Trade, can it Herald Peace?

Daewoo-Tata Motorway, surprises I have never heard or read this term before. But yes little children do use the word Ta Ta or Tai Tai. Veeresh ji its time for Juma prayer so Ta Ta i.e. bye. (humm, this word reminds us of our childhood days)

I am a fruit importer-exporter from Pakistan. Impressed by the mouth-watering term of OBPM (One Billion People Market) of India contacted fruit sellers of India. Their response in simple words was ``Pakistani imported fruits are too expensive compare to Indian and here people cant afford them``.

This tiny subdivision of Punjab exports Kinno-Mandarin of worth 35 Million Dollar per annum and this can be increased manifold if Pak Govt. start giving subsidy as Indian Govt. gives to its farms and making their product very cheap.

Our main fruit market were Middle East, Far East and Europe, but now by the grace of Allah, this year we found a new and huge market i.e. Central Asian Republics and Iran. So we fruit exports see no charm in OBPPM (One Billion Poor People Market) of India.

re: asfand
re: Romair

It is better for businessmen from the two countries to instead work together in joint ventures and target the US and European markets (where arbitrage is bigger because of price differentials) instead of cannibalizing each other`s markets and jobs.

If we really want to create a free trade area in South Asia, we must first set up the regulatory infrastructure to ensure that free trade results in overall economic efficiency for both countries. Free trade must be accompanied with an expansionary monetary policy (low interest rates) and a regulatory framework that prevents an Indian firm from entering the Pakistani market... and then quashing all competition. Anti-monopoly policies are also necessary to ensure that free trade results in overall economic efficiency. Trade liberalization is a good thing in the longer run.. but it must be done very slowly and has to be accompanied with a regulatory infrastructure.

Thirdly, it would be a good idea to expand SAFTA to include Iran and Afghanistan. The former has natural gas and oil reserves that can help reduce the petroleum prices in South Asia. The latter has large mineral reserves and can serve as a transit to Central Asian goods. (Given their potential economic benefits, we really shouldn`t be splitting hairs on the question whether these countries are part of South Asia or not).

#96
My response was with respect to your comment:
``While Indians are eager to do business with Pakistan there is little interest in doing business with China``

Have you changed your mind on this point? If yes we can proceed further.

Now with repect to trade distortions/restrictions I dont think there is any doubt that India still remains protectionist to some (large?) extent. There is a whole system of ``countervailing duties`` and India last year initiated 15 anti-dumping actions against China last year. I believe that large parts of this system are illogical and hurts competiveness (internal and exports).

But on consumer goods I think there has been change, there are large number of Chinese consumer goods being sold in India, see:
http://www.atimes.com/atimes/South_Asia/EB15Df01.html

In other areas Chinese imports have caused some major shifts, in the pharmaceutical industry there are large number of small units in the Tarapur belt in Maharashtra and in Gujarat. A lot of these units went out of business, particuarly in the bulk pharmaceuticals sector. I personally was involved with a streptomycin plant that had to shut down. But, the survivors have innovated, they moved to flexible manufacturing constantly moving between several different products.

Similarly, I remember few years there was a big deal about Chinese motorcycles being sold in India, how they would blow away the market with Rs 25,000 bikes. But they could never make a dent in the Indian market on the contrary Kawasaki/Bajaj sells bikes in Indonesia, Phillipines etc. This is not due to any protectionism but because the industry is globally competitive.

I have a Senegalese friend who came back from a trip home and said that buses in Senegal are now made by TATA which assembles them locally. These are slowly replacing the old IVECO/Renault buses (imported 2nd hand from Europe) on the roads there. TATA vehicles are cheap to manufacture and maintain and are built for 3 world roads, India has a wealth of such ``3 rd world oriented`` technology. TATA`s acquizition of Daweoo`s heavy vehicles division is to break into the Chinese market.

So the picture isn`t all black or white with India. About Pakistan I dont have the slightest clue.

``India is definately doing better business with China but on limited list of items``
No, India is doing well on exports to China because of the large demand for raw materials in China. Major Indian exports are steel, iron ore, plastics, basic chemicals. So yes there may be a surplus now but it is not a ``quality`` surplus and quite vulnerable if growth slows in China.

And yes zippers in India too are chinese, happy :-)

Romair 99 . . . this conclusion was arrived at after having observed Pakistan and Pakistanis for the past 25 years.

