Caravan in motion: Indo-Pak trade - I

Preamble: 26 November 2008: Ajmal Kasab goes on a rampage and by the time the guns go off, 257 people lose their lives in and around Taj Mahal Palace Hotel in Mumbai. Probably every Pakistani became persona non grata in this landmark hotel.
26 September 2011: 70 Pakistani businessmen led by Commerce Minister, Makhdoom Amin Fahim accompanied by a team of government officials arrive on a historic visit to India. They are transported to this very Hotel where charming ladies, clad in colourful saris, welcome them with a captivating smile, a cool beverage, and an aromatic garland.
This symbolism of positive change is awesome. Three years ago, the two nations were on a high alert, ready to settle scores once and for all. And now, in less than three years, the hotel staff accorded amazing hospitality and bent backwards to make the delegation's stay a memorable one.
It is in continuation of this feel-good environment that Anand Sharma, the Indian Commerce Minister, invited his Pakistani counterpart, Makhdoom Amin Fahim, to Mumbai and New Delhi with a vision to upgrade the present status of trade and investment. Pakistan's Commerce Minister while accepting this historic invitation conveyed the message that he wanted a strong delegation of Pakistani businessmen to accompany him as the new thinking in Islamabad is to involve the private sector in crucial decision making process.
When PIA flight PK 278 left Karachi for a short flight to Mumbai, the delegation was optimistic but there was this uneasiness that it might just be a goodwill tour, even though it was after 35 years that a Commerce Minister led such a delegation, and that the road towards liberalisation of bilateral trade and investment was still meandering, was full of potholes, and there were many blind spots ahead. But there was a ray of hope.
Paradigm shift This first ray of hope in the long drawn process of normalisation and progress of bilateral trade and investment relations between Pakistan and India was the issuance of the Joint Statement at the conclusion of the 5th round of talks on commercial and economic co-operation held in Islamabad on April 27 and 28, 2011 by the Commerce Secretaries of the two neighbouring nations. Both Rahul Khullar of India and Zafar Mahmood of Pakistan were buoyant and bullish from the onset and as Khullar told some of us businessmen in Islamabad, "a successful Commerce Secretary should think and act like a businessman".
In spite of the roadblocks erected by vested interests, such as smugglers, extremist forces, myopic-vision hard-liners, and those who do not desire a peaceful environment in the sub-continent, the fact of the matter is that there is now a positive karma hovering around those who are in a position to introduce a new thinking in bilateral trade relations as well as in formulating a fundamental change in the trade and investment regime that has impeded and deterred meaningful progress.
The prime decision agreed by both the officials desired sensible confidence building measures, removal of distrust and misunderstanding, and appreciating the concept of business-friendly environment in its true and broader sense.
The joint statement has highlighted all the issues that need positive consideration so that a win-win situation is achieved. It is recognised that India's exports and investment, if any, would generally dwarf Pakistan's exports across the border. However, if this eventuality is taken as a reason for Indian dominance of trade and investment, then it would be fruitless to talk about trade enhancement. The solution lies not in indiscriminate and frivolous imports but in essential needs of the country, like oil and petroleum products, machinery, industrial raw material, alternate energy, processes for recycling, processes for productivity increase of agricultural products, information technology, and even joint ventures
The contentious issue of Non-Tariff Trade Barriers has also been a point of focus. There is an apparent shift in the thinking in New Delhi. It would provide a much-needed fillip to the trade regime if NTBs are sincerely addressed and are not made a subject of scoring points.
The issue of facilitation of trade, eg at the Wagah-Attari route, the shipping protocols, the easy and quick issuance of business visas, the opening of branches of banks, the decision of Manmohan Singh government to withdraw objections in WTO against the granting of short-term EU incentives to Pakistan, the people-to-people contacts thru initiatives like Aman Ki Asha, etc have also been helpful and are aimed towards progress. At the same time, SAFTA should be an achievable goal and the time-frame for its approval should be shortened.
The modalities for the visit were worked out between the two Ministries and other government officials with the co-operation of FICCI and FPCCI, the two apex bodies representing trade and industry of their respective countries. A fast-paced agenda was chalked out so that significant progress could be made.
The way forward was to highlight, deliberate, and find amicable and mutually beneficial solutions to trade and investment related areas with the desired optimism that these would transcend contentious issues and that trade and investment would not be hostage to these concerns and misunderstandings.
