This document outlines a discussion on enhancing business engagement between India and Pakistan. It provides an overview of current trade trends and non-tariff barriers faced by Pakistani exporters. It also examines informal trade between the two countries across various sectors. Further, it discusses prospects for investment cooperation and identifies sectors with potential for Pakistani investment in India. Key recommendations include liberalizing visa policies, recognizing standards, and facilitating transport infrastructure to promote greater trade and investment ties.

1. India Pakistan Trade
Changing Trends and Emerging Scenarios
28th March 2013
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2. Outline
• Overview of India Pakistan Trade
• Sector-specific Non-Tariff Barriers (Perspective from Pakistani
Exporters)
• Informal Trade between India and Pakistan
• Investment Cooperation between India and Pakistan
• Way Forward
• Open Discussion

3. Steps in Enhancing India-Pakistan Business Engagement
Research Advocacy Capacity Building
Participatory Trade diplomacy at
Sector-specific non-
approach to Ministry of
tariff barriers and
address non-tariff Commerce and
role of subsidies
barriers Foreign Affairs
Participatory Liberalizing Visa
FDI Prospects for approaches to Policy with in-built
India and Pakistan South Asian Safeguards at
regional integration Ministry of Interior
Automatic Route
Cost of non-
Investment led by
Informal trade: cooperation to
Chambers and
Gainers Vs. Losers South Asian
Board of
Consumers
Investment

4. Current State of Non-Tariff Barriers

5. General Non-tariff Barriers
Customs Rejection of transaction value
Valuation
Re-classification
Arbitrariness, delays, non-transparency
BIS Currently, BIS has 18,592 standards for various product
categories, only 84% are equivalent to International Standards
Standards
No data available on how many are actually enforced
Usually, ISO standards are sufficient but in case of imports from
Pakistan, discretionary powers are used

6. General Non-tariff Barriers
Tightly regulated
Import
Licensing
Easily available for export-oriented industries (example of leather)
Not easily available for value-added products
Indian banks do not honor L/Cs opened by Pakistani banks beyond
Financial $10,000. Thus, shipments released in parts
Measures
Indian banks usually request for an extension in maturity date of L/C
up to 60 days
Absence of direct courier service

7. Sector-specific NTBs

8. Textile & Clothing Sector
• Non-value added products imported
• Importers need to submit shipment samples in public sector
labs to ensure that dyes and colors used are not hazardous
• Automatically generated invoices by manufacturers are
unacceptable, have to be reformatted.
• Specifications and standards certified by company labs are
unacceptable
• Certificates of international standards and other international
certifications such as SJS are unacceptable
• Sampling takes up to 3 months

9. Textile & Clothing Sector
• Pre-shipment inspection used to determine use of hazardous
dyes
• PSI certificate is required from a textile testing lab accredited
by the National Accreditation Agency of Pakistan. There is no
such facility in Pakistan
• Thus all Pakistani samples are tested and certificates for these
are granted by Indian agencies
• Over 25% of samples are drawn for testing, and the report is
only valid for 6 months
• Hefty testing fees complex procedures impede imports of high
quality apparel & those imported in small quantities

10. Fruits & Vegetable Sectors
• Agricultural sector heavily subsidized in India, making
imported goods uncompetitive
• Total subsidies in 2010 $28.9bn (2.2% of GDP)
• Minimum support prices, credit and insurance
schemes, fertilizers, irrigation water, electricity, diesel at
subsidized rates
• All agricultural products require import license, SPS certificate
and import permission from Plant Quarantine Authorities
• Challenges in completing SPS requirements: SPS & Bill of
Lading required by issuing bank to initiate L/C

11. Fruits & Vegetable Sectors
• All food products are tested by Port Health Authority. Officials
absent at times and samples sent to other labs
• Consignments with pending reports are sent to
warehouses, not equipped to store perishable items
• Results of lab authorities cannot be challenged
• Certificates from Pakistani labs not accepted, those from
other international labs are accepted

