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MFN status for India on the cards

Published Jan 26, 2014 06:34am


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After getting an assurance for market access, MFN status will be granted to India through the issuance of a statutory regulatory order (SRO), a high-ranking official in the ministry of commerce told Dawn.  — File Photo
After getting an assurance for market access, MFN status will be granted to India through the issuance of a statutory regulatory order (SRO), a high-ranking official in the ministry of commerce told Dawn. — File Photo

ISLAMABAD: The PML-N government sprung a surprise at the recent trade talks with India by offering New Delhi the most-favoured nation (MFN) status from next month — with a condition. Pakistan sought access for 250-300 of its items at lowered duties.

After getting an assurance for market access, MFN status will be granted to India through the issuance of a statutory regulatory order (SRO), a high-ranking official in the ministry of commerce told Dawn. The MFN status means abolishing the negative list of 1,209 items.

In 2012, the PPP-led government opened up the Pakistani market for Indian products, but the deal could not be closed fully in view of the general elections scheduled for May last year. Now that India itself is going for elections in May, the PML-N government thinks it is a good time for closing a deal with the incumbent Congress-led government.

New Delhi may well opt for the deal because Islamabad has reduced the roadmap for granting of complete MFN status from three years to 45 days, a major political concession for the Congress party. Now, any progress depends on New Delhi’s response to Islamabad’s open offer by the end of the current month, the official added.

“Yes, we have agreed to give non-discriminatory market access (NDMA) to India next month,” federal Commerce Minister Khurram Dastagir Khan told Dawn.

The NDMA has been suggested as a new name for MFN in an attempt to reduce the political fallout.

But, Dastagir Khan said, this can only happen if India gives market access to products identified by Pakistan. These items have been listed in the sensitive list of South Asia Free Trade Area (Safta). Textiles and chemicals, which form the bulk of these products, are currently subject to higher duties by India.

Pakistan has handed over the list to the Indian government.

The change of heart in the PML-N government towards India came mostly because of domestic factors, especially the ‘Punjab factor’ (although there was also an IMF demand for opening of trade with India).

On the domestic side, Punjab Chief Minister Mian Shahbaz Sharif visited Indian Punjab and New Delhi in December to pave the way for the much-awaited trade deal. He was accompanied by Mr Khan, then minister of state for commerce.

During the visit, Indian Prime Minister Manmohan Singh agreed to Mr Sharif’s proposal of holding a special meeting for giving final shape to the suspended yet agreed-upon timeline for the opening of border trade.

The recent meeting held in New Delhi was not part of the composite dialogue because India categorically conveyed to Pakistan that there would be no new round on trade liberalisation.

It was a review meeting to implement the already agreed-upon timeline for trade liberalisation. Composite dialogue is still suspended in its true spirit.

The importance of the meeting was clear from the fact that Prime Minister Nawaz Sharif not only elevated Mr Khan to the status of federal minister on Jan 16, one day ahead of the meeting in Delhi, but also sent him to India on a special plane.

Mr Khan got a clear mandate from the prime minister before meeting his Indian counterpart Anand Sharma in New Delhi on Jan 17 to offer the granting of MFN status to India in a shorter time. This visit was a follow-up to that of the prime minister’s adviser on foreign affairs, Sartaj Aziz, who visited India in November.

Documents and interviews with relevant people reveal that the trade deal will only enhance Punjab-to-Punjab trade. The opening of the Wagah border 24/7 will divert trade from the seaport to the land route. Moreover, the government also agreed to allow the import of all products from India at the Wagah border, as opposed to the current 137 items. These two factors will mostly divert trade from Karachi to Punjab.

Commerce Minister Khurram Dastagir Khan said that the Wagah border will be declared a dry port by the end of next month. As a result, the containerisation of cargo will be started next month as well. “We are ready for container cargo at the Wagah border,” Mr Khan said.

On the other hand, the Sindh government has repeatedly asked the federal government to allow trade on Khokhrapar-Monabao border on the pattern of Wagah-Attari. However, the federal government is not willing to start development on the Pakistan side. The revival of the Khokhrapar-Monabao station for trade between Sindh and India’s Rajasthan is not visible in the near future.

But the commerce minister said that the government intends to set up land-port authorities at major exit points, including Khokhrapar-Monabao, for trade with India. Before 1965, Pakistan and India used 11 land routes for bilateral trade, eight in Punjab and three in Sindh.

The enhancement of trade at Wagah-Attari will certainly benefit land-owning elites that have invested in real estate. The price of land has started moving up on both sides, a person who deals in real estate in Lahore told Dawn.

To control and facilitate the flow of trade and people, both sides have agreed to enhance the number of gates at the border. Currently, there is one gate each for travellers and trade. It is being considered that the latter be increased to three with one additional gate for travellers.

The commerce minister said that the Indian government has agreed to allow a Pakistani bank to open a branch in India. He said banks will have to meet the criteria of the Reserve Bank of India.

A commerce ministry official said that the National Bank of Pakistan, United Bank and Muslim Commercial Bank got the green signal to open branches in India. However, three issues — including money-laundering — needed to be sorted out before licences for opening branches could be issued.