Evening in Mumbai It was late in the evening by the time the delegation completed the Hotel formalities and got down to business. Some delegates had pre-arranged meetings and were engrossed in what they do best. Doing business. However, the TDAP official incharge of logistics suddenly announced that a high level Roundtable meeting had been arranged with CEOs of various Indian and multinational banks and finance companies and that we had to accompany the Minister. The Indian side was co-ordinated by Meera Sanyal, Country Executive (India) of Royal Bank of Scotland. Both sides articulated their opinions in a professional manner and there was a consensus that it was high time both countries allowed banks to open branches across the border.
The Pakistani delegation advocated the removal of Pakistan from the Reserve Bank of India's negative list of countries where Indian investment was not allowed. Both sides agreed that the restricted visa system was a major impediment and must be addressed on a fast track. In my short speech, I emphasised the need for India to remove more cobwebs than Pakistan if there was to be an enhancement in bilateral trade. I also asked the CEOs what the Indian businessman wants from Pakistan. They had only one demand - Most Favoured Nation status! After the meeting, I remarked half in jest to Ms Sanyal and others that even though India has officially given Pakistan MFN about 15 years ago, Pakistan has accorded an unofficial MFN status so many moons ago thanks to those involved in undocumented trade.
At night, FICCI President Harsh Mariwala hosted a well-attended dinner in honour of the Pakistani Commerce Minister and the delegation. This provided businessmen a wonderful opportunity to interact and discuss trade, cricket, and the health of Pakistan's top singer Mehdi Hasan. Before dinner the host and Chief Guest made the usual speeches and then we were served a lavish dinner.
Exploring business between neighbours (Mumbai conclave) The second day in Mumbai began with a filling breakfast where I was fortunate to have the company of the charming and energetic Deputy Secretary General of FICCI, Ms Ambika Sharma, who was deputing for Secretary General Dr Rajiv Kumar who was in Washington and was scheduled to meet us in New Delhi.
The prime programme of the day was the India Pakistan Business Conclave and the theme was Exploring business between neighbours. The FICCI President, Harsh Mariwala, in his Welcome Address highlighted the wish list of Indian businessmen regarding more trade between both the nations. He dwelt upon the need for MFN, bank branches, raw cotton exports to Pakistan, etc. He informed that FICCI would be sponsoring a document identifying the relevant issues and offer practical solutions. He also disclosed that FICCI would soon send a large business delegation to Pakistan. He was also very optimistic about the outcome of the November meeting in New Delhi between the two Commerce Secretaries.
Senator Haji Ghulam Ali, the FPCCI President, in his very inimitable style very forcefully stated that the 21st Century is the Century of trade and not war. In a speech laced with touching observations, he stated that there are ample opportunities in both the nations for investment, human resources, and natural resources but leaders of both the countries have their fingers on the nuclear button and are pre-occupied with defence matters rather than trade and investment. He very emphatically declared that "Indian and Pakistani businessmen must take the lead and break all barriers and then both governments will have to accede to the wishes of the business community." He lamented the fact that even though Pakistan and India had 20% of the world's population, the trade between the neighbours was less than $2 billion. He wondered why businessmen were not allowed to drive across the border in their own vehicles. He very poetically added that it is time that the businessmen broke the shackles of distrust and forgot the past as there was a desire for love, peace, and progress.
S M Muneer, the present President of India Pakistan Chamber of Commerce and Industry, stated that when today globalisation dominates the world, over 45 million people in India and Pakistan are living below the poverty level and in the last sixty five years, serious efforts have never been made to eliminate poverty, disease, and unemployment. It is the opportune time to think trade, trade, and trade. He advocated the opening of trade facilities thru Munabao and Khokrapar instead of concentrating total land trade through Wagah. He wondered why Indian private airlines do not have any strategy to tap the Indo-Pak air passenger traffic.
Minister Makhdoom in his remarks said that "regional trade is most important and is more effective in bringing progress in any country." He compared Saarc with EU, Nafta and Asean. He advocated a non-restrictive trade regime and advised the two Commerce Secretaries to prepare a comprehensive road map to encourage trade and investment. He requested the Indians to support Pakistan's case of EU benefits at present stuck up at the WTO. He said he has brought a large delegation representing 28 to 30 sectors and each one of them means business.
There were four prime presentations after the formal speeches and then there was animated interaction between the businessmen from both the countries. Adil Malia, Group President of Essar Group showed a five minute video on the Essar Group. He disclosed that Essar Power was the first private sector power plant set up in India with a capacity of 1600 mw. He gave some relevant take-home quotes that are very pertinent in how companies grow and prosper. He stated that "every achievement is not an end but the beginning of a journey." He added that "crucial difference in his Group and others lies in our people." And then he ended his presentation by stating that "of over 70,000 employees world-wide, only those who will risk going far will realise how far to go."
