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Tense Pakistan-India relations hampering South Asian economic integration

Published on 25th July, Edition 30, 2016


Strained ties between India and Pakistan have been a major obstacle to make SAARC an effective platform
Pakistan making all-out efforts to increase exports to India

Pakistan believes in transforming ties with India under the tense developing relations between both the neighboring countries and as Pakistan is making steady progress towards economic front, taking it a priority of foreign policy, to have good economic relations among South Asian peers.

Although relations between India and Pakistan have been complex due to a number of historical and political events and the latest atrocities of Indian forces in Occupied Kashmir Pakistan struggles to develop democratically and subsequently regarding its efforts to minimize the chances of war and maximizing the possibilities of economic cooperation with its adversary India, therefore contributing towards possible regional economic development in South Asia.

There is immense need of regional cooperation in South Asia to carry forward such as trade and regional economic development; disaster management and climate change mitigation; and terrorism to peace building effort.

Not a single country can boost its economic, political and social policies. The world today is becoming more and more multicultural. It is a high time for South Asian countries to reinvigorate the role of South Asian Association for Regional Cooperation (SAARC) through mutual cooperation and not through conflict or coercion.

South Asia needs to refocus its attention towards more regional integration and economic cooperation. The climate change effects and the upsurge in extremism and intolerance calls for a combined regional strategy to address the growing challenges that the region is facing.

The role of SAARC has not been satisfactory to address regional matters such as trade, climate change mitigation, disaster management, counter-terrorism or peace building.

Major obstacle to SAARC

The strained relations between India and Pakistan have been a major obstacle to make SAARC an effective platform.

South Asia, in other words, is facing a major problem with integration. Relation between Pakistan and India is seen harming South Asian integration. Sri Lanka, Nepal, and Bangladesh have strongly supported greater regional connectivity.

The extent to which China ought to be integrated in SAARC is to be seen. The countries like Sri Lanka and Pakistan are likely to push for more Chinese influence at SAARC.

Terrorism and violent conflict remains a challenge among many of these states there is absolute lack of coordination in terms of evidence sharing or negotiation on this matter.

The average per annum trade volume of Pakistan with South Asian Association for Regional Cooperation (SAARC) countries had been $5,630.74 million during the last three years.

Less than 5 percent of the region’s global trade takes place. Also, at this level, less than 10 percent of the region’s internal trade takes place under SAARC Free Trade Area. Indian companies are investing billions abroad, but hardly less than 1 percent they (India) investing into the region.

It is through mutual efforts of both Pakistan and India the easier it will be to boost to political and economic ties. The trade, renewable energy and infrastructure investments can help smaller countries in the region to overcome their structural constraints and improve access to larger markets.

Both countries should cooperate in the promotion of small and medium enterprises, agriculture, tourism and culture, research, branding of Basmati rice and visits of business groups.

If the tensions keep growing between Pakistan and India the opportunity for economic development will be lost. It’s high time for ordinary people of these countries to pressure their governments to pursue a policy of peace and economic cooperation instead of conflict and confrontation.

Low integration of Pakistan within South Asia is primarily due to bitter relations with India. Unfortunately, its Pakistan and not India, which is more affected due to unfriendly relations between the neighbors.

Making stronger relations

Pakistan’s increasing isolation within the region, not only on the economic but also on the political front, is already sending negative signals across the globe.

Pakistan and all other countries in South Asia need India as a supplier of relatively cheaper goods and services. Nepal and Bhutan are heavily dependent on India as a trading partner.

India receives almost 58 percent of Nepalese exports and 51 percent of the Nepalese imports come from India. Similarly, almost 59 percent of Bhutanese exports go to India and the latter accounts for a whopping 75 percent of Bhutanese imports.

India and other SAARC countries may consider a ‘small’ SAARC model of integration, one that moves forward with regional connectivity without Pakistan.

A disturbing fact for Pakistan out of this regional aloofness is an already existing sub-regional bloc within South Asia named SASEC (South Asia Sub-Regional Economic Cooperation) of which Pakistan and Afghanistan are not members but all other countries of SAARC are.

Due to proximity, Pakistan is the most favorite and cost-effective market for India in terms of raw material import for their agriculture and textile products.


Pakistan is making all-out efforts to increase exports to India to $1 billion within a year as textile products and readymade garments have a great potential in the neighbor’s market.

Pakistan is the most favorite and cost-effective market for India in terms of raw material import for their agriculture and textile products.

Indian food manufacturers were looking for different Pakistani agricultural products like mangoes and kinnows in specific seasons.

For a long term strategy other agricultural products like green peas could also be exported to India as they run cold storages at a far less capacity of 200,000 tons.

Well-built SAARC

SAARC can become a lively organization and it will be making it more competitive for other regional blocs like Association of Southeast Asian Nations (ASEAN) and North American Free Trade Agreement (NAFTA) etc.

Cross-border trade is especially important for smaller countries and for landlocked provinces/countries, including Afghanistan, Bangladesh, Bhutan, Nepal, Northeast India and Northwest Pakistan.

Climate change is assumed to be a greater threat than terrorism. Bangladesh is considered to be one of the most disaster susceptible regions in the world. Pakistan experienced its worst floods in 2010-11 and 2015 displacing millions and causing colossal damage to life and property. India has also incurred losses due to floods and heat waves in 2015.

Agriculture in the South Asian region with low productivity in agriculture can be a danger to food security. According to FAO, South Asian region has about 40 percent of the world’s hungry.

South Asia remains one of the highest food insecure regions in the world. Individuals lose more than 10 percent of lifetime earnings because of malnutrition.

SAARC has yet to develop institutions like a SAARC Parliament to broaden and legitimize its actions for peaceful resolution of political conflicts.

A large part of their national economy is to defense and military preparedness, especially India and Pakistan. There is the absence of any regional forum to address these issues. As a result hostilities keep growing.

Pakistan relations with others

Pakistan’s trade with Bhutan and Nepal is either minimal or zero. Countries like Nepal and Bhutan are heavily dependent on India as a trading partner. India receives almost 58 percent of Nepalese exports and 51 percent of the Nepalese imports come from India.

About Maldives, Pakistan is not any one of the major exporting and importing partners of the country. On the other hand, India accounts for almost 10 percent of Maldives’ imports.

Both Bangladesh and Sri Lanka have a free trade agreement with India. Both Bangladesh and Sri Lanka trade more with India than Pakistan.

India became the largest trading partner of Bangladesh in 2013. On an average, Bangladesh exports to India have increased 25 percent over the last decade whereas the Indian exports to Bangladesh have increased by 19 percent during the same period.

Moreover, the land trading route between Pakistan and Bangladesh goes through India, so in no way can Pakistan think of using that land route without normalizing relations with India.

India is the largest ‘global’ trading partner of Sri Lanka. Sri Lankan exports to India increased from $58 million in 2000 to $566 million in 2005, depicting a ten-fold increase over a period of five years.

Later years witnessed a decrease in exports till 2009 after which exports again began to increase and reached $567 million in 2012. Although Pakistan also has a free trade agreement with Sri Lanka, still the latter trades more with India.

Afghanistan, which is near with Pakistan and not with India, it has been observed that till 2012, Pakistan was the biggest importer of Afghan goods with an import of 33 percent. India was still importing at a ratio of almost 25 percent from Afghanistan.

However, Pakistan remained the biggest exporter in the world to Afghanistan with an average of almost 26 percent; whereas Indian exports to Afghanistan were almost six percent.


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