Nawaz Sharif’s in-tray is bulging with one pressing domestic crisis after another: a civilian government about to run out of money, terrorists striking at will across the country and widespread electricity outages.
But the prime minister-elect, whose Pakistan Muslim League-N party won the most seats in the May 11 election and will form the next government, may also find an opportunity to kick-start the strong economic growth he promised Pakistanis.
From his hometown of Lahore, the opportunity lies about 25 kilometres east: in India.
Pakistan and India have fought three major wars since 1947. The countries have a running dispute over Kashmir and Pakistan-based militants who carry out attacks on Indian soil. But experts say Mr. Sharif has the drive and the connections to transform a modest $2.4-billion bilateral trade relationship into something approaching $20-billion.
“He, being a businessman, sees that potential intuitively and then his constituency is also going to gain,” said associate professor of economics Syed Turab Hussain of Lahore University of Management Sciences.
Mr. Sharif swept the country’s wealthiest and most populous province of Punjab with the support of industrialists, merchants and traders – interest groups that would stand to gain the most from normalized trade relations with India.
A key step toward normalization would to grant each other “most favoured nation” status, which would commit both countries to giving each other equal trade advantages like low tariffs and removing trade barriers.
Although India granted Pakistan that status in 1996, Pakistani businesses complain that red tape at the border, stringent visa requirements and poor road, rail and storage infrastructure near Lahore are slowing the flow of trade, according to Prof. Hussain.
Pakistan announced in 2011 that it would extend “most favoured nation” status to India, a move that was supposed to see the two countries slash the number of products that were banned from export and exporting specific products across the border, and instead opening wide the gates of trade. But Pakistan did not deliver when the January, 2013, deadline came.
Mr. Sharif, a wealthy steel baron and businessman, has a history of reaching out to India, and is expected to finally officially grant the favoured trade status. As prime minister in 1999, he invited his Indian counterpart to Lahore for historic peace talks between the nuclear-armed countries before he was ousted by the military from power, imprisoned and then exiled.
Trade experts say normalized trade would give Pakistani consumers access to a range of Indian products at cheaper prices than they now pay and would allow the import of Indian technology and equipment that would help improve Pakistani productivity.
But some Pakistani businesses fear that that freer trade will slow their growth. Automotive and pharmaceutical companies have opposed opening up Pakistani markets to Indian companies. And Pakistan’s agriculture industry, which represents 35 per cent of the country’s GDP, is wary of more open trade.
“India heavily subsidizes its agriculture sector. They subsidize fertilizer, pesticides, electricity. So they have an unfair advantage over Pakistan if those particular food products are exported,” said Prof. Hussain.
Lahore-based textile mill operator Rana Imran Haider, who exports raw and finished cotton products to China and India, supports Mr. Sharif’s initiative.
“I believe [the relationship] has to improve – that’s the key to quickest [economic] betterment of Pakistan,” he said.
Mr. Haider said his former U.S. customers, who once represented the bulk of his business, are now too afraid to come to Pakistan because of the deteriorating security situation. And Indian customers account for just 10 per cent of his business. The way to improve his fortunes, in Mr. Haider’s view, lies east, in India, with its population of 1.2 billion and big consumer market.
While security is still a concern, Prof. Hussain said, it won’t derail trade talks and future trade relations.
“Governments would find it very costly if the trade links and economic ties are no more,” he said. “So they won’t be able to reverse the process once you have these strong lobby groups who are deriving benefits from trade, because the cost of reverting back to how things were is going to be very high.”