The World Bank’s blog recently had a post “India-Pakistan Trade: Making Borders Irrelevant”, also highlighting the creation of the Attari-Wagah checkpoint as a sign of the two countries making serious efforts of removing trade and movement barriers. See my post for more on Indo-Pak border issues.
It also highlighted some recent developments that also point to the two countries being serious about closer relations:
- Pakistan intends to formally give India MFN status by the end of 2012.
- India, which formally granted Pakistan MFN status in 1996 (but maintained barriers) has agreed to reduce its sensitive list of 865 items by 30% within four months.
- India has also agreed in principle to allow Pakistani foreign direct investment in the country.
- Both countries have agreed to allow each other’s central banks – the Reserve Bank of India and the State Bank of Pakistan – to open bank branches across borders to facilitate financial transactions.
The question of closer integration in South Asia remains a crucial topic as South Asia is the least integrated region in the world, despite making significant progress in integrating with the global economy. As Ahmed and Ghani point out, South Asian countries have maintained a higher level of protection within the region than with the rest of the world and the beneficial effects of common cultural affinity, common geography, and potential for trade remain clouded under restrictive policies within the region.
Image source: http://www.outlookindia.com/printarticle.aspx?228212
It definitely is a ‘step ahead’ however if we are to dwell into this issue there are other larger ‘steps’ that need to be taken. The FDI arrangement is valid just for a year as of now. It needs to be a longer time frame to see results. Bank branches across borders (I like).