The Political-Economy of the South Asian Economic Union

anil#87

Pakistan has to make up its own mind on this issue. India cannot persuade it - there just isn`t the level of trust to do so. How can you influence anyone who thinks that you carry a knife under your arm when you sweet-talk?

There are some voices in Pakistan who have started to speak for greater bilateral trade. These are some economists and some vested interests who are potential beneficiaries of greater trade. All India can do is to enter into bilateral agreements with countries who are eager to do business with it and demonstrate to others the benefits of such arrangements.

Arjun_m (#88)

There is no doubt that Belgium does not demand territorial adjustments. That does not mean there were no territorial disputes among the members of EU. They now look so miniscule compared to the benefits. No body wants to disturb the show. You know India can defend its position quite well. Pakistan knows it too, otherwsie there would have been war, right now it is only emotional. Let the benefits of peace dividends and economic growth get in the valley. The realization may happen, after all Indian Kashmiris were indifferent before insurgency there. This is atleast my optimistic view.

Anil

#85 by anil on January 5, 2006 2:31pm PT


When a Belgian becomes the President of EU,


Belgium doesn`t demand Germany hand over Karsruhe to Belgium as a precondition for Belgium being a member of the EU...

Jang (#85)

India is world`s largest producer of cotton. It overtook, the U.S. a few years ago. However, Pakistani cotton is of superios quality, and they are engaged in preferrential treatment for their apparel in trade negotiations with the U.S. and the EU. Therefore, you may be correct how much bigger Pakistan`s cotton industry can grow, but it certainly will grow bigger than what it is right now. It may not dominate in entire South Asia, but probably will dominate Pakistan.

Religion is an emotional problem. I certainly do not have answer for these, as I am quite religion blind, and keep my spiritual values to my personal space. However, religion problems too have been solved in medivial Europe.

The link you gave points to some article on new about a temple in Kerala allowing buddhists to enter.

Anil

Anil Kapuria

#85

can pakistan live with a possibility of a dominant cotton empire called Laxmi Cottons, new ground-breaking pooja-muhurat etc? sri-lanka and inidia dont have the religion problem

http://ia.rediff.com/news/2006/jan/04spec1.htm?q=sp&file=.htm

Dost-Mitter (#79)

``Pakistan, in particular, is wary of conceding leadership to India in any sphere.``

India should respect this aspiration of not only Pakistan but all its neighbors, because Pakistan and others at best can look for symbolic leadership. When a Belgian becomes the President of EU, does not mean the power of Germany, France and the U.K. goes down. The ground realities are known for everyone to see. Especially in South Asian region, India is dominant by a factor of 10. No one - including Indians, if they were on the otherside - would want such a skewed trading block.

Until now market distortions allowed each economy to do everything themselves, however, inefficient that may have been. In alternate scenario, market forces will decide. Pakistan may end up having a dominant cotton industry, Sri Lanka may end up having a dominant tea industry etc. If Pakistan indeed becomes the hub, then it may even have a dominant engergy industry. India can take a lead to show it respects the aspirations of smaller nations. This does not mean India should ever compromise on Kashmir issue beyond what its constitution allows, this is not respecting asprirations, it is appeasement.

``The whole foreign policy and military strategy of Pakistan has been geared towards being able to challenge and checkmate Indian supremacy, not to concede it a leadership role, even if it means incurring considerable costs.``

This is Soviet Union philosophy, which, in less than 80 years, simply disappeared from the face of the Earth. Pakistani leaders also see it. We can have faith on economic forces and modern communcation to bring reality to leaders and massses alike.

From my vantage point, Pakistani establishment seems to be bogged down in dealing with the terrorism originating from its territory and its creation. Leadership on this issue seems to be disconnected from the masses. Masses there do not see Jihadist and Telebanists are terrorists and problems, whereas the Pakistani leaders must act, although in the short term they can seem to be acting, to root out terrorism.

