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Hafiz Pasha, dean of Beaconhouse National University, Lahore, and former commerce minister, finance minister and deputy chairman of Planning Commission, government of Pakistan, tells Nayanima Basu India has to do much more than Pakistan to normalise bilateral trading relations
How is the trade normalisation process progressing?
It is going very well. In the last one year, it has proceeded remarkably well. Though it was initiated in 2011, a number of developments took place in 2012. First, Pakistan moved from a positive list to a negative one. We allowed from India imports on 82 per cent of our tariff lines, against 27 per cent earlier. This is a big jump. Then, India announced its sensitive list and brought it down 30 per cent. Pakistan has also come up with its sensitive list. And, we have fewer items, compared to India.
What about the non-trade barriers front? Pakistan hasn't done much in this space.
On the contrary, we have made significant progress on non-tariff barriers. We have signed three agreements on this with India. The first issue we have agreed on is customs facilitation. The other is on quality control and the role of different agencies. The third is essentially on transport facilitation. The only unfortunate thing was Pakistan was supposed to grant the most-favoured nation (MFN) status to India by December, which it didn't. It has become more symbolic now than real, because mostly, we have opened up. But as elections were approaching, it was held up.
Can you indicate a time frame by when the MFN status would be given?
It should be around June-July. Once the new government takes over, this would be one of the items that would be on its agenda, irrespective of whichever government is there. If it is the Nawaz Sharif government, it would certainly give MFN status to India. And, India is now committed to the sensitive list. Now, it wouldn't be only an MFN status; it would be a preferential status because most of the items would be out of the sensitive list of the SAFTA (South Asian Free Trade Area). It is not that we are going to be trading on MFN terms alone; it would be MFN, as well as preferential treatments. Pakistan has already issued its sensitive list and notified it.
What if somebody else comes to power, not Nawaz Sharif?
There is complete unanimity across all political parties that MFN status would be granted to India, except possibly for the extreme right-wing parties. But they are unlikely to secure power. If it is (Pakistan) Peoples Party or the Muslim League, MFN status would certainly be given to India without any delay.
You said Pakistan would give India MFN status, along with preferential treatments. Considering the various lobby groups campaigning in Pakistan, is that possible?
Of course! It will be possible for the simple reason that we have already liberalised 82 per cent. Meanwhile, the sensitive list has been announced. So, in effect, India is already enjoying preferential treatment on 82 per cent of imports from Pakistan. This is something most people in India do not realise. India can already export to Pakistan 82 per cent of the tariff lines, with 70 per cent of those on preferential treatment.
Some primary items of India's interest are kept in the negative list. How would you silence various lobby groups that are actively seeking to derail the process?
It is very simple. If there are some crucial items, we will continue to have them on the sensitive list. That is it. But please realise that Pakistan has already liberalised more than India.
How do you substantiate your claim, given that India has taken far greater strides in normalising trade with Pakistan?
Our sensitive list is smaller than India's, under the SAFTA, which has been notified. We have about 1,550 items, while India has 1,750 items at the eight-digit level of the harmonised code. So, tell me who is taking greater strides in normalising trade relations? This is something not many people know or have actually analysed.
Do you feel it is difficult for your banks to open branches in India?
Yes, the Reserve Bank of India (RBI) does not like branches. It prefers wholly-owned subsidiaries. Second, it wants minimum capital to be brought, which, in Pakistani rupee terms, is five billion. Third, it has a very strange clause that says any country that has a difficult set of political relations would not be given a branch banking licence. It has to waive this requirement. It is not the commerce ministry that would give this facility; it is RBI, which insists on the so-called very strong prudential requirements. It also insists the country's sovereign rating should be very high. Given these preconditions, it would be very difficult for a reciprocal arrangement on branch banking.
It seems Pakistan isn't much enthused with India's decision to allow investments from that country. Why?
There is clause that it would be allowed under government approval. This is the only country in the world being subjected to this requirement. This is not acceptable. You have to treat Pakistan like any other country. We do not have any such restriction in our country. India continues to have discriminatory treatment.
Have you communicated this to the Indian government?
Yes, we have. But the problem is the Indian bureaucracy is not willing to let go. It is not the political parties, but Indian bureaucracy.
Do you feel an element of distrust still exists?
It is very much there. We have opened up, but India has not. When you single out one country in your FDI (foreign direct investment) policy, what else can one assume?
Various lobbies such as agriculture, pharmaceuticals and automobiles ones are not keen on trade normalisation with India because they fear Indian goods would flood their markets. Why is this the case, given they have survived Chinese products?
China is not exporting agriculture products to us. The prices of food items are much higher in Pakistan than in India. This shows the extent to which India's agricultural sector is subsidised.
What is your concern on pharmaceuticals?
Here, the concern is totally different. The concern is of quality and standard. Indian products are subject to drug regulation at the state level, not at the Union level. According to World Health Organization, India has the weakest drug regulatory system in the world. We are worried substantive medicines might come into India.
Why, given India is treated as the 'pharmacy to the world' and a leader of generics?
But you do not have appropriate regulation. That is our only problem. So, we will approve import of only those drugs that are approved by the European Pharmacopoeia, nothing else.
