14 April 2014
On the sidelines of the nuclear summit in The Hague in late March, Pakistani Prime Minister Nawaz Sharif announced that the decision to grant Most Favoured Nation (MFN) trade status to India had been postponed until a new government in India is formed (India's national elections are now underway). The announcement has again dashed hopes of a manifold increase in bilateral trade and economic integration. India has been waiting for more than a decade to get MFN status from Islamabad; India herself granted this status to Pakistan way back in 1996.
India and Pakistan, economically the largest and strongest countries of South Asia, have insignificant trade with one another. The present volume of bilateral trade is a mere US$3 billion; a normalised trade regime could increase that to around US$40 billion. The Sharif Government wants MFN status for India to capitalise on Prime Minister Manmohan Singh's offer of a bilateral trade deal under which, in return, Delhi will grant tariff concessions on 250-300 export items produced by Pakistan's key economic sectors including textiles, cement, surgical instruments and sporting goods.
But as always, Pakistan's dominant military establishment, the self-appointed guardian of the country's national interest, objected to the democratic government's desire to have preferential trade with India.
Leading Pakistan English language daily The News wrote that the government has been 'forced' to postpone MFN for India because of the cold-shoulder attitude by the military. The Times of India, quoting its sources in the Indian Government, wrote: 'In addition to political and security policy, the Pakistan government does not even have the ability to go against the Pakistan military dictates on issues related to economic reforms.' The previous Pakistani government, led by the Pakistan People's Party, actually announced the granting of MFN status to India in November 2012 but was forced to back out by the irreconcilable military.
Pakistan's military, which has directly ruled the country for nearly half of its existence and has always dominated (if not dictated) its foreign and security policies, has consistently prevented Pakistan from improving relations with Delhi, including on trade. Pakistan's intelligentsia cite various reasons, mutually reinforcing, for Pakistani military opposition.
The foremost reason is the over-representation of Punjabis in the military. Punjabis are 57% of Pakistan's population while more than 80% personnel of the military are from the Punjab. The Punjab was one of the two provinces divided at the time of creation of India and Pakistan in 1947. Most of the Muslims killed during the mass migration of that time belonged to the Punjab, creating large-scale ill-will among the Pakistani Punjab against India. So, over-representation of the Punjabis in the military resulted in stringent anti-India policies by the military.
Another reason for the military opposition to free trade with India is its apprehensions that volume of the trade would be directly proportional to good relations between the two countries, which would reduce the importance of the military. Around 0.6 million active service and more than 0.5 million reserve military personnel consume a large portion of the country's budget and a good chunk of its GDP, preventing resources from being allocated to health, education and development. As the military has historically justified its huge size due to the security threat from India, Islamabad's good relations with India, the military leadership think, would raise demands for reducing the size of the military.
An allied reason for Pakistani military opposition to freer trade with India is that good relations would shift power over policy-making from the military to the democratic leadership and civil society.
Pakistan's military is also a big corporate entity, owning huge business enterprises in the manufacturing, real estate, banking, construction and transportation sectors. In her 2007 book Military Inc: Inside Pakistan’s Military Economy, Pakistani writer Ayesha Siddiqa finds that the total worth of businesses and enterprises owned by the military is about US$20.7 billion, making it one of the largest corporate entities in Pakistan. The success of the business enterprises and corporations owned by the military is attributed to its dominance over the country. Therefore, the military elite fears that in case of free trade with India, Pakistan would be engulfed with goods from India, inflicting economic losses on the military.
Apart from Pakistan military opposition to free trade with India, extremist Hindu and Muslim sentiments in India and Pakistan have also stopped the two countries from having extensive economic ties. Yet advocates of sustainable peace have long argued that increasing trade would reduce tension and create the conditions to end political and territorial disputes.
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