive to all the multinational companies (MNCs), including Indian investors”, a recent comprehensive SBP report on prospects of Pakistan’s trade and economic relations with India says. Spread over more than 50 pages, the SBP report gives analysis of Indian and Pakistan trade, the direction, trend and volume of trade and has identified the opportunities available for each other within the existing trade and economic structure.

Agricultural products, food processing, auto spare parts, minerals, chemicals, pharmaceuticals, leather, textiles, tyres, information technology, telecommunication, power and natural gas pipelines are some of the potential areas identified by the State Bank researchers for joint venture projects with India.

As India and Pakistan compete to sell their goods in the global market, there are many areas in which both the countries can complement each other’s needs and hence produce cost effective quality goods.

A bilateral investment with India, it suggests, should pave the way for flow of investment from India into Pakistan. Since 1959, Pakistan signed bilateral investment agreements with 46 countries which do not include India.

Another significant factor that has potential to boost mutual economic cooperation between India and Pakistan is the presence of common multinational corporations operating in their respective countries. “These can act as meaningful conduits for trade and investment, if these source raw material from each other,” the report suggests.

Indian intellectual property capital is admired worldwide, the report observes while explaining the success of the non-resident Indians who now stand fifth in line with total investment of Rs110 billion ($2.4 billion) in India in the last 15 years. Since 1991 when India started opening up, the US is the top foreign investor with Rs581 billion followed by Japan Rs118 billion. NRIs now aim to bring more investment in India than flowing from Germany, France and the Netherlands.

Even in terms of remittances, the NRIs as a group remitted $14.8 billion to India in 2002-03, which was almost three per cent of the Indian GDP.

The report has a close look at the available opportunities andthreats for Pakistan in trade of textiles and clothing with India. It states in clear terms that Indian textile industry is better placed than that of Pakistan in the post-quota scenario. India is regarded as a major alternative source to China for apparel and made-up textile products, while Pakistan is considered as a supplier of limited range of textile products.

However, Pakistan is considered as a competitive supplier of cotton goods, particularly men’s apparel, home textile and fabrics. At present Pakistan and India do not trade directly in clothing and textiles. But the report has given a comparison. It identifies 176 common items which have comparable value in 48 textile products. In these products, Pakistan enjoys price advantage in 128 products. In light of this finding, the authors of the SBP report question the perception that an MFN status to India will flood the Pakistan market with Indian textile goods.

The report has drawn elaborately a comparison of iron and steel, chemicals and pharmaceuticals, automobile, SMEs and information technology to illustrate the point that import of a large variety of items from India to Pakistan as against the present supply from other international sources is much cheaper, reliable and quick to deliver.

The average annual trade between Pakistan and India through formal channels has been estimated at $284 million in the last five years. But informal trade and circular trade through third countries — Dubai, Singapore, Afghanistan, Central Asian republics, etc., is said to be between $1 billion and $2 billion.

The SBP authors estimate potential of bilateral trade between $1 billion and $5.3 billion. The commerce ministry estimates it at $2.87 billion and the Karachi Chamber of Commerce and Industry from $10 to $15 billion. There are no illustrations for these indicated potential except the SBP report which has quantified its potential from the comparable import-export and unit value.