There is a mix of patriotism and pragmatism when talking to businessmen and traders about normalising trade ties with India.
“China has become expensive because of the imposition of the environmental protection law in every factory,” says one small trader. “It is better to route through third parties such as Dubai, Malaysia, Hong Kong and purchase from India than directly through China.”
His responses regarding imports are mixed, tempered with a fervent hatred of the neighbouring country which he refers to as the dushman mulk.
“Informal imports from India have decreased. People prefer non-Indian products unless the margins justify it. Do you think American goods are not available in Iran despite the sanctions? But importers act in fear of whistleblowers as there is an incentive for competitors in the market to rat out their rivals. Big companies, such as multinationals, have shifted away from Indian raw materials because they need official channels rather than risk losing their containers,” he says.
Exporting to Pakistan impacts Indian economy much less than importing from India benefits Pakistan — even if it is a hard pill, it has to be swallowed
Another trader compares Dubai to a world market. “It is very hard to prove who is importing from where. People import from all over the world, change the labels and the tags and sell to Pakistan. Who is to say what comes from where,” he says adding that Israeli goods are available in the local market as well.
The real beneficiaries, it seems, are the customs officials. “There are checks at customs to determine the country of origin through documents — this has resulted in an increase in bribes to customs officials,” says the importer, stating as a fact that containers cannot be accessed by importers without underhand dealings, regardless of the country of origin.
However, politics and history do not allow for formal trade, especially currently.
“The government is so unstable that I don’t think anything can happen right away. Opposition parties, PML and PPP, have always been in favour of Pakistan-India trade so I expect this to be one of their priority items: normalising trade with India,” says Dr Manzoor Ahmed, a former ambassador to the World Trade Organisation.
“Trade is already taking place, why increase its cost — don’t see it as benefiting India, view it as benefitting Pakistan,” he said. In a recent article, he had explained that extra costs include those of repacking, stuffing and de-stuffing, port charges and preparing new bills of lading and expenses for the intermediaries.
“We are short of cotton,” says Chairman Businessmen Group and former president of Karachi Chambers of Commerce & Industry, Zubair Motiwala. “Previously, we used to import from the Wagah border and it was just like importing from Sialkot or Lahore to Karachi. For Punjab it was next door, even inventory was not required.”
“So many raw materials are sourced from India. Even after the ban, we had to ultimately allow pharmaceutical raw materials. We are unnecessarily paying more at a time when the cost of logistics is already at an all-time high. A vessel that was $1,500 per container is now at $7,000. Not trading with India is hurting Pakistan’s economy,” he laments.
Exports are on an upward trend. If Pakistan aims for lofty goals such as the doubling of textile exports over the next three years, it will need to procure an adequate amount of raw materials. And India is a source of cotton and chemicals that are used in value-added processes.
“Food inflation has always been controlled through the Wagah border,” adds Dr Ahmed. “Not to mention, we have a surplus crop of potatoes – nine million tonnes instead of the about 5m tonnes we require. In the past we could export the surplus to India.”
Notwithstanding statements by Mian Muhammad Mansha and Advisor to PM on commerce Abdul Razak Dawood, the facts are as follows: 1) Pakistan imports from India continue through third-party countries, though it is hard to estimate the scale of informal trade. 2) Politics supersede economic sense
India’s exports are more than 10 times Pakistan’s exports. Exporting to Pakistan impacts its economy much less than importing from India benefits Pakistan, as a hard a pill as it is, has to be swallowed. And yet, the rhetoric on the ground forbids pressure on the foreign exchange and food inflation to decrease.
Published in Dawn, The Business and Finance Weekly, March 28th, 2022
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