12. Leather Sector
• Demand in India due to footwear industry picking up since
last 5 years
• Thus, NTBs in this sector are minimal
• Import licenses are easily available since leather is required by
Indian export industries selling value added products
• Leather footwear is on Indian negative list
• Other finished goods of leather are subject to extensive
sampling procedures
• Exporters complained about packaging being destroyed while
inspection and sampling procedures

13. Recent Developments
• BIS – PSQCA
• Relaxed Visa Regime: executive order issues but not
implemented
• Wagah-Attari: Integrated check post available, but has already
reached full capacity
Need for:
• Trucking Agreement
• More land routes need to be opened
• Containerization via railways
• Direct courier services

14. Trade – Despite of NTBs
• This was Pakistani exporter’s perspective
• Indian claim: these are same for all exporting to
India
• Two replies from Pakistan
– Pakistan should adapt
– While rules same for all – they are applied more
strictly on Pakistan
• What about the consumers?
– Trade with India continues – case of informal trade

15. Informal Trade
• Land routes
• Product categories
• Quantification

16. Methodology for Identification of Sectors
• Some available literature e.g. Shaheen Rafi Khan et al. (2005)
• Expanding inquiry in line with products mentioned on
negative list as of Dec-2012
• Creating inventory of products identified by informal traders
in various hubs of informal exchange
• Validating the above mentioned inventory with
wholesalers, retailers and custom clearing agents

17. Selected Identified during Survey
Fruits and Automobile
Textile Jewelry
vegetables parts
Herbal
Cosmetics Medicine Tobacco
products
Paper and
Spices and
paper Crockery
Herbs
products

18. Respondents in Informal Trade Survey
• Importers/Exporters (19)
• Retail whole sellers (67)
• Transporters (10)
• Custom clearing agents (2)
• Government Officials (5)
• Kheepas, Frequent family travelers (9)

19. Markets & Cities in Survey
Sector Primary Market City Primary City Primary City
Market Market
Textile Bolten Market Karachi Shaalam Lahore - -
Market
Tobacco Nanakwara Karachi Paan Mandi Lahore - -
(Anarkali)
Kharadar
Livestock Yazman, Rohi Bahawalpur - - - -
Multan
Autoparts Ranchor line Karachi Badami Lahore Perwadhi Rawalpindi
Al-Noor market Bagh
Pharmaceutical Peshawar Shahalam Lahore - -
Market
Cosmetics Bolten Market Karachi Anarkali lahore - -
Jewelry Bolten Market Karachi Anarkali Lahore - -
Spices Jodiah Bazar Karachi Shaalam Lahore - -
market

20. Informal Trade Routes
• Major routes
– India Dubai Iran (Bander Abbas) Afghanistan (Kandhar)  Chaman
Karachi
– India Dubai Iran (Bander Abbas) Afghanistan (Kabul) 
Torkhum/Bara Lahore and Rawalpindi
– India Iran (Bander Abbas) Torkham/Bara  Lahore and Rawalpindi
– India  Karachi  Afghanistan  Peshawar (Afghan Transit Trade)
• Minor Routes
– Kashmir-Chakoti border
– Regions adjoining Bahawalpur
• Work in Progress
– Qusai Fromal trade (Singapore and Dubai)

21. Fruits and Vegetables
• At the time of survey team’s visit (February 2013)
Kinoos and plums where being exchanged through
Kashmir-Chakoti border
• The volume of informal exchange was around 20-30
trucks per week and value of exchange amounted to
PKR 540 million
• There is anecdotal evidence for other minor crops

22. Textile and Clothing Sector
• Sarees, Bridal dresses and other fancy suiting is being
exchanged through:
• Route:
– Gordaspur  Karachi channel
– Kheepas & frequent family travelers
– via Dubai (Qausi formal)
• The inward value of exchange is valued at PKR 370
billion

