Trade, can it Herald Peace?

here are my arguments of the benefits to pakistan from free trade in the subcontinent:

1. marketsize: the indian consumer class (roughly defined to mean those who can afford electrical appliances, motorized transport) is i think between 130 million to 150 million. In pakistan, the number is considered to be around 20-30 million. Thus, if a pakistani industry can break into even 10 percent of the indian market, it would have doubled its revenue.

2. globalization: with india emerging as the service center to the world (no kidding!), pakistan gets strategic benefits from joining the bandwagon. trade in services is generally underreported under current accounting systems (even in countries like the US), and its actual impact is far greater than the numbers indicate.

3. economic theory and history: while not getting into specifics, the fact is that there is overwhelming evidence in favor of free trade from economic theory and history. benefits include lower prices (and therefore improved standard of living) for consumers, faster increase in gdp.

4. peace and cultural balance: when nations are trading, the cost of political confrontation is increased. so they dont start finding territorial disputes and other reasons to create tensions. also, mullahs will now have to compete with bollywood actresses for attention.

Bongdong

There are several examples but there is one that has effected me personally very much. In late 80`s and early 90s a Pakistani engineer developed the design and prototypes of all Pak-made motor vehicle - a pick up truck to be exact. By 1990 he started the full scale production of those vehicles. I cannot remember that gentleman`s name or the name by which he marketed his truck at this moment. I was a student at that time and met him personally a couple of times in regards to my research thesis and had detailed discussion on how designed his vehicle etc. Since, it was such an enviable accomplishmment of the resolve of one man, I got emotionally attached to his endeavor and started following his progress. The market price of those vehicles was half that of equivalent suzuki pick-up but gave more horse-power and torque than suzuki. Then a time came that his vehicles were seen often on the streets of Karachi and by the time the first gulf war started his orders reached to Rs. 160 Millions - quite a substantial amount of money at that time. The gulf war coincided with the Pressler amendment and sanctions were imposed on Pakistan for no obvious reason by US - as they usually do with their allies after they have gotten what they wanted. The war and Pressler amendments caused to devastating effects on the economy. The fuel prices sky-rocketted and value of rupee declined sharply. Before war and Pressler the exchange rate was Rs. 11 for a dollar and during and after war it went down to Rs. 26-30 per dollar. Meanwhile Japanese put extreme pressure on Pak government to reduce import duty on its vehicles and also on its local made ones in exchange for financial aid. Not Pakistan, but its rulers were cash strapped and were feeling dry after decade of gobbling up American aid. So they bowed down. The GOP bowed down to japanese pressure which resulted in sharp decrease in the price of diesel powered trucks. In some case the reduction was upto Rs. 200K per vehicle. Pakistan`s first Henry Ford, who started his endeavor with his life savings could not compete with these conditions and a time reached that he went bankrupt. Thus our own government killed our very own henry Ford due to its cowardice, shortsightedness, and greed.

ankit

You are only proving Ahmadzai`s point. Now please explain to me how can we do business witha nation who is brainwashed into beleiving that Pakistani education system teaches k for kafir and j for jehad?

Tauheed at # 34:

You have excellent points in the favor of free trade. However, my concerns remain psychological barriers created by Indian propaganda against Pakistan and Muslims.

ahmedzai #37 thanks. on propaganda, money speaks louder than words. businessmen thrive in times of peace. and no amount of propaganda can fool anyone anyway. thus 50 years of anti-Pakistan propaganda (and anti-India propaganda this side of the border) was forgotten in the last cricket series.

#35

... And if there was trade with India he could have continued to sell in the Indian market. Or he could move his business to India (or atleast threaten to do so).

... Just imagine venture capital from Hero in Ludhiana, components from Gurjaon, design offices in karachi, plants in Ludhiana and Lahore ...

Gazi Urstruely is shaking in his boots fearing bania terrorism from ambani and tata. He can deal with the daalkhor khatri army, but the mere thought of trade and bussiness makes him feel faint. Some bad collective memories from pre-partition days? Come on, let it out. Dont hold back anything (specially the slurs and stereotypes).

Its bad enough having to work in Gary Indiana, or Pontiac Michigan, imagine being forced to work in Detroit of the east ..idli sambhar for breakfast! (Something apropriate in arabic at this point to express disgust).

I have to tell you that all this heated discussion about superiority of Pakistani products or inferiority of Inidan products is mute. Eventually it is the free market that determines who survives and who perishes.

If, just for the of argument, we say that Pakistan`s products are inferior and Indian products superior today, does not mean that they will remain so for eternity. It all happens in cycles.

Having said that, the Pakistanis should be seeing the writing on the wall as far as their education system is concerned. It is broken and needs to be fixed NOW if they are to catch the next wave.

Fine, if Pakistan does not want to trade with India then so be it. I don`t think it affects India one way or another. India has achieved critical mass in many sectors today and its march cannot be stopped. The sooner Pakistan realizes this and changes its attitude from confrontation to cooperation, the better it is for the development of the region. If it insists on continuing the confrontation, it will be detrimental to its people but will not affect India`s progress in any significant way.

