Pakistan holds trade show in India, but obstacles remain

NEW DELHI, (Reuters): Showcasing gourmet chefs and catwalk fashion, Pakistan unveiled a trade fair last week in India’s capital as commercial ties between the nuclear-armed rivals begin slowly to bloom.

Despite a combined population of 1.4 billion people and thousands of years of shared history and culture, cross-border trade between India and Pakistan is paltry - a legacy of three wars since their independence from Britain in 1947.

The show opened days after President Asif Ali Zardari made the first visit by a Pakistani head of state to India in seven years, and serves as the backdrop to talks between their trade ministers, who will open a border trade post on Friday.

But long-standing Pakistani frustration about India’s “non-tariff barriers” also surfaced - in particular the achingly slow clearances for goods to be shipped across the border. Pakistan’s commerce secretary told Reuters in an interview that Pakistani businesses still thought they were being unfairly treated.

Liberalising heavily restricted trade and investment flows has become a driver of peace efforts between the neighbours, whose fragile relations were shattered when Pakistani militants attacked the Indian city of Mumbai in 2008.

“Terrorism should not take business hostage,” said Tariq Puri, head of the Trade Development Authority of Pakistan, which is organising the trade fair.

“We are going to give you the soft image of Pakistan,” he told Reuters in an interview.

“When you will enter the hall, you will feel good. You’ll say ‘OK, we had a totally different view about Pakistan, but here you see Pakistan so contemporary, so fashionable, so design-oriented’.”

Musicians clad in orange turbans and green scarves drummed and danced as Indian and Pakistani trade delegates arrived to open the fair.

“Why can’t we, who do not need an interpreter to talk to each other, do much more, and demonstrate to the world, that the state of Pakistan and the state of India have decided to open a new chapter?” India’s Trade Minister Anand Sharma said, as women shopped for designer dresses in the background.

Both sides have trumpeted the improving atmospherics since November 2008, when 10 Pakistani militants went on a killing spree in India’s financial hub Mumbai that left 166 dead and sparked fears of Indian military reprisals.

Ahead of the fair, an Indian government official talked proudly to Reuters of how India had granted visas to more than 600 Pakistanis to promote products ranging from furniture to kebabs.

Among the expected visitors are tycoon Mian Mansha, listed by Forbes magazine as Pakistan’s first billionaire, as well as Pakistani singers and film stars.

Old gripes could be heard though, as exhibitors grumbled that protectionism made it too hard to do business in India.

“Normal duties in the world are 5 to 10 per cent on textiles. In India they are 28 per cent. Plus there are non-tariff barriers which are really ridiculous,” said Bashir H. Ali Mohommad, the chairman of Karachi-based textile house Gul Ahmed.

Less than one per cent of India’s merchandise exports are sold to Pakistan, in terms of dollar value, but in September the two sides pledged to double bilateral trade within three years to about $6 billion.

India welcomed a decision by Zardari’s government, in the face of some domestic opposition, to grant India most favoured nation status in November, which ended restrictions that require most products to move via a third country.

Pakistan expects its neighbour to reciprocate by liberalising its visa regime for Pakistanis, as well as by slashing the bureaucratic red tape that strangles the sale of products from textiles to cement.

“The thing is that Pakistani businessmen are under a very strong impression that they will not get a level playing field in India,” said Pakistan’s Commerce Secretary Zafar Mahmood.

“They did not have the appetite for a normal trading relationship. That is still the case. We are bringing those mental reservations down.”

Indian restrictions on the movement of Pakistani nationals mean that, for example, business leaders coming to the Indian capital New Delhi would first need to ask for permission to cross into the neighbouring business hub Gurgaon, he said.

In “such a kind of atmosphere where they have to report to the police station in the evening like a criminal, who can trade?” he said.

On Friday, Sharma and his Pakistani counterpart Makhdoom Amin Fahim will be on the border at Wagah, between the Pakistani city of Lahore and India’s Amritsar, to open a trade post.

This week, businesses are also hoping to strike a clutch of deals including one on Indian machinery to extract rice bran oil and another for India to export tea to Pakistan. For years, Kenya has been Pakistan’s main supplier of tea.

Indian Prime Minister Manmohan Singh, whose government has been rocked by corruption scandals, has targeted lasting peace with Pakistan as a cornerstone of his political legacy.

But decades-old disputes, especially the fate of the divided Kashmir region, cast a shadow over talks. During his meeting with Zardari on Sunday, Singh pressed him to bring to justice the perpetrators of the Mumbai attacks.

“Trade normalisation has created an enabling environment,” said Mahmood, adding that warming commercial ties could pave the way for the two countries to tackle key issues including the fate of disputed Kashmir.