ISLAMABAD: The Nawaz Sharif government will seriously consider importing 1,000MW electricity from India as part of its short to medium term strategy to end loadshedding.
On an immediate basis, different options are under consideration at different levels, and the PML-N will present a roadmap for eliminating the circular debt. According to the option number one, the government will have to either hike its budget deficit by a few percentage points for diverting additional resources towards controlling the losses of power sector or as a second option divert major resources from the Public Sector Development Program (PSDP) to energy crisis.
“The task force on energy has presented its recommendations in which the upcoming minister and his team have been advised to end the circular debt at all costs,” former finance minister Shaukat Tarin, who is also a member of this task force, told The News on Monday.
Showing his reluctance to share the details of any further recommendations, he said the budget deficit might go up, but the upcoming government would have to take steps for strengthening the energy sector that had literally choked all the economic activities.
However, sources in the economic ministries confirmed to this reporter that import of electricity from India as well as from Iran and Central Asian Republics (CARs) was feasible. It is also a pre-requisite for reviving the shattered growth prospects in the future.
When an Islamabad-based top official of the World Bank was asked if the bank had conducted any feasibility for exploring the import of electricity from India, he replied: “Yes” and added that 1,000MWs could be imported from India within the next two years.
The lingering energy crisis has severely damaged GDP growth in the last five years of PPP-led regime and average GDP growth stood at 2.5 percent of GDP on per annum basis.
The Planning Commission, which is preparing the salient features of next five-year plan, has estimated that the GDP growth could touch the 7 percent mark in next five years because huge untapped potential existed in this economy.
Citing examples, the official said, the country’s industry was running at 50 percent capacity and if power situation improved and industry achieved the level of its operation in the range of 70 percent, the country’s economic activities would be restored and GDP would be pushed up by 1 to 2 percent on per annum basis.
Governance reforms in the power sector will also play a key role in ending corruption and leakages and improving the energy supply. The auction of Third Generation (3G) technology will also boost economic activities by improving growth rate in the range of 2 to 3 percentage points over the medium term.
According to the WB officials, the electricity trade between Pakistan and India will be completed in next two years including conducting feasibility studies and pricing as well as placing transmission line to make it a reality.
India and Pakistan are working on energy cooperation, as there is no regional energy sharing mechanism in this region and it is the only way forward to end crisis.
Pakistan had formally requested the World Bank (WB) for multimillion dollar assistance for importing 500 MW electricity from India. Considering watershed developments between India and Pakistan, the WB official said Pakistan’s industrial load shedding resulted into loss of 400,000 jobs.
Sri Lanka is the only country in South Asia which is surplus in electricity and all other countries are energy deficit but there is no energy trade scheme.Pakistan and Afghanistan can import electricity from Central Asian states for lowering down power shortages.
Feasibility studies have confirmed technical and economic viability of exporting summer time electricity surpluses from Tajikistan and Kyrgyzstan from existing power plants to relieve power shortages in Pakistan and Afghanistan.
“Trade in energy is negligible,” said the sources and cited an example that Afghanistan and Nepal could produce 100,000 MW hydropower which could be used to alleviate the crippling energy shortages in the region.
Pakistan chapter of Pakistan-India Joint Business Council (PIJBC) has decided to set up six committees on sectors that have shown reservation vis-a-vis liberalisation of trade with India.
Caretaker Commerce Minister Maqbool H H Rahimtoola had a meeting with the representatives of PIJBC Pakistan Chapter at the Trade Development Authority of Pakistan and assured businessmen that the government wanted to work as a team with business community of Pakistan with regards to normalization of trade with India.
It was decided that the committees would also see trade facilitation and infrastructure issues. The committees are set up for auto sector, pharmaceutical, textile, agriculture, trade, infrastructure and financial sector. Syed Yawar Ali was selected as Chairman of committees.
Secretary Commerce Munir Qureshi emphasised the committee to also differentiate between perception and realities when working on issues relating to India. He also described the fact that pacts signed with India were in process of operationalisation and in future things would be better.The issues of capacity constrained, lack of research and coordination, hidden NTBs by India were also discussed in the meeting.
The members also agreed to show prudence and consciousness while liberalising trade with India. The recommendations of committee will be considered in future negotiations of Pakistan=India trade.
The meeting was attended by leading businessmen of Pakistan including Bashir Ali Muhammad, Chairman Gul Ahmad Textile Karachi, Sikander Mustafa Khan, Chairman Millat Tractors, Lahore; Abdul Razak Dawood, Chairman Descon Engineering Lahore; Nauman Dar, President and CEO Habib Bank Ltd; Iftikhar Ali Malik, owner Guard Groups of Companies, Lahore; Dr Muhammad Tariq Bucha, President Farmers Associates Pakistan.
KARACHI: Indian businessmen and professionals said on Monday that Pakistan Muslim League-Nawaz’s decisive victory in the election has rekindled hopes of improved bilateral trade and the granting of a Most Favoured Nation (MFN) status to India.
