Confidence-building measures: India, Pakistan set to lift ban on investment

Pakistan may double number of goods it imports from India.

Ppi September 05, 2011

NEW DEHLI: India and Pakistan are set to lift the ban on investment, with Pakistan increasing the number of goods it imports from India by 100 per cent, Indian newspapers reported on Monday.

Commerce ministers of India and Pakistan are expected to meet in the Indian capital later this month.

“The proposal to allow investment by both sides is under consideration and is likely to be approved. This is part of the confidence-building measures,” a senior official of the Indian commerce ministry told The Telegraph.

“There is no reason to block investments from Islamabad when we can regulate investments from China. Decisions can be taken by vetting each proposal on merit,” the report said.

It quoted NR Bhanumurthy, an economist with the National Institute of Public Finance and Policy, as saying that the opening of investment would not result in a deluge of money flowing across both sides of the border. “Signals of closer economic cooperation will lead to positive political gains,” he said.

Pakistan is the only country in India’s negative list under the Foreign Exchange Management Act, the report said. It said that the Indian government had deleted the names of Sri Lanka in 2006 and Bangladesh in 2007 from the list. India’s finance and commerce ministries are now examining the possibility of removing Pakistan from the list as well, it said.

Bilateral trade between India and Pakistan is estimated to be $2 billion while trade between the two sides through third country is estimated to be worth another $2 billion. According to a study by the Indian Council for Research on International Economic Relations, India and Pakistan has a trade potential for $14.3 billion, with India exporting about $11 billion worth of goods to Pakistan.

According to India’s Economic Times, although Pakistan is ready to increase the number of goods it imports from India, it is not expected to offer the most-favoured nation (MFN) status to India that it promised earlier this year.

At a meeting in New Delhi last week, Pakistan said it was trying to meet its obligations to India under the South Asia Free Trade Agreement (Safta) which would go beyond offering the MFN status and would involve the extension of tariff concessions agreed under the pact, the report said.

“Since Pakistan does not ban imports from other countries, stopping even a small number of items from India would amount to discriminatory trade and violation of the MFN principle,” the report quoted an Indian government official as saying.

Under the World Trade Organisation’s MFN rule, a country has to extend its trading partner similar treatment it gives to other countries.

Published in The Express Tribune, September 6th,  2011.