23. Auto Parts and Light Engineering
• The spare parts being exchanged include
gears, differentials, windscreens, pumps, and nozzles
• The Tyres being exchanged included Indian brands such as Apollo, JK, MRF
• Route:
– Dubai-Iran-Afghanistan-Chamman/Torkham
– Afghan Transit Trade
– Iran-Balochistan-Karachi
• Market share in local market:
– Spare parts: 30%
– Tyre: 70% (include majority refurbished tyre)
• Monetary worth:
– PKR 26.8 billion

24. Jewelry and Related Products
• The informal exchange includes high grade artificial
jewelry, bridal sets, bangles and lockets
• The mode of exchange is through Keepas, family
travellers, Afghan transit and Quasi formal trade via
Dubai
• Monetary worth:
– PKR 8.8 billion

25. Cosmetic Products
• Informally exchanged items include soaps, beauty
creams, makeup kits.
• The well know brands available include
Godrej, Garnier and Liril products made in India
• Routes
– India  Afghanistan(Kandhar) Chamman Karachi
– India  Afghanistan (Kabul) Peshawar
(Bara/Thaurkhum) Lahore and Rawalpindi
– Kheepas, Family visits
• Monetary worth:
– PKR 4.8 billion

26. Medicinal Products
• Informally exchanged medicines include
Aspirin, Amoxilin, Ampicillin, Cemetidine, Laxotanil, Co-
trimaxazole, famotidine, Ciprofloxine, Rentidin
• Route:
– India  Afghanistan  Peshawar
– India  Afghanistan Peshawar Lahore
– India to Afghanistan (Formal)
• Monetary worth:
– PKR 5.9 billion

27. Tobacco Items
• Informally exchanged items include Betel leaf
(available in Pan mandi, Lahore)and ghutka (available
in Nanakwara and Kharader, Karachi)
• Route
– Betel leaf coming through indirect channel
• Kerala Mumbai Dubai Lahore
– Kheepas and informal sea routes
• Monetary worth:
– PKR 4.4 billion

28. Herbal Products
• Informally exchanged items include creams and hair oils
• Route:
– Kepaas and family travellers
– Via Dubai (Qusai formal)
• Monetary worth:
– PKR 110.4 million

29. Spices & Herbs
• Informally exchanged items include Black
tea, Cardamom, Cinnamon, Jaiphal, Javitri
• Route:
– India  Afghanistan(Kandhar) Chamman Karachi
– India  Afghanistan (Kabul) Peshawar
(Bara/Thaurkhum) Lahore and Rawalpindi
– Sri Lanka’s tea also available through Kashmir route
• Monetary worth:
– PKR 960 million

30. Estimated Informal Trade
PKR
Sectors Million
Fruit and Vegetables
Pharmaceutical
Textile
Spices (inculdes tea and spices)
Tobacco items
Automobile
Cosmetic items
Herbal medicine
Jewelry
Paper and paper products
Crocery
Total (Rs million)
Total US $million
Total US $billion

31. FDI in India: Prospects for Pakistan

32. Pakistan’s Outward Investment Flows
• Pakistan to UAE: USD 670 million (FY 2012)
– Annual Increase stands around 33 percent
– Includes investment through routed channel
• Pakistan to Afghanistan: <USD 700 million (FY 2011-12)
• Pakistan to Malaysia: <USD 600 million
• Pakistan to Bangladesh: <USD 30 million (since 2008-09)
• Pakistan to Sri Lanka : >USD 0.15 million (July-Jan FY13)

33. Potential Pakistani Investment in India
Sector Amount (Million US $) Percentage
Textile 1,209 48
Cement 327 13
Hotel and Restaurant 276 11
Services
Auto Sector 202 8
Sugar & Wheat Products 151 6
Banking and Insurance 102 4
Others 253 10
Total 2,520 100

34. Trade-Investment Nexus
• Investment creating trade
– What Pakistan learnt from Investment in Bangladesh?
• Trade creating investment
– What Pakistan learnt from Trade with Sri Lanka?

