Galaxy
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Islamabad looks to India to aid economy
October 17, 2011
Fears over Pakistan's struggling economy have persuaded the country's leadership to take steps to gain greater access to the neighbouring, fast-growing Indian market.
A proposal to grant Most Favoured Nation status to India – 15 years after New Delhi accorded the same to Islamabad – and the easing of visa restrictions are the latest steps towards a long-awaited trade liberalisation between the two nuclear-armed rivals.
Pakistan's military commanders and business community are increasingly worried about the poor performance of the economy under the rule of President Asif Ali Zardari. The fiscal deficit has widened, security threats have chased away investors and mounting debts have forced an energy crisis on the nation.
Economic growth, buoyed by the rural economy, textile exports and remittances, has slipped to about 3 per cent this year. Earlier this month, the central bank resorted to emergency measures to spur industrial development and boost demand ahead of likely parliamentary elections next year by cutting benchmark lending rates by 150 basis points.
Sakib Sherani, a leading economist, describes the economy as "going into a freefall towards a big macroeconomic crisis."
Just over the border, India's economy is growing at about 8 per cent a year. The difference has been clocked in Islamabad. Senior ministers say that there is no reason why Pakistan, which had a higher rate of growth than India in the 1980s, should not grow at the same pace as the rest of the region.
The answer, according to Pakistan's economic planners, is to improve market access with trading partners. Pakistan has gained preferential market access to the European Union, is negotiating a bilateral trade agreement with the Gulf Co-operation Council and has already taken the bold step of agreeing a free-trade agreement with China.
"There's one thing the US and the rest of the world can do and that is give us market access which is preferential. We feel that for all the sacrifices we have made [in the fight against terrorism] this is the only right that we have," says Hina Rabbani Khar, the foreign minister.
Ideological obstacles have long prevented greater integration with arch-rival India in spite of shared language and customs. Since the end of British rule 64 years ago, Islamabad has traditionally "punished" New Delhi by withholding trade and complains that India maintains formidable non tariff-barriers.
Some leading Pakistani industrialists see benefits for sectors such as engineering, textiles and agricultural output if links are boosted. Others are less convinced. The Pakistan Pharmaceutical Manufacturers Association has warned that opening up to Indian companies such as Ranbaxy, Dr Reddy's and Cipla would be suicidal for the local industry.
Khwaja Muhammad Asad, the head of the industry group, said Pakistan should follow Bangladesh's example by keeping out Indian drugs. "It is not possible for the local industry to compete with a global player, and it will make survival of the industry difficult," he said in a letter to the ministry of commerce.
Some Islamabad-based diplomats are enthused by the trade developments, viewing them as turning a corner in the hostile relations between India and Pakistan. They were struck that Islamabad signalled a promise of better trade terms only days after New Delhi had formalised a strategic partnership with Kabul, an agreement distrusted by Pakistan's security establishment.
"It's more crucial for Pakistan than it is for [fast-growing] India," said one western diplomat. "It could have a profound impact on the way the country feels about itself. The logic until now has been a very security aware, zero-sum game."
Hasan Askari Rizvi, Lahore-based military historian, said: "The army has probably concluded that they can't fight on every front. There are too many fronts. But their decision to accept an MFN status for India is probably also because they feel that this does not compromise Pakistan's most vital interests."
Other international partners, however, are less optimistic. They view the progress in talks between Pakistan and India as still "glacial" and say that a lasting peace will only be reached if the two sides reach a compromise over the disputed territory of Kashmir.
Islamabad looks to India to aid economy - FT.com
October 17, 2011
Fears over Pakistan's struggling economy have persuaded the country's leadership to take steps to gain greater access to the neighbouring, fast-growing Indian market.
A proposal to grant Most Favoured Nation status to India – 15 years after New Delhi accorded the same to Islamabad – and the easing of visa restrictions are the latest steps towards a long-awaited trade liberalisation between the two nuclear-armed rivals.
Pakistan's military commanders and business community are increasingly worried about the poor performance of the economy under the rule of President Asif Ali Zardari. The fiscal deficit has widened, security threats have chased away investors and mounting debts have forced an energy crisis on the nation.
Economic growth, buoyed by the rural economy, textile exports and remittances, has slipped to about 3 per cent this year. Earlier this month, the central bank resorted to emergency measures to spur industrial development and boost demand ahead of likely parliamentary elections next year by cutting benchmark lending rates by 150 basis points.
Sakib Sherani, a leading economist, describes the economy as "going into a freefall towards a big macroeconomic crisis."
Just over the border, India's economy is growing at about 8 per cent a year. The difference has been clocked in Islamabad. Senior ministers say that there is no reason why Pakistan, which had a higher rate of growth than India in the 1980s, should not grow at the same pace as the rest of the region.
The answer, according to Pakistan's economic planners, is to improve market access with trading partners. Pakistan has gained preferential market access to the European Union, is negotiating a bilateral trade agreement with the Gulf Co-operation Council and has already taken the bold step of agreeing a free-trade agreement with China.
"There's one thing the US and the rest of the world can do and that is give us market access which is preferential. We feel that for all the sacrifices we have made [in the fight against terrorism] this is the only right that we have," says Hina Rabbani Khar, the foreign minister.
Ideological obstacles have long prevented greater integration with arch-rival India in spite of shared language and customs. Since the end of British rule 64 years ago, Islamabad has traditionally "punished" New Delhi by withholding trade and complains that India maintains formidable non tariff-barriers.
Some leading Pakistani industrialists see benefits for sectors such as engineering, textiles and agricultural output if links are boosted. Others are less convinced. The Pakistan Pharmaceutical Manufacturers Association has warned that opening up to Indian companies such as Ranbaxy, Dr Reddy's and Cipla would be suicidal for the local industry.
Khwaja Muhammad Asad, the head of the industry group, said Pakistan should follow Bangladesh's example by keeping out Indian drugs. "It is not possible for the local industry to compete with a global player, and it will make survival of the industry difficult," he said in a letter to the ministry of commerce.
Some Islamabad-based diplomats are enthused by the trade developments, viewing them as turning a corner in the hostile relations between India and Pakistan. They were struck that Islamabad signalled a promise of better trade terms only days after New Delhi had formalised a strategic partnership with Kabul, an agreement distrusted by Pakistan's security establishment.
"It's more crucial for Pakistan than it is for [fast-growing] India," said one western diplomat. "It could have a profound impact on the way the country feels about itself. The logic until now has been a very security aware, zero-sum game."
Hasan Askari Rizvi, Lahore-based military historian, said: "The army has probably concluded that they can't fight on every front. There are too many fronts. But their decision to accept an MFN status for India is probably also because they feel that this does not compromise Pakistan's most vital interests."
Other international partners, however, are less optimistic. They view the progress in talks between Pakistan and India as still "glacial" and say that a lasting peace will only be reached if the two sides reach a compromise over the disputed territory of Kashmir.
Islamabad looks to India to aid economy - FT.com
So, let's get this right - this guy suggests replacing textile mills with IT workers, since "computer machines" consume less power, and so their energy crisis will be solved. I suppose the textile workers will magically start programming, consulting and support. And oh, clients are just waiting to come running to Pakistan to do business in IT. 
