INDIA OPENS DOORS TO PAKISTAN
Allowing FDI will not lead to much investment but give bilateral ties a huge fillip
India has finally allowed foreign direct investment ( FDI) from Pakistan and it is just the opportunity that many Pakistani companies have been waiting for. Pakistan’s richest man, Mian Mohammad Mansha, and his managers are busy preparing investment proposals for India’s banking sector. “Yes, we intend to open branches of Muslim Commercial Bank in India,” says Mansha whose Nishat Group, which deals in banking, textiles, insurance, cement and power, is worth $ 5 billion ( Rs 27,500 crore).
Till the official notification on August 1, Pakistan had been the only country forbidden from investing in India. Pakistani nationals and companies will be allowed to invest in all sectors except defence, space and atomic energy. They will be screened by the Foreign Investment Promotion Board ( FIPB) before they are given the green signal. “We welcome this decision,” says Pakistani foreign ministry spokesman Moazzam Khan.
The two countries have been making concrete efforts to improve relations through improvements in trade. In March, Pakistan’s Ministry of Commerce allowed more goods to be traded with India by switching to the concept of “negative list” that lists around 1,200 items that cannot be allowed for trade compared with the earlier technique of having a restrictive “positive list” of 1,900 items that could be imported. In April, the two nations opened an integrated checkpost at the Wagah- Attari border where the number of trucks that could cross over daily increased from 150 to 600. Pakistan is likely to give India the Most Favoured Nation ( MFN) status by yearend. Getting an MFN status would mean that India would be able to export 6,800 items to Pakistan, up from the 2,000 items currently exported.
Experts in India say this move would be more important in confidence building than actual inflow of investments. “I’m not expecting India to be deluged by investment from Pakistan,” says Rajiv Kumar, secretary- general of the Federation of Indian Chambers of Commerce and Industry ( FICCI). The official bilateral trade between the nations stood at $ 2.7 billion ( Rs 14,850 crore) in 2010- 11 while unofficial trade through third countries is estimated at $ 10 billion ( Rs 55,000 crore). Officials estimate that bilateral trade could reach $ 6 billion ( Rs 33,000 crore) by 2015. “This move is more symbolic,” says Sanjeev Krishnan, executive director of PricewaterhouseCoopers.
Majority of investments are expected in textile, sports, surgical instruments, designer wear, hospitality catering to Dubai and Pakistani tourists and auto components. A few companies have already shown interest in grabbing the India opportunity. United Bank and government- owned National Bank of Pakistan have been given permission by the Pakistan government to operate in India; diversified conglomerate Fateh Group has also applied for permission to invest in the Indian automobile industry. “We think India can prove to be a great opportunity for us,” says Gohar Ullah of Fateh Group, based in Pakistan’s Hyderabad city.
There is much more that needs to be done. The first hurdle is that the Indian Government needs to amend the Foreign Exchange Management Act, 1999. “Only after that can the proposals come in and go to FIPB for approval,” says Saurabh Chandra, secretary of the Department of Industrial Policy and Promotions. SAARC’s Vikramjit Sahney says visa restrictions for businessmen need to be removed between the two countries. The Pakistan- India Business Council has asked the Indian Government to ensure investments of businessmen are secured by providing adequate legal and constitutional cover.
A small step for commerce will be a giant leap for bilateral relations between the two countries.