Emotionally, India may be anathema to many Pakistani, but reality is more than emotions, but the grind that disconnect between emotions of masses on terrorism and actions of leaders creates would bring some reality and sense on emotionalism on India. Fro now debt and aid are driving Pakistan`s growth. The collectors will be knocking to collect. If these investments did not fuel the growth and starts giving returns by then, Pakistan will find itself again on the operating table. This to me indicates Pakistan needs more trade and savings than emotions.

Two options as I see are: The war on terror becomes perpetual, and Pakistan becomes perpetually embroilled as the battlefield. Pakistan will be ravaged like any other battlefield during this period. The west - especially the U.S. - is running on the defecit, and cannot finance forever. Neither can Saudis or UAE Sheikhs, there money is tied up in the western economies. They came with the west and will go with the west.

The second option is that Pakistan must emerge on its own, and make the most of the current situation, as democracies have very short memories and indeed move on when their interests shift. Pakistani leaders know it too. In this scenario what can Pakistan do to build its economy. The options are limited to probably three or four. Regional economies and regional trading block is certainly one of them. In my view more sensible one. India may need to cooperate with Pakistan leadership to nudge it away from older thinking, without compromising India`s strategic interests. India is doing that with Sri Lanka quite well.

Anil Kapuria

Indian investment rises after Sri Lanka President`s visit to India
Thursday, January 5, 2006, 12:19 GMT, ColomboPage News Desk, Sri Lanka.

Jan 05, Colombo: Investments worth 564 million US dollars will be undertaken by Indian investors in Sri Lanka this year following agreements signed during the President`s recent visit to India.

Investments will be made on a coal-fired power plant and the manufacture of super phosphate fertilizer.

India will also undertake investments in the modernisation of tourist hotels and the refinement of raw sugar into white sugar. The total anticipated investment is 564 million US dollars.

The Sri Lankan government says that another objective was to target the generation of 100,000 jobs, which in turn will ensure higher salaries.

India doesn`t need Pakiland..Pakiland offers jack..

Conexant Puts $250M in India

The number of semiconductor maker’s employees in India will rise nearly threefold in five years.
January 5, 2006

Conexant Systems, a maker of semiconductors used in broadband communications, enterprise networks, and digital homes, plans to invest $250 million in India over five years, its chief executive said Thursday.


“Over the next five years, Conexant will invest $250 million in India on people, capital, and R&D facilities,`` Dwight Decker told reporters in Hyderabad, India. Mr. Decker is part of an elite semiconductor delegation from the United States attending an industry conference here.

He said the Newport Beach, California-based company, with 775 people in India already, would increase its headcount to 1,200 by March 2007 and 2,000 in five years.

Conexant employs about 750 people in the U.S., but Mr. Decker’s logic is that if two-thirds of the work is done at one-fourth of the cost, the overall cost comes down by half for the company.



Conexant is among those technology firms aggressively following a global-development strategy to lower the costs of development while simultaneously getting better access to scarce engineering talent.

The company has four design centers in different cities across India. Two of them were acquired indirectly because of acquisitions of companies in the U.S.


In November 2005, Mr. Decker told The New York Times that in the first year of large-scale work in India, Conexant had reduced costs by $36 million.

Today there was article in newspaper(The Hindu) that Japan has entered into a FTA with India&China.

now THATS something interesting.can we talk about those kind of deals? i feel that while SAFTA is something that may go a long way in promoting trade between the neighbouring countries,it is being debated too much here on Chowk(especially by fellow Indians).

cmon guys,we can do better than keep rambling here ,as one other member put it in the beginning itself,nobody else(meaning other nationalities) have bothered to post any interacts.

regarding free-trade between pakistan and india, the ball is fully in pkistani court. as far as i can see, there are entrenched bussiness interest..from dawood-ibrahims movie pirating bussiness to auto assemlers, for whom free-trade is end of easy gravy and mafia strength. for smaller bussiness and traders, its major opportunity, but they are not as entrenched in power structure. for common man, its cheap medicines.

so a free-trade deal will come only from a huge political effort. to embark on such a thing, mush needs a symbolic gesture so that he can screw the entrenched with a smile. to indians it smells like a weird blackmail, if you want free-trade, give me kashmir concessions.

one way out is if the small-bussness (traders, hospitality, farmers) lobby gets strong enough, and dawood and his allied mafia meets an encounter.

