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Millennium Post

Engineering LOC unrest

ISI, Pakistan’s internationally networked external intelligence cum espionage agency, may not be working alone to engineer a full-scale escalation of cross-border tension and attack on Indian posts. Events in the last two weeks suggest that there may be a deeper economic conspiracy behind the latest round of diplomatic spat between the two frequently belligerent-looking nuclear-armed  neighbours as the immediate victim of the army actions and political reactions from both the sides is Pakistan’s decision to stop the proposed ‘most favoured nation’ (MFN) status to India.

Both the governments of India and Pakistan have worked hard since 2011 to normalise trade and economic relations between the two countries in the process of addressing bigger and more tenacious issues such as Kashmir and border disputes. The effort had started paying dividends. The trade between the two countries jumped, last year. India is committed to extend economic cooperation to Pakistan in the field of power generation and transmission among a few others. The sudden killings and armed flare-up across the border now threaten to kill these encouraging initiatives, which have potential to affect the well-entrenched business interest of China and the UAE in Pakistan. For instance, Dubai alone is set to lose a transshipment business worth four billion dollars simply re-routing imported Indian goods to Pakistan if India and Pakistan engage in direct trade using the land and sea routes between the two countries Similarly, a normal Indo-Pak trade relation is certain to affect Chinese trade and economic expansion interest in Pakistan. China accounts for almost 20 per cent of Pakistan’s global trade. And, it is expanding. This explains why Pakistan’s trade partners such as the UAE and China are unhappy with improving Indo-Pak trade relations. A disruption in the peace process between the two culturally-cohesive nations is to great advantage of Pakistan’s traditional key trade partners in the region.

The world trade data shows Pakistan-China trade increased by 17.6 per cent to a total of $12.4 billion in 2012. Pakistan’s exports to China increased by 48.2 per cent to only $3.14 billion. Pakistan’s imports from China were up by 9.9 per cent to $9.2 billion, leaving a massive trade gap. Pakistan’s major imports from China include machinery and mechanical appliances, textiles and textile products, metals, chemical products, mineral ores, plastic scrap and transport equipment. Pakistan’s global exports during 2011 were $25.344 billion and its imports were worth $44.012 billion. Thus, Pakistan’s total international trade volume in 2011 was $69.35 billion, or equivalent to 0.18 per cent of the total global trade.

Notably, the bilateral trade between India and Pakistan grew 21 per cent to $2.4 billion, last year. Islamabad reaped the benefits of trade normalisation more than the gains made by New Delhi. According to latest figures with India’s Directorate General of Commercial Intelligence and Statistics, the volume of bilateral trade recorded a net increase of $410 million from April last year to March this year. Pakistan’s exports to India grew 28 per cent while Indian exports to Pakistan increased 19 per cent. The prospect of the direct bilateral trade between the two countries jumping to $6 billion in the next two years appeared very reasonable as both countries decided to treat each other equally. Currently, most of the trade between India and Pakistan takes place via Dubai and its volume is estimated at over $4 billion. The trade normalisation could witness the Indo-Pak bilateral trade soaring up to $12 billion in five years. That could be bad news for both the UAE and China.
 The growth in bilateral trade, especially in Pakistan’s exports to India, reflected the positive effect of a number of steps taken towards fully normalised trade relations since 2011. Last year, the two sides added three bilateral agreements in the areas of customs cooperation, mutual recognition of standards and addressing trade grievances – all intended to further improve the trade environment. Last February, Pakistan took a giant leap forward abolishing the positive list containing only 1,956 tradable items and enforced a negative list of 1,209 untradable items until both sides agree on absolute trade normalisation. Pakistan was expected to abolish the negative list by December last year, but the deadline was missed due to Indian reluctance to address Islamabad’s concerns about non-tariff barriers and resistance by Pakistan’s automobile and pharma sectors.

In fact, Prime Minister Nawaz Shariff, who hails from a top Pakistani business family, had recently said the two countries ‘must sit together with open and clean heart’, even as shelling between the two countries continued on the LoC and the International Border. ‘Let us make a new beginning. Let us sit together to resolve all outstanding issues in a friendly manner and in a peaceful atmosphere,’ he said. Surprisingly, Shariff’s message came hours after Pakistan’s Foreign Office summoned India’s Deputy High Commissioner Gopal Baglay alleging ceasefire violation by the BSF on the LoC.
Earlier, Sharif had said that both sides should work swiftly to shore up a 10-year ceasefire. But, the more currents events across the border are making things extremely difficult for both Shariff and the Indian Prime Minister Manmohan Singh for direct talks on the the subject. It seems Shariff’s good intension has been held hostage by ISI top brass with whom he never enjoyed good rapport. The killings and the shelling have now put under cloud Singh’s earlier proposed meeting with Sharif in New York next month.

The question is: at a time when both India and Pakistan have been seriously looking forward to better bilateral relations and the two prime ministers were keen to confer on the sidelines of the United Nations General Assembly meet next month, what really went wrong to call for such a sudden armed flare-up across the border? Who are engineering it? And, Why? Blaming ISI alone for the act may be too simplistic a judgement given the extremely positive outcome of Indo-Pak economic relations, last year, affecting the business interests of some of Pakistan’s key trade groups. It is only likely that the latter have induced ISI to engineer cross-border killings and infiltration to vitiate the bilateral atmosphere. Both sides need to watch up. IPA
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