In addition, this being the land of my forefathers, I think I speak with some amount of first-hand knowledge as well as inputs from those who did live there at one time.

vereesh #98: ``I think Pakistan, with a couple of years of decent governance, could supply a whole lot of products utilising ground level basic enginering skills. Both design and maintenance.``

``I did observe during my short trip to Pakistan, an attention to detail as well as pride in work, on the streets and at ground level.``

Have you done a study on this? Or is this conclusion based solely on some observations you made on the street and at the ground level?

Ranajee #77 . . . as of now, (apart from supplying Pakistani soldiers to be commanded by Indian officers as suggested to me while in Pakistan by more than a few Pakistani soldiers), I think Pakistan, with a couple of years of decent governance, could supply a whole lot of products utilising ground level basic enginering skills. Both design and maintenance.

I did observe during my short trip to Pakistan, an attention to detail as well as pride in work, on the streets and at ground level.

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#89 by asfand

Indian markets are open to chinese goods and indian consumer goods are competing just fine after some initial flooding. In bulk goods (some chemicals etc) chinese imports are far cheaper. Consumers poor quality goods are chinese but good quality are mostly prefered from local companies (brands). The biggest surprise was in steel and ferrous alloys. There is a furious export in that area to China. Also, an interesting thing is even small-time indian manufacturers seem to be opening manufacturing shops in China and becoming expert consultants as shop-setting agents. For example, I know a company, which used to make import sub. chemicals. With globalization, that business went bust, but the company has grown and is thriving with expertize in setting up plants in china. Apparently English really helps when you need to buy phoren machinary, and the chinese (or whoever is setting up the shop in Guandong) are happy to get a firm take care of stuff fast.

Needless to say, poor quality yet expensive local stuff is history.

Bongdongs:

Lets not mention the cave issue here. I love the cave I live in.

Does India has engaged in open trade with China?? In that case you would see even zippers coming from China too. India is definately doing better business with China but on limited list of items. Trade between India and China can not be labled as free trade meaning ``no holds barred`` import export both ways.

Trade between China/Pakistan has less restriction. So in Pakistan you will find zipper that is made in China because it is imported at much cheaper rate then being produced locally.

India is a different story. Yes there is imports from China but with tarrifs and import duties. Just check the prices on VCR, TV and other electronics in local Delhi markets and try matching these with the same items available in Pakistan. You will find huge differences where Pakistani prices are less then Indian prices. This pertains to zippers too.

NOW try competing in this market. As I have said earlier, India definately has an edge over China in certain areas but if you are thinking to sell Indian made VCR or TV or Cell phones AND the infamous zipper (needles included) then you have to come out of your ``cave.``

Try opening Indian market with unrestricted business with China like Pakistan and you will see that only few industries will survive.

Why Pakistan has opened its market to China? Because in Free Trade world the old English saying stays ``Penny wise pound foolish.`` If I can get an item cheaper from outside why should I make it here. USA is prime example. Can usa make the infamous zipper? YES it can but since it is available cheaper from China, lets import it from there.

But does that mean I have to import every thing from China. NO, I have to find an edge on items that I can produce cheaper and better. I f I can do that and surpass Chinese products then that means I now have gained an edge and I can export it to any country engaged in free trade and make money like USA.

So in a close heavily tarrifed market like India people will end up buying bad quality expensive zipper just beacuse India do not want to compete with a superior country and India has less initiative to work hard and smarter. Try exporting that zipper in Pakistan and try to compete with China. The answere again is anybody`s guess.

Now why so many of the multinationals are so eager to do business with India? Simply because it is ONE BILLION people market. AND the market will open up eventually. If India can find an edge by then in industrial market then truely India wins. If not, then just think what all these multinational companies want? Better profits period.

Asfand

Pakistan needs to open up all trade with India. If for no other reason, than because that is the only way Indians will learn enough about Pakistan, to get rid of their biases, and eventually agree to compromise and make peace......

I am not an economist, so I do not know the details of which market in Pakistan will go under if trade happens. But, I don`t think it looks too bad at an abstract level.

Why do Pakistanis feel such an inferiority complex vis-a-vis being driven out of business by Indians? So far, Pakistan has done alright in terms of running private enterprises in South Asia. Pakistan`s experience in privatization started a good 30 years before India`s.

