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'Pakistan has deliberately kept trade with India restricted'

Zia Khaleli has been doing business with India for the last twenty years supplying iron ore from Goa to Pakistan Steel.

As Secretary General of the International Chamber of Commerce, Pakistan, he would like to see India and Pakistan trade in more than the 600 items that they currently do.

In a conversation with Ramesh Menon he says there are tremendous opportunities if free trade starts between the two countries but politicians will first have to talk peace.

What are the potential areas of trade and commerce that India and Pakistan could exploit? Do you now think they will?

Since trade relations were opened in 1981, after the 1971 Bangladesh crisis and the war. Pakistan's approach was always to open trade with India gradually. It started with 200 items, which could be imported from India.

Then it went to 300 and so on. In the last twenty years, it has moved up to six hundred items. This is like moving a snail.

This approach of Pakistan has not helped open up trade with India. Pakistan has deliberately kept trade with India restricted.

Why?

The political problem regarding Kashmir looms very large in the minds of policy makers in Pakistan. Unless the Kashmir problem is resolved, no one is going to move substantially to improve trade and economic related issues.

Since 1980, we have seen over 10 short- and long-term governments in Pakistan. We have seen Zia-ul-Haq, Bhutto, Benazir, and Nawaz Sharif.

We have covered the whole spectrum of political leadership and parties. There has been no change in the way they have tackled this problem vis-à-vis India. So the reality is that there is consensus of how to deal with India on economic matters.

How do we change this?

If the Kashmir problem is resolved, trade may be opened up to let Indian goods flow in.

But it is such a sticky issue. There does not seem to be an immediate solution.

There is a $200-million worth of trade between the two countries officially. About 55 per cent is sales from India and the rest 45 per cent is from Pakistan. The unofficial trade is easily more a billion dollars.

Even without resolving Kashmir there is still a substantial amount of trade between the two countries. If Kashmir is not resolved, we cannot have joint ventures. India has given us the 'most favoured nation' status, but Pakistani businessmen will not attempt to penetrate the Indian market till there is political stability.

Why is Pakistan not keen to grant India MFN status?

If the MFN status comes, Pakistan will be swamped by Indian goods.

Is that a major fear in Pakistan?

It is not a fear. It is a reality and we have to deal with it. No country will like it to be dominated by anybody else whatever be the economic reality is.

But you can see in the billion-dollar trade, 700 million is India's share and 300 million is Pakistan's share. Now if trade is opened up, that is what the ratio is going to be.

This is something that Pakistani economic and political planners have to be aware of and so could come up with long-term arrangements. India will swamp the market. We are aware of that.

What are the areas that Pakistan would be interested in as far as trade with India is concerned?

India is such a developed industrial base for us that we can certainly get a lot particularly from the engineering side.

Pakistan is today buying textile machinery from Japan and Germany. It could have instead bought it from India at a much lower cost.

Similarly, on the leather equipment side, India has a sophisticated leather industry and there would be many who are interested in leather equipment. India's huge engineering equipment industry could be another area.

Two billion dollars is achievable if there is free trade.

Are Pakistani businessmen pressuring its government to work towards some deal with India so that business could flourish?

Pakistani businessmen have been demanding for opening of trade. They have been asking for Indian textile and leather equipment for many years. The Chamber of Commerce for Karachi, said a recent newspaper report, had requested that there should be open trade between the two countries.

The business community is clear and would like to see free trade. This request has been made repeatedly for many years.

So what is new?

Nothing is new. It is heard and filed. Again heard and filed.

That is sad. Business can open the kind of doors that politics cannot.

That is right. We need to do it. For over two decades the governments have said the same things. Everybody who has come into power in Pakistan has said the same thing. That is why in twenty years, we have moved to trading in 600 items. It is a joke.

So, if you want anything to happen, it has to happen across the political and economic spectrum together. That is the reality.

But the benefits of peace are not difficult to see.

There is a limited amount we can export. So where is our benefit in opening up trade? It is a benefit in terms of imports as if we buy from India it would be cheaper and it will help our overall balance of trade. So there is definitely a benefit for us.

But from the Indian point of view, where is the big benefit? If you are already exporting officially and unofficially one billion dollars, the benefit to India is only a marginal increase in exports.

India has done so well in foreign exchange earnings that I don't understand where a quantum jump will come out of a relationship with Pakistan.

In other words, what is the pressure on India to increase trade with Pakistan? Pakistan is not the United States of America where you can go from $1 billion to $10 billion. India is not pushed to find extra billions.

So where is the quantum jump for India? What is India's carrot if there is normalization of relations? What is pushing India to solve the Kashmir issue?

We are quite clear that the Kashmir issue is solved; we will be able to get cheaper imports from India. We will be able to cut our defence expenditure. We will have a better relationship with India. We will strengthen our civil society. We will improve our living standards.

So the benefits to Pakistan are quite clear. What are the benefits to India? India's defence expenditure is already 2.6 of the GDP. Then it will become 2.3 or so. It is a marginal reduction because India is looking at the scene with broad eyes.

Where does India stand to gain?

The big economic benefit for India will come by tapping the energy resources of west and central Asia. The real carrot for India is energy.

If you want to move gas in an economic way from Kazakhstan, Tajikistan, Iran, Oman, Iraq Turkmenistan, Qatar or any of these gas rich areas, you will have to bring it through Pakistan.

The gas pipelines have to flow through Pakistan. India might say that there is an underwater route, but it is too expensive.

Nobody talks of east flowing pipelines. It is not in their mindset.

Gas pipelines can be made to flow through Pakistan and India to other areas like Bangladesh and Singapore. Trans-Asian gas pipeline is a great idea. Pakistan today is self-sufficient. But, five years later it may need gas.

India needs gas today.

Energy requirements of north-west India, I am told, are a shortage of four billion cubic feet of gas per day. That is double the amount of gas that Pakistan consumes today. That means there is a huge latent demand for gas. Pakistan must ensure that this gas flows through its country.

Pakistan has 175 billion tones of coal sitting near the Rajasthan border. India could cooperate to bring that energy in. We cannot take it over the Himalayas.

If the Iran-India pipeline comes through Pakistan, it will benefit from transit fees.

Yes, it will, but it is not the question of transit fees alone. A gas pipeline from Pakistan to India also becomes a statement of peace.

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