The next speaker was Ramesh Natarajan who is the VP (South Asia) DHL Express. He is a regular visitor to Pakistan and he moaned that for him, visa was the main issue and due to various visa restrictions, the cost of doing business and the cost of logistics increase. He brought up the real issues at hand and questioned how trade would increase if four issues were not tackled. This point was echoed at all meetings by businessmen from both countries. He said that the four issues are visa, communication (cell phones and Blackberry do not work in each other's country), road network, and a reduced negative list. He ended his comments by stating that "let's move beyond the rhetoric."
Rizwan Shaffi, CEO Crescent Bahuman, a leading denim manufacturer of Pakistan, gave an analytical comparison of India's trade with various SAARC nations and highlighted the scope of potential in enhancing trade. He enumerated various sectors and products that should be focused on for improving Pakistan's export figures to India.
Farid Fazal is the Director of Marketing and Sales DG Cement owned by the Nishat Group. He had a very detailed and pertinent presentation with latest figures about the cement industry. He criticised the attitude of officers of Bureau of Indian Standards who were not willing to come to Pakistan to certify atleast four cement mills on the pretext of volatile conditions in Pakistan. He said that his company had offered to fly the officials direct from the airport to the mills in their personal aircraft but still these officials refused to come. He termed it as a blatant and obvious non-tariff trade barrier. He also advised the Indian cement importers to increase their imports from Pakistan since the cement mills in Pakistan had ample production capacity and India was facing a cement shortage due to massive construction activity going on in India. He said that Pakistan had 29 cement mills producing over 45 million tons per annum and this would rise to nearly 52 million tons in this fiscal year. Most of the mills have the latest dried technology and Pakistan is a major player in global exports of cement.
There was a lively interactive session after the presentations. Prominent business leader Tariq Sayeed initiated the session with his comments that Saarc visa stickers are only limited to 100 people from Pakistan for only one year and for some reason, this facility has been reduced to three months. He remarked that when institutions and organisations are created, these should be allowed to function and the facilities or privileges given to them must be honoured.
In my remarks, I brought up the issue of cement exports by trucks thru the Wagah border. In this context, I proposed that since there would be a heavy demand for Pakistani cement, and since the Pakistani cement is accepted and utilised by building contractors, and since Indian cement industry is unable to cope up with domestic demand, it is imperative that both the countries should allow movement of cement cargo by trucks so that the objectives mentioned above are achieved. I added that 5 to 7% less Pakistani cement is required as compared to Indian cement. I also highlighted the importance of including minerals in bilateral trade as both countries can meet their needs from each other's mineral base. I also echoed the contention of most of the businessmen that both the governments must allow roaming facility of mobile phones in each other's countries.
Commerce Secretary Zafar Mahmood disclosed that a Working Group has been formed to ascertain the feasibility of an oil pipeline across the border. He also said that warehousing facilities at the Wagah border are being upgraded. He also did not appreciate the clause in Indian visa application forms where Pakistani businessmen are asked an irrelevant question, "When did Indian businessman open the L/C in your company's favour?"
At the conclusion of the first session, Manojj Patodia of FICCI presented the Vote of Thanks and ended with a comment that "a small step taken by Indian and Pakistani businessmen would be a giant leap for other Southeast Asian countries."
After a superb lunch, the B2B meetings commenced. A large number of Indian businessmen gathered in the hall and waited to interact with the Pakistani businessmen. I was one of those very few Pakistani businessmen with whom most of the Indians wanted to meet. In fact, I was the first to take my position and the last to leave the hall. I was able to sign a few MOUs under which my company would represent some Indian companies and vice versa. I was able to conclude in principal three deals that would be operative from November 2011. These related to chickpeas, millet, soybean meal, etc from India while chrome ore and rice for third countries from Pakistan by Indian businessmen were also agreed.
Late in the evening the delegation got into the buses for the long trip to the airport for our flight to New Delhi. The sore point in the stay in Mumbai was that delegation members like me were not able to see anything in Mumbai except for the Gateway to India Memorial and that too since it was opposite the Hotel.
Doings in Delhi Darbar Morning in Delhi on a warm Wednesday morning began at ITC Maurya Hotel in the cantonment and secured area of New Delhi. The organisers had planned a B2B event during the day. I was being assisted by Mandip Sharma, Founder President of Association of Women Entrepreneurs and Career Women of India (AWECWI) that I helped set up in 2007 when I was KCCI President and of which I am the Global Patron. Here too my plate of appointments was full and here too I was the first to be in the Hall ready for action. I had meetings with some of the Indian businessmen with whom my company already does bilateral trade. I was also able to get new reliable and well known future contacts as they fit into our company's scheme of things.
