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Indian traders await Central Asian access after MFN grant
What the euro means for Asia REUtERS
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LAHORE
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IMRAN ADNAN
FTER Pakistan’s decision to award most favoured nation (MFN) status to India by December 31st, businessmen and traders of Indian Punjab are anxiously waiting to get transit access to Afghanistan and entire Central Asia through Pakistan. IndoPak trade experts point out that India had recently initiated talks to get land route access through Pakistan, Afghanistan, Iran, Central Asian Republics (CARs) and Caucasian sea and three countries having already signed agreements. Countries except Pakistan and Afghanistan had already started a process to tie several loose ends related interconnectivity and customs, they underscored. They states that Indian Punjab businessmen believe that if these routes become operational, Punjab would again emerge as manufacturing hub for heavy machines, tools, pharmaceuticals, agriculture implements and textiles. It would help reviving Indian Punjab hosiery industry that compromised its share after free trade agreements with Sri Lanka in early 1980s and Bangladesh recently. They estimate that current trade between the two countries might touch $15-16 billion, if figures of legal, illegal and trade via Dubai or other countries are accumulated. They believe that non-tariff barriers (NTBs) on both sides of the border are main obstacles in liberalising trade between the two neighbours. Experts point out that refusal of trade through land route is one example as out of 1,963 tariff lines only 14 items are allowed to
cross border through land route. Only this barrier increases the cost of freight by over 233 per cent. Despite inefficient infrastructure at Customs Stations at Wagha Border, a 20-foot container crosses border through land route at $300 whereas the same costs more than $1,000 if diverted through sea route, they estimate. A cement exporter discloses that Pakistani cement has huge demand in Indian markets due to its premium quality. But, Pakistani exporters are facing great difficulty in enhancing cement exports with India. Not only Indian port authorities but also Indian bureaucracy and cement industry is creating hurdles in the way of Pakistani exports. He lamented that Pakistani exporters had to bribe Indian Railways officials and contractors to get their wagons unloaded. In a recent conference, Professor Sajal Mathur from Delhi-based Centre for WTO Studies indicated that transit route was one of the components of the WTO-mandated MFN status to all the countries, but in case of India and Pakistan both countries were looking towards transit access with fingers crossed. However, it might not be mandatory for both countries and Afghanistan as it was not a member of WTO. Indian business community believes that if transit route is allowed, Indian Punjab will get back its pre-partition glory as not only Indian Punjab would become industrial hub but also it will get higher revenue receipts, promotion of trade and even manufacturing to feed Pakistan, Afghanistan and Central Asian States, which are witnessing a double-digit growth.
Monday, 05 March, 2012
HE euro should not exist. In a perfect world (run by economists) the euro would never have been created. Sadly, however, the world is not perfect — and it is run by politicians. The result is an entirely dysfunctional monetary union. The Spanish economy has youth unemployment approaching 50 per cent. The Greek economy is in its fourth consecutive year of negative GDP growth and will embark on a fifth year of negative growth later in 2012. Euro area countries have to share a common interest rate and a common exchange rate with Germany — where unemployment is at a 20year low and growth is positive if unspectacular around 2.5 per cent. This is an unworkable situation — what Greece needs is very different from what Germany needs. Will the euro break up? We must hope not. The consequences would be devastating. The social unrest we have today is minor compared to what could take place if the euro were to fragment. As the euro was essentially a political creation, it must be political will that keeps it to-
gether — and it would be wrong to underestimate that political will. So what will happen? Because so much rests on political decision making, the path for the euro area is hard to determine. But it seems highly likely that there will be a recession this year. How bad that recession is depends on what happens to the banking sector. Euro area banks are increasingly reluctant to lend money — and with all the risks that they have been through over the last six months, this is hardly a surprise. Slower bank lending growth will hit some economies particularly hard. Fiscal austerity is being urged by Germany. In the wake of France’s downgrade (and with the UK outside the euro and unlikely to ever join) it is Germany’s voice that is loudest in setting the euro policy agenda. When the slowing credit creation is combined with further fiscal austerity, the consequence is likely to be negative GDP growth. Not all countries will be negative, of course, but Italy, France and Spain all seem likely to see a drop in economic activity. So why do the convulsions of the euro area matter to Asia? There are three reasons why Asian companies and investors need to follow the Euro drama.
