India, Pakistan banking on each other?
SBP (State Bank of Pakistan) Governor Yaseen Anwar announced on Friday that as a result of their discussion with RBI (Reserve Bank of India), both India and Pakistan have agreed upon granting banking licenses to a couple of banks from each country. SBI (State Bank of India) and BOI (Bank of India) would be opening their branches in Pakistan soon – after their licenses are approved in a few months’ time – while NBP (National Bank of Pakistan) and UBL (United Bank Limited) would be doing the reciprocation from our neck of the woods. This timely banking back-scratching has come after Mian Mohammad Mansha, the richest man in Pakistan and the chairman of Nishat Group, had showcased his desire to ensure that MCB Bank enters the Indian banking arena, with three branches in Delhi, Amritsar and Mumbai being the target of the tycoon. In an interview with The Economic Times last month, Mansha also revealed that United Bank and Habib Bank were also planning their respective raids in India.
The current year has been atypically harmonious on the banking front – and on the trade front in general – as far as Indo-Pak ties are concerned. With Pakistan promising in March to ease out the negative trade list – which has been reduced to 1,209 items – with India by the end of this year; India formally allowing FDI (Foreign Direct Investment) this month and gradually removing the NTBs (Non-Trade Barriers); the opening of a second trade gate in April which quadrupled the number of trucks crossing the border; groups like Godrej and Nishat showing their interest in establishing operations in Pakistan and India respectively; and now this banking love-in – 2012 has seen fiscal amity forestall political enmity, even if temporarily.
The banking symbiosis bodes well for not only the banking sector of the two countries, the respective economies, the wife of Mohammad Mansha (whose Nishat Linen would in all probability accompany MCB in Indian markets), but most importantly it would ease up the transition towards Pakistan granting the much heralded MFN (Most Favored Nation) status to India by the end of this year. New Delhi had granted the MFN status to Islamabad all the way back in 1996, and it has taken 16 years of cynicism, political antagonism and downright dillydallying before Pakistan is slowly coming to the realization of the massive economic potential of the Indian market. Islamabad switched to a negative trade list in March this year, following Anand Sharma’s – the Indian commerce minister – visit to Pakistan, in which our businessmen tried desperately to grill the minister into submission, but to no avail.
The main cause of skepticism for our industrialists with regards to MFN has been the fact that it would result in a massive influx of Indian goods in our market, which would be ‘far superior in quality’. The claim that we can’t compete with the Indian goods has been the clamor of our entrepreneurs for 16 long years now, and maybe just maybe, when our goods are thrown in at the deep end and actually face some competition, the disparity in quality might finally be bridged.
Here’s a stat – courtesy former SBP Governor Ishrat Hussain – for you: if Pakistan manages to capture merely one percent of India’s middleclass market (of 300 million people), its bilateral trade would multiply five times. India, on the contrary, would need to delve into 10 percent of its counterpart (of 30 million people) to achieve a similar boost.
Our bilateral trade is already heavily skewed towards India and if anything we don’t have much to lose really. Out of a total of $1,053 worth of trade between India and Pakistan last year, our imports constituted 81.67% of the number ($860 million), while the exports were a meager 18.33% ($193 million). Therefore, granting MFN – a move that seems to be on the brink of realization at the tail end of this year, if the recent chain of events are anything to go by – would eventually help us somewhat flatten out the tilted trade numbers not only with India, but with other countries as well. Or of course we could continue our indirect trade via Dubai, and continue to waste precious time, money and energy and keep on justifying the pointless exercise on the basis of political disagreements.
Economic cooperation does not mean that we’d have to compromise on our political disagreements. Russia and Norway continued bilateral trade for four decades even though they had border disputes, and there’s no reason why India and Pakistan can’t do the same. Just like making a mélange out of religion and politics can be detrimental for the harmony of the state, failure in separating commerce and politics can hinder the prosperity of the nation – something we ought to have figured out by now.
The writer is a staff member and can be reached at [email protected]