“We think bilateral trade between India and Pakistan is growing and will grow further in coming years,” Senior Manager-Exports, Raymonds, Durgesh Buxy, told The Express Tribuneby telephone from Mumbai.
Raymonds, a renowned apparel brand of India, is going to launch its first store in Karachi by the end of this month.
“We are hopeful that we will get good response from Pakistani customers because we are a renowned name in world’s apparel market,” he said. We simply do business and do not want politics to affect trade relations between neighbouring countries, he added.
The outgoing Pakistan Peoples Party government had promised to grant an MFN status to India by December 2012, but failed to do so. Businessmen are hopeful that India will be granted this status during Nawaz’s tenure.
“It is a very good development, and obviously India is looking forward to move on,” President-Export, Siyaram’s, NP Singh told The Express Tribune by phone. “I think the present governments of both countries want to move forward as people of both neighbouring countries want good relations.”
“We are hopeful that both countries will move forward, but at the same time we are cautious too.” Managing Director of Suneja Poly Yarns Mukesh Suneja said.
Suneja, who has a factory in the Indian state of Gujarat, visited Pakistan last year with a big delegation in the hope of marketing his products in the country. “We have to see what is coming next because every time we take one-step forward, we move two steps backward. This has certainly made us cautious in trade and investment in Pakistan.”
Moreover, leading trade and commerce associations of India and Pakistan say that MFN is the biggest hurdle in trade relations between South Asia’s two largest economies.
After joining the World Trade Organisation (WTO) in 1996, India granted MFN status to Pakistan but Pakistan did not reciprocate the gesture, saying that the two countries should first resolve border issues before moving on trade and commerce. But now Pakistan’s position has changed and it is now open to trade talks.
The current bilateral trade between India and Pakistan is valued at $2.5 billion. However, leading trade bodies of both countries say that bilateral trade can be increased to $15 billion in next five years because of extremely low current trade volumes. The two neighbours have never traded smoothly since the start of 1965 war.
ISLAMABAD – Bilateral trade between India and Pakistan grew 21% to $2.4 billion last year, as Islamabad reaped the benefits of trade normalisation more than the gains made by New Delhi, said the Indian High Commission.
According to latest figures of the Directorate General of Commercial Intelligence and Statistics, Ministry of Commerce and Industry India, which were released on Monday, the volume of bilateral trade recorded a net increase of $410 million from April last year to March this year. Pakistan’s exports to India grew 28% while Indian exports to Pakistan increased 19%. Bilateral trade has increased to $2.4 billion, which may soar to $6 billion in the next two years if both countries decide to treat each other equally. Currently, most of the trade between India and Pakistan takes place via Dubai and its volume is estimated at over $4 billion.
The figures come hard on the heels of interests shown by the political leadership of both sides to improve bilateral ties following sudden heightening of tensions due to killing of each other’s prisoners. According to an official statement released by the Indian High Commission in Islamabad, Pakistan’s exports to India in the last Indian financial year (April 2012-March 2013) grew 28% and reached $513 million. Metalliferous ores and metal scrap, organic chemicals, raw cotton and leather were among the commodities that contributed significantly to the increase. The High Commission termed the 28% increase in Pakistan’s exports “impressive” when viewed in the context of negligible increase (0.3%) in India’s overall imports. India’s exports to Pakistan in the same period increased $300 million, a growth of 19%. Total Indian exports to Pakistan stood at $1.84 billion, putting the trade balance in favour of New Delhi.
“The growth in bilateral trade, especially in Pakistan’s exports to India, reflects the positive effect of a number of steps taken towards fully normalised trade relations,” the High Commission stated. It added three bilateral agreements signed in 2012 in the areas of customs cooperation, mutual recognition of standards and addressing trade grievances were intended to further improve trade environment.
NEW DELHI – India’s exports to Pakistan has improved to $1.64 billion during April-February 2012-13, the parliament was informed on Monday.
For the entire 2011-12 fiscal, the shipments to the neighbouring country had stood at $1.53 billion.
The country’s imports from Pakistan too increased to $487.5 million during April-February 2012-13.
In 2011-12, the imports stood at $421.8 million, Commerce and Industry Minister Anand Sharma said in a written reply to the Lok Sabha.
The total bilateral trade during the 11-month period of the last fiscal aggregated at $2.12 billion. It had stood at $1.95 billion in 2011-12, he said.
However, in 2010-11, the two-way trade was $2.37 billion. Both the countries are in the process of further strengthening their trade ties as Pakistan has already switched over from a positive list to an approach of selective negative list of imports.
By Nisha Taneja
The series of trade facilitating measures enacted by India and Pakistan starting in November 2011 were undoubtedly the first steps toward creating new trading opportunities that could lead to a quantum leap in bilateral trade between the two countries. Trade potential between India and Pakistan is estimated to be $19.8 billion (U.S.), which is 10 times larger than the current $1.97 billion in trade. Of this, India’s export potential accounts for $16 billion and its import potential accounts for $3.8 billion. The potential in India’s mineral fuels is another $10.7 billion, of which export potential accounts for $9.4 billion and import potential $1.3 billion.
