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Beyond the conflicts Trade liberalization

Saying that “competition in business is a blessing, for without it we wouldn’t be motivated to improve” instigates me. Relate it with the current arguments made against Pakistan Indian Trade liberalization!

The economic opportunities lying under cultural and geographic links between Pakistan and India have never been realised in its true essence. The reasons are political tensions, annoyance and mistrust mounted over years. However, to ensure regional progress, trade diplomacy seems to be the viable solution against this arms race. Our arguments are mostly based on the assumption that it would destroy the domestic industry of Pakistan. But while considering it a menace, we neglect a number of historical examples that small economies when opened to big ones have reaped huge financial gains and that trade has always proved to be a shield against war. We are closing our eyes to the cost and benefits associated in trading with geographically closest neighbours. Access to the expertise and technology along with a chance to penetrate in a bigger market. Yes, we do have a competition but with our fears and then with the Indian Industry.

Let’s take the case of Pharmaceutical Industry, despite the fact that Pakistan’s pharma sector is at par and has shown a tremendous growth in comparison to India over a few years and that there has been a rising demand of Pakistani medicines in countries eg Sri Lanka, Vietnam, Nigeria and Kenya (previously relying more on Indian products), trade between Pakistan and India is a concern. However, this fear is justifiable in terms of mass production capability, exports capacity, low prices and the market penetration techniques of India. Does that mean we may never be able to compete? Will we always enjoy the comfort of protectionist approach?

Recent report by Sustainability Development Institute of Pakistan clearly mentions rapidly growing Pharmaceutical Industry of Pakistan with almost 400 Pharmaceutical manufacturing units including 25 multinationals providing direct and indirect employment’s to over 70,000 and 150,000 people respectively. 80% of the domestic demand is fulfilled with our own sources while rest of 20% is met through imports.

With limited ability to produce special medicines (cancer, lifesaving and biotech products like hepatitis vaccines, other vaccines, Oncology, blood product and AIDS medicine), high cost of production, and high prices, the ultimate sufferers are our consumers. Whereas India enjoys lower labour and production cost, well-established network of laboratories and R&D infrastructure for new drug development, access to pool of highly trained and skilled scientists, both in India and abroad. I am not making a comparison of the industries as we cannot simply do it but if bilateral trade is encouraged, Pakistan and India will enjoy same trade terms as India and China of almost a $100 billion. Opening up trade will have a positive impact on consumers of both the nations with more choice at a lower cost. Moreover the manufacturers can gain benefits by having cheaper raw material and inputs. Governments of both countries will gain advantage in terms of taxes through formalised trade. In particular, joining hands in Research can bring huge benefits to Pakistan.

As a matter of fact, there is lack of interest in local manufacturers of Pakistan to pursue marketing strategies. Local manufacturers mainly rely on the third party marketing and/or direct product selling. In fact we do not lack marketing strategy actually we don’t opt it. Sensing the competition, our pharmaceutical companies will respond to it by adapting the effective marketing strategies. This effort, though forced, will enable us to compete more effectively not only with India but across the globe.

It is said that due to lack of FDA compliance, we are not exporting to the European and North America countries having 75% of the pharmaceuticals global sales and that Pakistan is playing with only 25% of the pharmaceuticals market (CARs, South Asia and African countries). But I say, if we are not realising the full potential of trade with India, we are not even trading with 25% of the world market in its true spirit.

It’s not that opening trade in this sector would benefit without abolishing some of the serious issues our industry is facing, and which reduces our exports potentials for example first we have to make a number of internal modifications eg minimising the delays in licensing of pharma companies in Pakistan, timely issuance of export related certifications and documents.

Open trade paired with foreign investment can prove to be a success story of South Asian Regional Integration. FDI should also be encouraged in Pharmaceutical sector so that India can get access to Central Asian States. Moreover both nations need to focus on the poor masses, which is a challenge across all of South Asia. Let’s hope that the emergency of this realisation sinks in with all stakeholders of this region.

Dr Shimail Daud, "Beyond the conflicts Trade liberalization," Business recorder. 2014-06-22.
Keywords: Political science , Political issues , Political leaders , Social issues , Economic issues , Foreign trade , Pakistan-India relations , Pakistan-India conflicts , Trade , Liberalization , Pakistan , India