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Pakistan and India to boost FDI
via Bilateral Investment Treaty

It may sound like a business fable from the Arabian Nights, but lots and lots of investors are talking about Pakistani FDI going to India. And, Indian investment coming to Pakistan under their new Bilateral Investment Treaty, or BIT.

Pakistani FDI inflows into India will be preceded by much bigger two-way trade by late-2012-early 2013. Similarly Indians plan to invest in Pakistan under the proposed BIT. New Delhi has officially allowed Pakistani FDI into India for the first time in 64 years when these two countries won freedom as a result of the British India. Modalities and details of terms and conditions are yet to be fully unveiled.

What prompted India to open up for Pakistani FDI?

Sheer business acumen and foresight that it will boost trade, which means a still bigger push to Indian exports to Pakistan, opening up possibilities of joint ventures, and gaining benefits of economies of scales of production and marketing in a market which is one billion plus.

Above all the two people will enjoy “a peace bonus.” It also means massive savings in freight, insurance and handling costs, as FDI — and traded goods and services—move just across the border —17 miles from the second biggest Pakistani city of Lahore to the biggest Indian northern city of Amritsar. The BIT initiative follows the fact that a good deal of Pakistani FDI has been out-flowing into Bangladesh, Dubai, and Malaysia in recent times. Reason? Better business prospects in the new host countries, lower cost of production there, lower interest rates, expanding markets, and using concessions like duty free export quotas from countries like Bangladesh to EU-US.

The latest bout of optimism comes also out of a private initiative by two newspaper organisations — Jang Group of Pakistan and Times of India Group of India. The two governments and their diplomats have contributed a good deal, including promise for easy grant of visas for businessmen. Islamabad will reduce the list of items, banned for import from India. India, in turn, promises to reduce non-tariff barriers (NTBs) on Pakistani products.

Investors, and leaders of the top business organisations who participated in the Lahore session of the two-day Aman-ki-Asha Economic Conference, share this optimism. Rahul Bajaj chairman, Bajaj Auto Limited, said: “Finalisation of the bilateral investment treaty between India and Pakistan will encourage foreign direct investment in both the countries.” In his comments, entitled “Mutual Stakes: Looking Beyond Trade, Towards Investment,” he said “ the business community complains against protectionism and its negative effects on industries and business on both sides. It needs to be addressed in such a way that traders of both the countries are facilitated. We welcome Pakistani businessmen and their investment in India. I assure you the impression that opening the door for Indian investment in Pakistan will not hurt interests of the Pakistani business community. It did not happen when it opened up to China and other countries.”

The key Indian business leaders, supporting FDI and larger trade flows included Adi Godrej, President of Confederation of Indian Industries (CII) and chairman of Godrej Group; Rakesh Bharti Mittal, managing director of Bharti Enterprises; Vikram Singh Mehta, chairman Shell India; Rahul Kansal, executive president, Times of India Group.

Business can be big. Look at this. A few days ago, top Pakistani textile manufacturers took stakes of new summer lawn and lawn dresses for their exhibit in India. Hundreds of fashionable Indian ladies almost raided the exhibition halls and lapped up 95 per cent of all high quality, fashionable and affordable lawn and textile products within two days — a big booster to Pakistan.

Adi Godrej, President of CII and chairman, Godrej Group identified some of the lucrative sectors of growth as excellent for investment. These include: Textiles, agriculture, energy, IT, and healthcare.

Joseph Massey, managing director of Multi-Commodity, said “ an integrated network of markets in South Asian Alliance Regional Countries (SAARC) will help in yielding the maximum benefit of our potential. Linking of capital and financial markets of both India and Pakistan will give a boost to economic activities.”

Muneer Kmal, chairman Karachi Stock Exchange, (KSE), Pakistan’s biggest bourse, said, “KSE and the Bombay Stock Exchange (BSE) are signing a memorandum of understanding, enabling KSE to be listed at BSE.”

Mohammad Ali, Chairman of Security & Exchange Commission of Pakistan (SECP) says, “Pakistan needs investment in infrastructure and Indian investors can benefit from this opportunity.” Other key Pakistani businessmen urging greater FDI and trade flows included: Amin Hashwani, Shahrukh Hassan, Chief of the Jang Group of Newspapers, and, Asad Omar, President, Pakistan Business Council (PBC).

Mohammad Mansha, Pakistan’s richest man, banker and textile magnate, says “ if New Delhi permits me, I will open branches of my Muslim Commercial Bank (MCB) in India today, to finance FDI and trade.” MCB is one of the five Big Banks of Pakistan.

Asad Omar, President PBC said: “In the last three to four months, significant and encouraging movement, for investment. It’s an historic moment. it will be a pity if the conference is not used to convert promise into a concrete potential.” The ball, now, is in the court of both the Indian and Pakistani governments, investors and businessmen. Will they grab it?

Views expressed by the author are his own and do not reflect the newspaper’s policy