The items with the largest export potential include cellular phones, cotton, vehicle components, polypropylene, xylene, tea, textured yarn, synthetic fiber, and polyethylene. The items with largest import potential include jewelry, medical instruments and appliances, cotton, tubes and pipes of iron and steel, polyethylene terephthalate, copper waste and scrap, structures and parts of structures, terephthalic acid and its salts, medicines, and sports equipment.
In a major move towards normalizing trade relations, Pakistan’s transition from a positive list to a negative list in March 2012 (except for road-based trade, for which Pakistan continues to maintain a positive list of only 137 items) was perhaps the most significant step toward unleashing bilateral trade potential. Under the positive list approach, Pakistan imported from India a specified list of items. The negative list specifies the banned list rather than the permitted list of imports, allowing a much greater flow of goods from India.
India and Pakistan also maintain sensitive lists as members of the South Asian Free Trade Area (SAFTA) agreement. While negative lists specify items that are completely banned from trade, sensitive lists consist of items on which trade is permitted but tariff concessions are not allowed. As in any trade liberalization process, there will be both winners and losers. The negative and sensitive lists indicate sectors in which countries want to protect domestic industry from each other’s imports.
A substantial proportion of India’s export potential to Pakistan – 58 percent – is in products that are on Pakistan’s negative or sensitive lists, applicable to India under the South Asian Free Trade Agreement (SAFTA). Similarly, 32 percent of India’s import potential from Pakistan is in items on the sensitive list for Pakistan applicable under SAFTA. Further, Pakistan’s negative list indicates that the automobile and component industry is the largest sector that enjoys protection from Indian imports.
On the other hand, agricultural items, for which resistance to liberalization is building up in Pakistan, are unlikely to have any impact as this sector has already been liberalized. Pakistan’s sensitive list indicates that textiles account for 24 percent of the items on the list, but this sector accounts for only 3 percent of India’s export potential of items on Pakistan’s list. India’s sensitive list indicates that the textiles sector is protected the most-a sector in which Pakistan enjoys a comparative advantage. Most of the items on the sensitive list are fabrics, which if allowed at preferential (lower) tariffs into India will compete with large firms (rather than small firms) in India that produce comparable quality. Even though these firms are likely to oppose liberalization, there is no rationale to protect large firms.
India’s sensitive list under SAFTA applicable to Pakistan indicates that the textiles sector is protected the most (accounting for 22 percent of India’s import potential) – a sector in which Pakistan enjoys a comparative advantage. It can be inferred that while Pakistan considers its automobile sector as the most vulnerable, India fears competition in the textile sector.
To realize the untapped trade potential between the two countries, several physical and regulatory impediments need to be addressed. Expansion of physical infrastructure at the land borders, amendment of transport protocols to allow seamless transportation without the requirement of transshipment of cargo (the transfer of goods from one country’s truck to the other country’s truck at the land borders because Indian and Pakistani trucks cannot operate in each other’s territory),and dismantling of the road-based positive list are measures that could bring about a substantial reduction in the transaction costs of trading between the two countries.
Non-tariff barriers have been a key issue for Pakistani business people trying to access the Indian market. While there are genuine non-tariff barriers related to the complexity of regulatory procedures, non-transparent regulations, port restrictions, and problems related to recognition of standards and valuation of goods, these are not discriminatory and are being addressed in India’s ongoing reform process. It is more difficult to address “perceived” barriers that business people face in entering each other’s markets. Business people fear entering these markets as they are not sure their goods will be welcomed. This is more so in the consumer goods market segment. However, there is evidence that some businesses have made a bold entry with their country labels and have not met much resistance. Exhibitions and fairs are an effective way of dealing with these perceived barriers.
For deeper and stronger trade linkages it is important that there are foreign investment flows between the two countries. Businessmen from both countries are reluctant to invest as they fear the consequences of a possible political event. If a bilateral investment treaty is put in place it could improve business confidence. In the meantime, businessmen in both countries have suggested allowing joint ownership of manufacturing facilities located in the respective countries. Thus, investors can enter into joint ventures without physically locating in each other’s territory. This could be the first step for entry until legal systems can be altered to safeguard investments, and there is an improvement in investors’ confidence.
A key determinant of realization of trade potential is the liberalization of visas. The revised visa regime expected to become operational soon provides only an incremental improvement over the existing system as it introduces measures to ease travel of tourists, pilgrims, elderly and children. The business visa is also more liberal for certain categories. As security is a key concern, information technology-driven systems should be made to screen visa applications and physical movement of people.
India and Pakistan need to engage with each other to understand each other’s regulatory regimes. As new businessmen enter the economy it is important to have forums that would bring buyers and sellers together. The business communities must create multilevel channels of communication that can reduce misconceptions, bridge the information gap, and generate a significant change in the business environment of the two countries. This could help in realizing the untapped trade potential between the two countries.
Nisha Taneja is a professor at the Indian Council for Research on International Economic Relations in New Delhi.