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Revive LoC trade

March 09, 2012

IT is a great pity that trade across the Line of Control (LoC) between the two parts of Kashmir, which started in October 2008, continues to suffer under crippling restrictions which could and should have been foreseen.

Obscenely enough, trade continues to be based on barter in a clime in which progress in trade and communication facilities is the order of the day.

The ancient Silk route is being revived. All across Central Asia plans are being made to ensure seamless connectivity by road and the railways. This is apart from plans for oil and gas pipelines across national frontiers, of which there are more than one. In a context such as this, barter trade across the LoC stands out like a sore thumb.

In the last round of talks between Pakistan’s Foreign Minister Hina Rabbani Khar and India’s Minister for External Affairs S.M. Krishna in New Delhi last July, they agreed to permit trading for four days a week, as against the previous two. Adequate facilities were to be provided to traders, including telephonic communications and permission for personal interaction.

But “what happened in the follow-up is that nothing happened,” as R.S. Gull tersely said in an informed report on the state of the trade in the Srinagar weekly Kashmir Life on Jan 22. LoC traders remain “united in misery”. This is the state of the only initiative of real consequence on Kashmir between the two countries, apart from the bus service which began in 2005.

Trade is conducted along two routes, between Salamabad in the Uri sector, and Muzaffarabad, and between Chakan-da-Bagh in the Poonch area of Jammu and Rawalakot in Azad Kashmir. Fundamentally, India and Pakistan have not quite come to grips with the conceptual implications of their innovation. Is LoC trade intra-Kashmir trade or international trade? It cannot be the latter because neither side regards the LoC as an international border, and neither does the Simla Pact of July 3, 1972.

Once it is accepted that it is intra-Kashmir trade, the rest should follow. This includes proper banking systems, agreement on currency, functioning telecommunications facilities besides opportunities for personal interaction and a mechanism for the resolution of disputes.

Last year, Indian officials proposed to their Pakistani counterparts that the Asian Clearing Union (ACU) be used as a channel for currency for LoC trade. Indo-Pak trade is conducted under the ACU’s auspices since it provides a simple arrangement for payments. Kashmiris resent this as a first step towards partitioning their state de jure. Goods are valued by traders in US dollars. But barter is an ad hoc deal in which the balance of trade shifts to one side or the other, inviting officials’ suspicion of a hawala transaction. Officials are never slow to entertain the suspicion of hawala money being used to finance militancy.

A former president of the Kashmir Chamber of Commerce and Industry, Dr Mubin A. Shah, demands “a rupee trade”, pointing out that as “India is having a rupee trade with Nepal and Bhutan, so the system can be applied to intra-Kashmir trade as well.”

Barter trade demands the survival of the fittest. Reportedly around 40 or 50 out of 500 survive. These people are said to be the ones more skilled in ‘working the system’ comprising of the police, officials and other traders. Charges of corruption fly thick and fast. Banking, on the other hand, ensures transparency. It should, indeed, be made mandatory as should be the cheque for payments above a certain amount.

Next comes currency. Not long ago People’s Democratic Party (PDP) leader Mehbooba Mufti raised a howl of protest when she advocated a dual currency in the state, an inevitable and even desirable consequence once the LoC is reduced to “irrelevance” de facto. It is a goal to which both Pakistan and India are committed and one for which all Kashmiris ardently hope. Like it or not, dual currency does operate in parts of both countries — in reputed stores in Karachi and in certain localities in New Delhi.

Dr Haseeb Drabu, an economist and former chairman of Jammu & Kashmir Bank, listed some minimum and very sensible conditions for making trade feasible at the time it was launched. Time has proved him to be all too right, not least on telecommunications. Kashmir Life described the existing practice, which is comically archaic, in these words: “They [the traders] meet at zero point, once in a month, in which they discuss trade-related issues including conversion rates and the dispute resolution.

Usually, authorities including armies from the two sides facilitate these meetings. But not everyone has been lucky to be part of this exercise. While there has been only one such meeting between the traders of Salamabad and Chakothi using Jhelum Valley Road for business, the trade in Poonch has had more than 38 meetings so far. This included the famous meeting in which there was a fist fight over the issue of transactions and backlog.”

How on earth can a trader judge the market on the other side unless he is free to sound out traders, and more than one of them, across the LoC? It simply makes no sense to ban the use of mobile phones, especially now that the militancy is down by 90 per cent. The ban serves only to ensure clandestine communications. Kashmiris complain that there are powerful elements among the traders outside the state and officials both within and outside who do not wish to see trade flourish.

For all the impediments, trade did register much progress up to a point. Imagine the results if it were truly to pick up speed. Its political fall-out would be considerable. Yet an accord on the knotty questions should not be difficult provided there is a will to settle. The demonstration of that will in this limited sphere would send the signal that political will does exist to settle other issues as well.

The writer is an author and a lawyer.