Trade between Pakistan and India is only valued at a little over $2 billion, but it could be as high as $37bn, if both nations agreed to tear down artificial barriers says a World Bank report.
The bank also estimated Pakistan’s potential trade with South Asia at $39.7bn against the actual current trade of $5.1bn, Dawn reported.
The report, “Glass Half Full: Promise of Regional Trade in South Asia”, was released here on Wednesday unpacks four of the critical barriers to effective integration.
The four areas identified are tariff and para-tariff barriers to trade, complicated and non-transparent non-tariff measures, disproportionately high cost of trade, and trust deficit.
Talking to a group of journalists on key points of the report here at the
World Bank office on Wednesday, lead economist and author of the document, Sanjay Kathuria, said it was his belief that trust promotes trade, and trade fosters trust, interdependency and constituencies for peace. In this context, he added, the opening of the Kartarpur corridor by governments of Pakistan and India would help minimise trust deficit.
He said such steps will boost trust between the two countries. For realising the trade potential between Pakistan and India, he suggested the two countries start with specific products facilitation in the first phase.
Kathuria said Pakistan had least air connectivity with South Asian countries, especially India. Pakistan has only six weekly flights each with India and Afghanistan, 10 each with Sri Lanka and Bangladesh and only one with Nepal, but no flight with the Maldives and Bhutan.
Compared to this, India has 147 weekly flights with Sri Lanka, followed by 67 with Bangladesh, 32 with the Maldives, 71 with Nepal, 22 with Afghanistan and 23 with Bhutan.
The report recommends ending sensitive lists and para tariffs to enable real progress on the South Asia Free Trade Agreement (Safta) and calls for a multi-pronged effort to remove non-tariff barriers, focusing on information flows, procedures, and infrastructure.
Policy-makers may draw lessons from the India-Sri Lanka air service liberalisation experience. Connectivity is a key enabler for robust regional cooperation in South Asia.
Kathuria says reducing policy barriers, such as eliminating the restrictions on trade at the Wagah-Attari border, or aiming for seamless, electronic data interchange at border crossings, will be major steps towards reducing the very high costs of trade between Pakistan and India.
He argues that the costs of trade are much higher within South Asia compared to other regions. The average tariff in South Asia is more than double the world average. South Asian countries have greater trade barriers for imports from within the region than from the rest of the world.