Later, I attended a meeting where CEOs of different Indian organisations met the Minister and a group among the delegation. Various points were brought up and discussed. There was plenty of camaraderie and the CEOs also displayed lot of enthusiasm and sincerity.
Anand Sharma had arranged a sumptuous dinner and a scintillating cultural show for the delegation. Among the distinguished guests were Chief Minister of New Delhi, Sheila Dikshit, and Minister of State for External Affairs, Preteen Kaur, who is also the Maharani of Patiala.
Exploring business between Neighbours (New Delhi Conclave)The fourth day of the program was superb. The format of the conclave was changed after mutual discussions. The conclave was conducted by Arvind Mehta, the Joint Secretary, Indian Ministry of Commerce and Industry. To answer the various issues, especially the Non-Tariff Trade Barriers, that were hampering Pakistan's exports to India, FICCI had asked certain government officials to be present at the conclave. C. K. Maheswari, Chief (Certification) Bureau of Indian Standards, and his colleague U. K. Kher, S. K. Reddy, Director Department of Revenue, Ministry of Finance, and E Reddy, ADCI, Central Drug Standards Control, Department of Health, were present.
Arvind Mehta, in his opening remarks stated that NTBs are more of a perception than reality since the exporters compare the standards of their own country with standards in vogue in the importing country. Thus it leads them to consider these standards as NTBs. He challenged the Pakistani delegation to highlight even one Pakistan-specific NTB and said "this is the mental mindset" of the exporters from Pakistan. He referred to the BIS certification for Pakistan's cement mills and said that BIS usually gives one or two year certification to Pakistani cement mills after fulfilment of the mandatory procedures.
Moving ahead, he said that "our objective is not just trade normalisation but also to move forward. We have lost the opportunity of SAARC intra-trade and thus we are late with SAPTA and SAFTA." He added that India has accorded duty free access to all the other SAARC countries and if relations between India and Pakistan were normal, India would also consider the same facility for Pakistan but he complained that it is Pakistan that has not moved forward in normalisation of trade relations. He disclosed that India would bring down peak tariffs to 8% and by December 2012 to 5% on over 90% of the items. He further said that India will continue the liberalisation policy even if Pakistan is slow to reciprocate. He rejected the fear that Indian goods will swamp the Pakistani markets if MFN is given to India.
Tariq Puri, CEO TDAP, had a very focused and well-prepared presentation for the benefit of the Indian businessmen. He said that "preferential treatment in Indo-Pak trade is imperative and not just the process of liberalisation of trade." He commended the decision announced by Anand Sharma that India would withdraw its opposition in WTO against the EU decision of providing preferential treatment to 75 textile items from Pakistan. He appreciated the fact that promotion of Indo-Pak trade will now become "official in tandem with FICCI/FPCCI/SAARC-CCI. He offered the facilities of Expo Centers of Karachi and Lahore for Indian businessmen. He said that the target of US $6 billion set by the two Ministers would become a reality and he hoped that multiple-entry, one-year, many-cities visas to businessmen would give a tremendous boost to enhancing trade and investment.
Puri also presented some relevant facts and figures. He said Pakistan's exports of 426 tariff lines (6 digit level HS Code) amounted to $275 million in 2010; however India imports $37 billion worth of these 426 items from other countries and these make up 17% of India's total imports. Pakistan's share comes to a meager 0.75%. He wondered whether Pakistan could capture 5% of the market since that would be around $2 billion.
The potential is there and requires Pakistani exporters to gear up and capture their share of the Indian market. He lamented the fact that Pakistani businessmen were not aware of the prospects. He added that on the other hand, India exports 943 items to Pakistan (6 digit level HS Code) worth $1.60 billion. These 943 items make up over 50% of Pakistan's total imports and India's share is about 10%.
Tariq Puri also disclosed that TDAP would organise Pakistan Lifestyle exhibition in India in March 2012. The night before, at the Sharma dinner, I had introduced Puri to Neelam Kapur, Principal Director General, Press Information Bureau, Ministry of Information and Broadcasting. It was decided there and then that at the Lifestyle, Pakistani movies would be shown continuously for the duration of the exhibition.
After his presentation, the Pakistani delegation raised the anecdotal and procedural issues related to NTBs. Maheswari justified the process of certification by stating that BIS is not a regulator but its mandate is to grant licenses. With regards to cement, he said that it takes four months to grant license to a domestic cement mill and about six months for foreign cement mill. He added that policies are made by the government and his Bureau just implements it. On a complaint that renewal takes a longer time, he maintained that renewal was based on past performance, quality assurance, and on-time payment of prescribed fees. He disclosed that 14 Pakistani cement mills have been certified and that one more was certified just 24 hours ago.