From the Indian side, the State Bank of India and the Bank of India will operate branches in Pakistan. The minister said that banks can file applications for opening branches in either country.

Until 1965, there were nine branches of six Indian banks in Pakistan, while Pakistan’s Habib Bank had one branch in Mumbai. Banks in both countries were seized as enemy properties.

But for the commerce minister, ease in obtaining visas, the allowing of mobile phone facility and television channels are equally important issues for achieving the true outcome of trade liberalisation.


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Comments (18) Closed

pakiboy Jan 26, 2014 08:08am

why we r so eager to grant MFN status to india .. its market will suffocate our to death !!

krishna Jan 26, 2014 09:33am

Why congress party need to give so much importance to trade with Pakistan? It can barely make any difference for Indian economy

Last Word Jan 26, 2014 09:57am

'Better late than never' is an appropriate phrase for this positive step taken by Nawaz Sharif which would help Pakistan more than India. Pakistan who imports many goods including electronic items at very high prices from other countries can get them at a much lower price and of high quality.

Rao Jan 26, 2014 07:59pm

Why did it take so long for Pakistan to give MFN status to India?

allaisa xuver Jan 26, 2014 09:03pm

It has been on the cards for over 2 decades. Why not report it when it is actually given, instead of wasting precious newsprint on this 'no news'?

Jhon Jan 26, 2014 09:51pm

Is the common man in Pakistan willing to buy "Made in India" products? I certainly am NOT. Similarly, is the common man in India ready to buy "Made in Pakistan" products? Go figure how to create emotional trading routes.

Ike Khan Jan 26, 2014 10:09pm

No parliamentary discussions, no debate, just Mr. Dastagir and Nawaz Sharrif make decision. Of course, Shabaz Sharrif is the controlling factor.

vikash Jan 27, 2014 12:12am

No thanks.....India is already most favoured nation for attacks by terror groups operating from your soil

independentthinker Jan 27, 2014 12:52am

It is a win-win situation - apart from economic gains, imagine how it will bring our people closer. In countries outside of North America, there is no distinction between Indians and Pakistanis. We become close friends, shop at each others stores, dine at Indian/Pakistani restaurants and I don't think it ever occurs to us to worry about whether it is an Indian or Pakistani, who we are giving our business to. If we can do this on an individual basis, I am sure we can do that amongst our countries as well. The benefit would be enormous. Let this be the start and I hope it doesn't end here.

Ram Jan 27, 2014 04:37am

This story got nothing to do with economy or Market, but it might shed some light why Indian and Pakistan can not do any trade

I always hated my little brother and feeling was mutual my complaint he was asking for too much and his complain I was could get away with anything because I was bigger and stronger, as we grow older I realized my mistakes and tried to give him best of my advice but he ignored all of them because it was coming from me, as we got older he also realized his mistakes and we are doing just find because we got nothing to fight for.

This is a true story and India pakistan are only teenagers it takes couple of generations and many more loss of lives to realize it's worth to fight

jehangir Jan 27, 2014 04:56am

Why are we in such a rush? Have we done all due diligence?

Azmal Jan 27, 2014 05:34am

Pakistan's GDP is about the same size as the state GDP of Gujarat. By according MFN status to India, the difference to Indian economy will be minimal, but impact on Pakistan will be so huge.I would suggest that Pakistan try to get its economy atleast 25% the size of Indian economy before MFN status is established. BTW, have we given MFN status to China, US and Russia?

Hemant Jan 27, 2014 05:57am

@pakiboy: It is conditional my friend. It is against India lowering duty on 250-300 items to be exported from Pakistan. So there will be a give and take.

Expat Jan 27, 2014 05:59am

Free trade usually benefits the smaller country more. Although we've had free trade with a much bigger neighbour (China), trade with India should inevitably benefit as well. If anything, this should bring the two nations that share a common history and culture, closer together.

Bharat Patel Jan 27, 2014 06:27am

This is going to be big boon for Pakistan. There are some of us who are very reluctant to help... and we need to see some contrition

NORI Jan 27, 2014 09:14am

@pakiboy: What do you think are Chinese products doing to Pakistani market ? $ 2 billion Indian exports to Pakistan hardly make a big difference for Indian economy of $ 2 trillion, but if Pakistanis can get access to Indian markets, it could be a big difference. Leave away the egos and look at the bigger picture.

Ibrahim Jan 27, 2014 09:28am

This is a great step, and will open up doors for the private sector on both sides. More people will get employment in some form or the other.

Salma Jan 28, 2014 02:37pm

@Jhon: Hello Jhon. I am not here to bust your bubble. But do you have any idea of the era where we live in. Do you know how much both the countries lose out because our exports and imports are routed through Dubai. I have myself imported cement clinkers from Pakistan routed through Dubai. And the electronics that you use that starts with mobile phones to small bulbs et al is from India. You knowingly or unknowingly use Indian products. You know what, why dont u come down to India for a short business trip and realize the potential that India has to provide. When countries like US and China can benefit from India, why shouldn't a piece of former India benefit. I guess you get my drift. Cheers