The only are where I have seen India just overwhelm Pakistan, on the basis of natural talent, is the film industry. And that maybe because making films in Pakistan is still considered somewhat of a vulgur profession. While making music is not. And in the later category, Pakistan has done well vis-a-vis India.

Pakistan exports are based on textiles. This year, Pakistan experienced around 15% industrial growth, and 15% export growth. Textile exports should cross 10 billion dollars soon. How does Pakistan compare vis-a-vis India, in textiles? If that area is alright, then the rest of the areas should do ok.

There are two areas due to which Pakistan is bound to benefit far more than India. One is the geographic location of Pakistan, and the second are the large neighboring markets that Pakistan has. India has to go through Pakistan to get access to resources. Much like Pakistan has to go through Afghanistan. Pakistan does not, ``have`` to go through India to get to anywhere important. China and the Central Asian countries have to go through Pakistan also.

So Pakistan is bound to benefit from any growth that occurs in these two countries, even without doing much, just through the pipelines, etc.

Secondly Pakistan has the two biggest markets, China and India, as its neighbors. Just the tourism from India alone would create a boom in the tourism market. And there are bound to be things that Pakistan will outcompete India in. It cannot compete in terms of quantity, but it can, in terms of quality.

Those who underestimate Pakistan`s businessmen need to come take a look at the Agha Khani community in Toronto. I am slowly getting convinced that Agha Khanis, Memon Bhais (and whomever runs the Karachi business community) can outsmart the shrewdest of bania and even Jews.......

If you take the average economic growth from 1947 to today, Pakistan is quite a bit higher than any country in SAARC (not sure about Sri Lanka). And significantly higher than India`s, even though India has always had huge advantages over Pakistan. So I don`t think there is too much to worry about......

86 asfand

You have a point. Whether India can be ``next China`` - only time will tell.

But one thing is for sure - India has a long way to go. It has got mountains to climb. I feel that India hasn`t even scratched the surface. More and much more Infrastructure has to be built in war-footing. Power situation is grim.

Unfotunately - the gov`t that seemed to be doing just that - lost the election......... Naidu - a leader of immense foresight lost too........A guys who promised free power got his place. .....Left parties have become king makers. An political novice paraded by a kitchen cabinet of worthless individuals is slated to become PM.

GOd help India.

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#89

Which cave did you crawl out of?

asfand:
``While Indians are eager to do business with Pakistan there is little interest in doing business with China``

http://inhome.rediff.com/money/2004/may/12china.htm
``India-China bilateral trade is set to establish a new record this year by crossing the $10 billion mark...in 2003, India-China bilateral trade touched a record $7.6 billion...``

And India actually runs a trade surplus with China as opposed to the $1 billion + trade deficit that Pakistan runs with China to keep its master happy.

asfand...i was in india last week and everywhere you go, you see chinese goods being sold at the bottom end of the consumer market from fake gucci bags to fake rolex watches and hey, it suits the low income consumer mighty fine.Before ye say anything , i`m sitting in the middle of 34th st. in Manhattan, ny usa and 2 blocks down they sell the same stuff and people here buy the same stuff and this is supposed to be the world`s richest country.Kudos to the chinese.I don` t see the infux of chinese goods affecting local retailers and manufacturers as in a country of i billion people you have a captive market straddling all stratas of society.And, remember India is not one homogenous lot.It is many countries within one union, each with their own cultures, markets, economies and practices.Pakistan will have to realize that before they can benefit from the economies of scale that a huge country like india can provide, learn about the different cultures of india and how to trade with each state depending on what product or resource to access.Open trade between india and china has benefited both countries without threatening each other`s business base.Ford ikon cars are exported to china from india and chinese 2 -wheeler cos. are trying to access the huge market in india.Such moves only spur competition and keep prices low while increasing quality.India has withstood many lynn carpenter`s to get where it is and she does make some valid statements but that doesn`t mean everything she says is true.There has to be a mix of services and manufacturing along withsound agricultural development to sustain a mimimum QOL for all.

#86

And yet IT salaries rose 15% this year in India, how do you square that circle?

India will dominate at both ends of the scale both $10/hr and at this:

read and weep asfand:

http://www.theregister.co.uk/2004/05/01/intel_whitefield_uncovered/