The euro bloc is the second largest economy in the world. Over a third of APEC’s exports go to the euro bloc, making it the second most important market for Asia after the United States. If the euro area is to have a recession, falling demand, followed by poor growth, slow demand, then Asia needs to adjust its growth model accordingly. Of course, Asian dependence on export-led growth has faded in the wake of the global financial crisis, but there can be no complacency about exports to the Euro area. Euro financial institutions have been involved in the global economy for decades. Global trade, in particular Asian trade, has been financed by euro area banks. As euro banks retrench and the importance of the home market is emphasised, Asia will have to look elsewhere for funding. That is not to say that alternative sources are impossible to find — clearly, they are not. But it means that Asia must change. Similarly, the euro area as a globally integrated market will have an impact on other economies in the world. The euro bloc is over 20 per cent of US exports outside of the NAFTA trade bloc. The US may not be an export-led economy, but there is potentially an im-
pact from a euro area slowdown on US growth, which in turn has implications for Asia. In a globalised world economy with a complex web of trade and financial links, what happens in Athens can clearly have global ramifications. The wealth of the euro area can be discovered in surprising places (Italy, for instance, is a wealthier country than is Germany). Overall, the euro area is wealthy. Thus, the euro area has a role as an investor in the rest of the world. The political pressure on euro area banks and financial institutions to concentrate their investment efforts in their home markets is increasing. Popular hostility to overseas investment by multinational companies has also increased. Investment from the euro area into Asian stock markets, bonds and companies may well slow in the years ahead. The euro area is an economic mess — but it is a mess that the rest of the world must pay attention to. The slow growth that will accompany euro area reform and the changing relationship between the euro area and the rest of the world will be critical to global economics. Now might be a good time to start taking an interest in euro politics.
Pipeline politics and unreliable partners g
It is ironic that it’s the US, of all nations, that is giving us a tutorial on reliability of partners KUNWAR KHULDUNE SHAHID
M
y word, are we showcasing some guts in the IranPakistan pipeline episode! Hina Rabbani Khar’s riposte to Hillary Clinton’s ‘threats’ over the IP project was not only valiant she even made it sound realistic. Last week the US hierarchy – in a class ROFL moment – labeled the IP pipeline as a “bad idea”. And this week they are touting Iran as an “unreliable partner”…the sheer irony is painfully amusing. The US lecturing about the reliability of partners is like Lucas Papademos giving a tutorial on controlling debt crises or Veena Malik giving instructions on wearing hijaabs. So what is your idea of a reliable partner Mrs Clinton? Someone who doesn’t give a rabbit about your energy shortage? One who can’t stop meddling in your internal affairs and wants you to align yourself dutifully to its policies even if it’s bound to be detrimental for your own self? Or someone who kills innocent soldiers and civilians and then
doesn’t bother to do as much as apologise, for courtesy’s sake? Of the intriguing (read comical) verbiage served up by the US Secretary of State one particular statement stood out. “As we are ratcheting up pressure on Iran, it seems somewhat inexplicable that Pakistan would be trying to negotiate a pipeline,” Hillary Clinton said. With Pakistan finding itself in a deep hole as far as the energy predicament is concerned, fulfilling half of its energy needs via gas and running out of channels to quench the need of the aforementioned gas, is it really that ‘inexplicable’ Mrs Clinton that Pakistan would want to negotiate a pipeline with a neighbouring country that it has friendly terms with? Plus, the alternative that you’ve been giving us, the TAPI (Turkmenistan Afghanistan Pakistan India) pipeline has taken a nosedive into oblivion, primarily because a certain country has ensured that the A in TAPI borders on a war-torn fragile zone and definitely no way near the periphery of safety. The US has also been apparently mulling
over throwing in sanctions over the IP project. This looks clearly an act of frustration, especially after other Asian countries – including chums India and South Korea – have paid no heed to the Iranian sanctions. Although the American media is touting the rebuttal on sanctions as merely ‘tough talk’ meant for the respective publics, and that in reality the countries are taking a more conciliatory path. They flaunt the fact that India has ostensibly begun to look for alternative oil from Saudi Arabia and Iraq as the vindication. Either way what is unquestionable is that barring the European Union that would begin its embargo in July, not many are paying much heed to the US threats. And hence, gradually all their policies that are customarily touted by Washington as in the ‘best interest of the world’, are gradually falling within the ‘because I
say so’ jurisdiction. All the noise that the US has been making over the past couple of months, especially with regards to Iran, both on the IP front and globally smacks of the aggravation of that bully who just
can’t stand the fact that he is not being listened to, and that his ‘subordinates’ have the audacity to choose logic and self-interest in lieu of following the guidelines. And when one comes to think of the debate of the reliability of partners; the most important façade is the fact that if you have your own bases covered and give the national interests their due priority and do not compromise on sovereignty, the reliability of partners becomes a moot question. The writer is Sub-Editor, Pakistan Today. He can be reached at khulduneshahid@gmail.com