Reddy informed the conclave that every two months a joint meeting would be held at Wagah border to discuss and decide issues related to cross-border trade. On a complaint regarding the discriminatory attitude of Indian Customs, especially for those who participate in exhibitions in India, he assured that he himself would be the focal person and facilitator for Pakistani exhibitors for all matters concerning Customs.
There was a spirited interaction with business representatives from both the countries taking active part. I explained the difficulties faced by Pakistan's cement manufacturers and proposed that India allow cement to be transported by trucks. I called for opening up all four channels of transportation, ie, land, air, sea, and train for movement of goods, especially cement, minerals, and other bulk products. I also criticised the Regulatory Duty on Pakistani cement. I also advocated the idea that all SAARC countries should have a unified stance when negotiations for EU's GSP Plus is decided in 2014. I also asked for suggestions on how to reduce freight cost for Pakistani mineral exports to India.
The second session was attended by both the Ministers and relevant office bearers of FICCI and FPCCI. In his welcome address, Rajiv Kumar, the affable and knowledgeable Secretary General of FICCI, said at the outset that the joint decision of the two Ministers on the Indo-Pak trade was "uninterruptible and irreversible" and that the avenue of bilateral trade is now easily navigable. He presented, on behalf of FICCI, a "Green Certificate" to those on the stage and said that FICCI would plant a tree in the name of the recipients of this certificate.
Arvind Mehta presented a summary of the morning session and termed the visit as a "game changer" and said that all relevant issues were thoroughly discussed and debated. Rajan Bharti Mittal, Chairman of Airtel and a former FICCI President said that India's exports to Pakistan rose from $300 million to nearly $2 billion in the past decade. He said that "the political hierarchies of both the countries must provide the facilitation and that the concerned officials must also understand that the trade relationship has to be moved into a different trajectory."
Senator Haji Ghulam Ali again made a highly convincing speech and it was a thrill to hear his observations and opinions. He said that "the balance of scales has tilted towards more trade and that the Pakistani business community is overwhelmingly in favour of granting MFN to India." He hoped that the two governments would soon abolish the policy of issuing city-specific visas and instead country-specific visas would become a routine very soon. He also demanded that the condition of Police Reporting should also end since businessmen are not criminals or felons. He invited Anand Sharma to lead a 200-member strong delegation to Pakistan soon as guests of FPCCI.
Anand Sharma stated that the visit of the Pakistani delegation is truly a "defining one and that we have talked in an environment of freshness and frankness. Let us resolve to change the paradigm. Our relations are historic with centuries of partnership in food, culture, arts, and even Sufism." He further added that "ASEAN has become a region of vibrant economic activity and growth and is emerging as the largest integrated economic force. My question then is, why not then SAARC?" He very frankly said that "India and Pakistan's relationship has been turbulent and marked by events that should never have happened. We are neighbours and we have to co-exist in peace, love, and harmony. We have not overcome the baggage of history, of deprivation, of poverty, etc. The benefits of progress should percolate down to all citizens, especially the youth. This is the guiding and motivating principle. The world is watching what is happening in New Delhi and Islamabad and whatever happens would resonant not only here but in capitals in many countries of the world."
Sharma further said that "we would ensure that Indian GDP would grow at a substantial rate and that we have the largest middle-class population. India desires that the entire region should grow with us and there should be no delay. The time lines must be made shorter just like we desire a much shorter negative list in our bilateral trade. I am sanguine that a time will come soon when we would not have the need to talk of any negative list." He assured the delegation that India will address the visa issue very soon and would also undertake an early review of the investment policy regarding Indian investment in Pakistan. He disclosed that "some of the largest mergers and investments made today in USA and Europe are by Indian companies." He ended his speech by stating that "we have been patient too long and now we are impatient."
Makhdoom Amin Fahim began his speech by stating that "I am finding it difficult to differentiate between the Indian and Pakistani businessmen sitting here." He said that in his opinion, "composite dialogue has resumed and that trade will influence politics as trade flourishes in times of peace and co-operation." He further stated that "we lost the semi-final in Mohali but we won the friendship match since the atmosphere of fear and distrust has reduced considerably."
Vikranjit Singh Sahney, the FICCI Vice President, who had regaled us with Bulley Shah's poetry the night before at the Sharma dinner, presented the Vote of Thanx and invited all to join the Ministers at lunch.
(To be continued)