Urstruly (2 posts):

Thanks for agreeing. Pakistan will face two psychological barriers:

1. Brain washed mindset as I have pointed out earlier.

2. Mentality of being superior to the rest of the world.

The above two attitudes are demonstrated by Indian contributors time after time.

You are absolutely correct. If we go for the free trade, Indians will dump their products in Pakistani markets. Looking at historical patterns, Pakistani Government will be reluctant in imposing anti-dumping duty, even though its application will continue under such circumstances even under WTO. The situation would be worse than the trade patterns of USA-Japan in late 70s through the 80s. Americans had problems selling thir products in Japan even though they were of better quality and economically priced, primarily because Japanese were psychologically anchored on their own products. However, Pakistan will fare worse, because unlike the USA, we will not have any other advantage (military, market size, international reach, etc.) on India.

more on how the pakistani governments have fu!cked with business (and pardon the courtly language):

1. pakistani banks were number 1 in the developing world in the 1960`s, computerized and aggressively seeking deposits. bhutto nationalized them, and killed the banking sector.

2. man i know started a factory making machine parts for tractors. benazir made a special import of a large number of tractors from abroad (no doubt with kickbacks involved), and local tractor assembly plants came to a halt. since this man`s customers were the local tractor assembly plants, he had to close his factory. since then has wisely switched to foreign markets, since even paki politicians cant fu!ck (oops!) with them.

i could tell you more, much more, about how the pakistani governments and babus in secretatiats have fu!cked (sorry....i just get mad when i think of the damage these rascals have done to the nation) entrepreneurs in pakistan. but that would make this post too long.

re:#34 by tahmed32
``...the indian consumer class (roughly defined to mean those who can afford electrical appliances, motorized transport) is i think between 130 million to 150 million.``
Care to tell us how u arrived at that figure?
I think the real numbers are much higher.
http://www.geocities.com/Athens/Delphi/9158/paper21.html

``Overall size of the Indian market
In the absence of an exact demarcation of the section of the middle class , a brief picture of the overall households and income levels might help to give a clearer idea.
Five household surveys of consumption of selected manufactured consumer goods , each covering around half a million persons were conducted by National Council for Applied Economic Research (NCAER) between 1985-86 and 1993-94. According to these estimates the number of urban households rose from 40 to 42 million while the rural households rose from 102 to 113 million . This reflected a growth of 5% in urban and 10.6% in the rural households. As a percentage of population there were 27% urban households and 73% rural households in 1992-93. This survey suggests that the number of households in the two highest levels income continue to show the maximum growth. Further the growth in the two highest income levels is faster in rural India than in urban India. According to the study the households in the highest income level grew by 181% in rural India in the period 1989-90 to 1992-93 against 37% in urban areas. As a result , the number of households in the high income levels was a little below 2.1 million in urban India and over 1.5 million in rural India , totaling 3.6 million which is around 200 million consumers.
Now using income by itself to define a whole group of people is inappropriate and could be misleading . The purchase patterns provide a better picture.
The NCAER surveys showed that the households in the lowest level of income above the poverty line are also among the buyers of manufactured goods . In 1992-93 they bought 1.85 million transistor radios . 0.68 million small black and white TV sets , 0.67 million pressure cookers , 4.12 million flashlights , 2.46 million bicycles ,5 million wrist watches and over 1.8 million electric fans. Thus even among the low levels of income , there are those that can afford to purchase products of convenience and comfort.
Now if we add the middle income level households of about 65 million , according to the NCAER survey , to the 3.6 million households at the highest income levels as well as the 30 million households in the lowest levels of income described above we arrive at a total of 95 million households or 533 million people which is a huge market by any yardstick. However the size of the class of consumers which constitutes the core market for consumer goods and services vary , depending upon the specific product or service and ranges from 100 - 300 million. ``
In nutshell, the numbers are anywhere between 100 to 300 million and rising rapidly.
http://economictimes.indiatimes.com/articleshow/msid-44003292,prtpage-1.cms?
Sridhar

A point and many mixed metaphors:-

Geographically and politically, we have probably got bigger border disputes in India with China, than we have with Pakistan. We have a history of unresolved conflict. There are subtle and not so subtle interferences in internal matters of both countries by the other. But the relationship is a two-way street, may the best man win.

Pakistan, on the other hand, has an excellent one-way relationship with China. Ceding territory, opening access, bending backwards at every opportunity.

But hey, you know what? Do you see better two-way trade between India and China than you see between Pakistan and China?

I see plenty, upfront in the markets as well information, about Indian goods in China and Chinese goods in India.

I see plenty, upfront and information about Chinese goods in Pakistan, but what Pakistani goods go to China? I asked an Indian who trades with China and he said ``zilch``, there is nothing Pakistani available in China.

+++

Based on a very short visit to Pakistan, as well what little I know by reading and meeting Pakistanis, if I had to make a holistic small self business plan for Pakistan which would not disturb the political and religious worlds too, I would look at the power surplus, the agricultural produce and the dairy/food industry, coupled with the fast roads as well as world markets nearby. Some of the orchards I saw in and around Jhelum/Kharian and Gujran Town/Khan were amazing . . . but I was also told that hardly anything gets exported, even the pears I ate were imported from China!!