35. Top 5 FDI Recipient Cities FY 2011-12
US $ Million
9,553
7,983
1,533 1,422
1,001
Mumbai New Delhi Bangalore Chennai Ahmadabad
Source: Department of Industrial Policy & Promotion (DIPP), Ministry of Commerce & Industry, Government of India

36. FDI Flows to Neighboring Regions of Pakistan
FY 2011-12
140 130
120 US $ Million
100
80
60
40 33
20
0
Chandigarh Rajasthan
Source: Department of Industrial Policy & Promotion (DIPP), Ministry of Commerce & Industry, Government of India

37. Sector-specific Observations
• Leather Sector
• Hand-made products require specific labour
• Pakistan can introduce technology
• Capacity building of current leather units in India
• Joint venture in tannery sub-sector

38. Sector-specific Observations
• Engineering (and Auto Sector)
• Pakistan has import demand of raw material from India
• Can increase margins if subsidiaries in India are initiated
• Pakistani producers if in India should be able to access local
subsidies
• Ease the screening process through mutual recognition of
standards
• Due to the large sunk costs involved Pakistani producers want to
access local finance (particularly for working capital)
• Anecdotal evidence of Mittal episode
• Civil interrogation of several types (excessive red tape)

39. Sector-specific Observations
• Surgical and Sports Goods
• Need for a strengthening of competition policies on both sides
for preventing imperfectly competitive practices
• In international market Pakistan selling soccer balls for USD 2.50 versus
India at USD 2.48
• Pakistan also supplies to China however did not physically invest
due to Intellectually Property  specific local technology used in
the production process

40. Sector-specific Observations
• Food Processing Sector
• Containerization through railways
• Demand continuously outpaced supply
• Integrated check post reaching full capacity
• For import of raw material need for enhanced presence of plant
departments on both sides
• City specific restrictions will curtail supply chain

41. Sector-specific Observations
• Social Services Sectors
• Education
• Visa policy for faculty and students
• How many Pakistani faculty members in South Asia University, New
Delhi?
• Difficulty for Pakistani students to open bank accounts
• Registration with national and local education authorities
• Opening up of cellular services, online conferencing and e-
commerce
• Direct courier services missing
• Health
• Expedient visas needed for patients
• Need permission for special private flights
• Secure direct video conferencing protocols

42. Framing of Recommendations
Need to open Investment-specific
Privilege visa regime
investment through Dispute resolution
for investors
automatic route mechanism
Integrating
Labour mobility and transport and
Access to finance
work visas warehousing
infrastructure
Legal cover in the
event of political Double taxation
Currency Swap
upheaval/sovereign issue
Guarantee
How have both countries performed on Bilateral Investment Treaties?

43. Layers of Policy Dialogue
• Board/Ministry of Investment  automatic route of
investment
• Ministry of Industries  Advanced recognition of
standards/inputs and production processes
• Ministry of Interior  synchronizing visa policy with flow of
merchandise
• Ministry of Foreign Office  ensure compliance of above
mentioned

44. Way Forward

45. Trade in Services
– Potential
• Over half of both economies are led by services sector
• Youth bulge will require new services in education, IT and
health sectors
• Growth domestic commerce will fuel demand for
transport, communication and finance
– Issues
• Double Taxation Issue
• Visa Regime

46. Trade in Energy
– Power Sector
• Transmission lines through Wagah-Attari border
• Surplus pockets in Indian Punjab (and downwards)
• Pending negotiations on tariff
– Gas Sector
• Longer term vision required
• Gas pipelines will require security and order in the region
• Pending negotiations on tariff
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47. Commitment at SAARC-level
• Joint techno-economic evaluation of opportunities and
determination of pre-requisites
• Establish financially sustainable energy entities, promote
competition and ensure cost-reflective pricing of energy goods
and services
• Develop project-specific legal/institutional arrangements
• Seek advice and support from multilateral institutions
particularly in drawing experiences from Southern Africa Power
Pool, Nordel/Nord Pool and electricity trade in Europe
47

48. SAARC Energy Supply Chain
Efficient
Petroleum Infrastructure energy
products development markets
Trade in Decentra
power lized
electricit
y
solutions

49. Thank You
vaqar@sdpi.org
www.sdpi.org, www.sdpi.tv 49