Someday soon perhaps, you could be reading Money Matters en route to the airport in your brand new Tata Safari. As you wait for your son who's flying into Karachi from Pune, where he studies filmmaking, you could quickly check the price of your company's shares listed on the Mumbai Stock Exchange before jotting notes for the afternoon meeting with the high-powered group of Indian investors you're wooing. Life could be good.
It's precisely this vision of shared prosperity that has so many people on both sides of the border so excited about Pak-Bharat dosti. And this is the reason the 2nd Aman ki Asha Indo-Pak Economic Conference, titled "Dividends" is so important.
Bilateral ties - whether economic, military or political - have an implacable internal logic. Since this logic is fed by multiple sources - for example, domestic political imperatives, economic self-interest, the public posturing on global stage and what not - it becomes difficult to isolate and address a single problematic strain on relations.
For the longest time, for example, Pakistan-India relations were held hostage to Islamabad's desire to put the 'composite' back in 'dialogue' and New Delhi's refusal to look beyond Mumbai and Hafiz Saeed.
The Aman ki Asha (AKA) initiative has none of this baggage. The brainchild of the Jang Group and The Times of India, AKA benefits from its association with media powerhouses that are, in South Asia's rapidly evolving 'free press' environment, considered the disinterested arbiters of an enlightened self-interest. And the partnership with credible trade bodies such as the Pakistan Business Council and the Confederation of Indian Industry further reinforce the impression of neutrality since money has no religion. As Arif Zaman argues (see page 2), people trust the media and business leaders more than they trust governments.
And why shouldn't they? The media and big business have delivered consistently to their constituencies on both sides of the border. The Indian media has the Bofors scandal to its credit; the Pakistanis have the Agosta submarine scalp. If the multi-billion dollar Indian company Infosys began life with just $250, the Pakistani textiles-energy-banking-cement-hospitality behemoth that is the Nishat Group was once just a spinning mill in Faisalabad.
Simply put, these are the sort of people who make things happen because their media/business clout has given them political muscle. Cricket diplomacy, shrine diplomacy, people-to-people contact and hearty 'official' handshakes on the sidelines of international moots are all good. But around the world, governments, military establishments and people on the streets listen to big business because they are the ones who make possible election campaigns, government revenues, defence spending and cheaper consumer products. When big business outlines a vision, one expects they'll deliver (barring, of course, the Enrons, the Union Carbides and the BCCIs of the world).
So what does this vision look like? The sectors that are currently being focused on are the usual suspects - textiles, IT, some engineering - besides a few surprise entries such as hospitality, capital markets, education and healthcare. On an independent basis, some entrepreneurs and industrialists had already been eying the one-billion-strong Indian market. Since India's decision to open up to FDI from Pakistan, many in Pakistan are waxing lyrical about trade potential. (Estimates regarding growth in trade with India over the next five years range between $6 billion a year to $10 billion, depending on who one talks to.) As the announcement coincided with the visit of a high-powered Pakistani delegation to New Delhi, participants at the event are even more excited.
The secretary general of the South Asian Federation of Exchanges Aftab Ahmad is among them. His argument is that with the global recession still holding the EU and the US in thrall, Pakistanis would do better to look eastwards for investment. The point, says Ahmad, is for investors and entrepreneurs on both sides to look at each other as friendly asset classes, "not RAW agents or ISI agents". "Going forward, we want to have index-based products [exchange-traded funds]; cross listings on each other's bourses; we can also think of combining our exchanges, in line with global trends... there's so much we can learn from them regarding regulation, about market management and monitoring."
Humayun Bashir, IBM managing director, is another enthusiast. "Our biggest advantage is that our prices are lower. But we have to recognize Pakistan's image is such that international companies are not willing to outsource to Pakistan." As such, says Bashir, it makes more sense for Indian companies to take orders and outsource from Pakistan, particularly in the area of business processing (back office work; medical transcription; call centres).
According to his calculations, Pakistan's IT industry is netting around $1.2 billion in revenues in a year, of which $800 million are said to be the exports. "Comparatively, IT exports from India are in the region of $45 billion to $50 billion. Even a small chunk of this could help grow our own revenues substantially."
While critics of such plans pooh-pooh business-process outsourcing as low-brow, Bashir is more pragmatic. "This is low-hanging fruit. We're quite good in software development too but developing linkages and setting up collaborations will take time. In the meantime, we can learn how to develop systems, processes and training structures for outsourcing from the Indians." (The big question to ask, says Bashir, is whether Pakistan will also allow Indian FDI.)
College of Business Management rector Talib Karim agrees with Bashir as far as education and training are concerned. "Lots of universities in Pakistan are collaborating with universities in the Far East, Europe and the US; why not with India?" he asks. Karim's particularly optimistic about plans at the university level to set up student and faculty exchange programmes besides the conduct of collaborative research.
But what about textiles, the biggest moneyspinner? Nishat Mills' chairman Shahzad Salim didn't go to the Lifestyle Pakistan event but his company was there. "The biggest advantage in trading with India is that it cuts the cost of transportation," he explains. "Besides, we have a natural synergy: they have surplus cotton; we have yarn and grey cloth. The cost of production in Pakistan is much better in the textile sector. If it weren't for our energy-related issues, the quality of our spinning and weaving is much better and, to top it all off, we're very efficient."
The reason for this, says Salim, is that India was a closed economy till recently while Pakistan had regularly been importing the latest technology. His current plans include the exploration of the market for home textiles. "We stand to get a huge market share in east Punjab. We sell to [British retailer] M&S; we can also sell to Indian brands."
That said, Salim's not allowing himself to get too excited just as yet. "How can you mandate which items can be sent by road and which can go by train? The minute 20 trucks arrive at Wagah [trade gate], there's a pile-up because the checking at Customs on the Indian side takes so long. If you're serious about boosting trade, there needs to be containerised trade - you can't have the police and customs checking every bale of cotton!"
And this, agree most, is the only thing holding back Pakistan and India: all the Free Trade Agreements, WTO rules, SAFTA agreements and FDI deals won't make a jot of a difference till both governments thrash out the procedural hitches. Here too, the devil is in the detail.
The writer is Business Editor,
Monday, May 07, 2012
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