Yes, it would need a re-think by the feudal overlords and would bring forth a brand new consuming middle class . . . and if you ask me, in a nutshell, that is what worries the sort who go about from dusk to Dawn, screaming from the top of their 15 rupee newspapers that watch out, the sky is falling with parts of motorcycles imported from India at one-third the price!!

rsridhar #44 These figures (and the argument that I provided with it on the benefits of trade to Pakistan) were given by an Indian businessman to a Pakistani economist who was visiting India on trade related matters. I heard it from the economist when he visited the US last month and met with some of us pakistanis living in the US.

The Indian businessman had given exact figures of 130 million in India vs 30 million in Pakistan (I dont know where he got them from, but these were roughly the figures I had seen kicked around). I had expressed these as a range on chowk since obviously it is impossible to have precise figure. The write-up you provide indicates 200 million in India which it calls ``upper`` group, which is somewhat higher than the figure I had. It then adds lower income groups, to come up with a market of 533 million. But notice that the means of transport for the lower income groups is the bicycle, while I had used motorized transport in my example. So, the numbers are not that much inconsistent, and reflect different segments of the target market. And certainly, if one thinks of things like bicycles and battery cells, the market in India is huge. Just thinking of how much money one could make by selling a shalwar kameez to 1 billion indians makes me wonder what I am doing wasting my time on chowk. :-)


The point of course was not so much the figures, which are illustrative, but the argument: India simply is a huge and growing market, and offers opportunities to all serious businessmen in Pakistan.

not over to me shri veeresh ji -- you refuse to listen -- because you walked about in pakistan i should take your word for who owns tetley in pakistan and disregard an interview of the gentleman who is tetley pakistan`s MD ? you tell me what the facts are veeresh sahib -- your explanation about the santro is nothing more than obfuscation -- you have not responded to the fact that santros in pakistan are made with a joint venture between the dewan group and hyundai in korea -- i never said anything about daewoo --
as for hinopak -- this is from their website --

---

The company started operations in February 1986 and as a result of persistent efforts of the members of Hinopak family in Pakistan & under the guidance of our Japanese sponsors, Hinopak today has achieved standards of quality and excellence that rival the best in the region. In recognition of these efforts, the company has received a number of excellence awards for its management practices and quality standards.

In 1998, Hino Motors Ltd., and Toyota Tsusho Corporation obtained majority shareholding in the company after disinvestments by the other two founding sponsors. This decision to invest in Hinopak at a time when the country`s economy was passing through a depression and the sale of commercial vehicles was at an all time low reflects the confidence our Principals have in our company and their commitment to the Pakistani market.

It is the enduring success of Hinopak that has made the Hino name and symbol of quality & reliability and Hino vehicles a prize possession for its owners.

By continuing to move forward and staying alert to ever-changing market & social needs, Hinopak will continue to be a successful and well-respected corporate citizen of Pakistan

---

on their japan website too, no mention of the hindujas -- in any case, just because they own it doesnt make it an indian company -- mckinsey had or has an indian boss -- is the company indian, shri veeresh ji?

Omar Ji . . . yes, Sir, I often receive press handouts from business entities in India too . . . especially in context with issues pertaining to import content. Now whether I choose to believe them in toto, or seek the truth, is up to me. It does Dawn on me that for some seeking the truth may not be so important . . . an editorial is an editorial, after all, what bearing does it have on the truth?

Tetley Pakistan = Tetley UK = Tata, on that there is no argument. Whether they have an Indian or a Pakistani managing it is of no consequence, and if my Darjeeling Tea has been blended with leaf from Sri Lanka, Kenya and Bangladesh, then so be it. As on date, the single largest movements from the Shalimar ICD in West Bengal of bulk tea in containers is to . . . Pakistan.

Daewoo Heavy/Commercial = Tata, no contest.

Reliance = Flag = aviation fuel, no contest.

The ownership of Iveco, Hino and Ashok Leyland is in the open domain. The Hindujas, who own/control these companies, are British passport holders, for what it is worth. When you get close to a Varan Transport bus in Islamabad, please open the bonnet and get a closer look at the engine block . . . and then take a look at the axles. Believe me, I know a bit about automobile aggregates. I will some day find time to look at the pistons too.

Hyundai in South Korea focused the manufacture of small cars, especially the Santro, to their 100% owned Chennai subsidiary/factory. I had a close look at a new Santro in Pakistan, and apart from the tyres as well as dashboard cluster, the wiring harness as well as alternator were from India. Now whether it says ``Lucas`` or ``Lucas-TVS``, is something again, right, since TVS have the rights to both brand names.

I, for one, salute these joint ventures, howsoever well disguised they may be.

And before anybody blows their top, please be aware that almost 100% of all radiator caps worldwide are now made in India by one company, again, from the TVS Group.

Point is not to be patronising. Point is that if this simple fact were accepted and capitalised on, then cars and buses and motorcycles would be cheaper in Pakistan and trucks would be better painted in India . . . amongst other things.