#78 by Layman on January 5, 2006 5:52am PT

Nothing wrong with that...Sri Lankans are fun people..and India sure as heck doesn`t want pakis or bangladeshis..

the problem is that this only benefits India, not Sri Lanka...Most of the Sri Lankans I know went off to greener pastures i.e. US/Europe/Australia...and not one of them has gone back to Sri Lanka...even after years in the west..

Anil#75:

You are preaching to the choir here!

I am all for free trade in the region and am aware that all countries of the region, including India, will benefit from it and it would also be good for political climate. However, I also think that the smaller countries are unwilling to take the plunge at the present time. Pakistan, in particular, is wary of conceding leadership to India in any sphere. The whole foreign policy and military strategy of Pakistan has been geared towards being able to challenge and checkmate Indian supremacy, not to concede it a leadership role, even if it means incurring considerable costs. Never mind free trade, even normal trade would be a big step forward as it takes place only under win-win conditions. As of now, Pakistan is willing to pay more for a product and service instead of buying it cheaper from India because it considers non-economic benefits to more than compensate for the economic loss. India can do nothing more than what it is already doing, namely, giving unilateral tariff concessions to SAARC countries and entering into bilateral agreements with whatever country is willing to do so, thus demonstrating its benefits to others, as it is doing with Sri Lanka.

#77 arjun_m: ``you`ll end up in a situation where you have sri lankans coming to india to work for Indian companies...not branches of Indian companies in SL``
This should be okay too. What`s wrong in having Sri Lankans coming to India, learning IT and then setting up their own firms in SL. People from all over India come to Bangalore, Hyd, Gurgaon etc for IT work. I am okay with people from SL coming over too. Now, if it were people from our neighbour in the West, I`d be wary :-)

#76 by Layman on January 4, 2006 11:38pm PT


Need to develop resources in Pak, BD, SL.


Been there, done that...with SL..Didn`t work out..they have a decently educated workforce but not enough people with experience in major aspects of an IT org..we had to rush network engineers from India to Colombo because they didn`t have anyone there..until the sri lankan expats start coming back and bringing the talent and skill back to start forming companies, you`ll end up in a situation where you have sri lankans coming to india to work for Indian companies...not branches of Indian companies in SL..

I can think of several areas where India can benefit from more trade with Pak, whether the trade is `free` or not.
1. As Indian economy grows, we will consume more steel, cement, timber etc. China`s rapid scaling up of infrastructure has come about by sucking up steel etc from India and other neighbouring countries. Forests have been denuded in Malaysia etc to meet Chinese demand. If India has to grow like China, we can do with some help through imports from Pakistan.
2. Indian IT industry is already facing severe labour shortage and rising costs. Need to develop resources in Pak, BD, SL. If a company like TCS or Infosys set up branches in these countries, it will be easier (compared to local companies) to get more business.

Regarding the author`s plea for India to take leadership or show magnanimity, please note that Indian cabinet has already ratified SAFTA and we have reduced tariffs effective Jan 1 of this year. Now SAFTA calls upon the developing countries (India, Pak and SL) to reduce tariffs to 5% by 2013 and the least developed countries (BD, Nepal, Bhutan, Maldives) to do so by 2018. India has already gone ahead with unilaterally reducing tariffs, even though Pakistan and SL are yet to do so (India has a FTA with SL, so it may not matter much, but Pak has the opportunity to drag out the tariff reduction process while getting the benefit of unilateral reduction in tariff by India). Also, in terms of the restricted lists, Pak has put in a lot of items that are out of the purview of SAFTA, whereas our restricted list is shorter. This is another advantage that Pak has, due to Indian `magnanimity`.

I would like the author or the readers to suggest in concrete terms what more they want from India. There was an article in the Business Standard on the 4th of Jan that said that India`s FTA with SL, though it does not benefit India all that much economically, has helped it politically because it has created a stake for SL business folks in Indian economy and the anti-bigbrother feeling is reduced somewhat in the past year. India has steadfastly kept its nose out of the SL-LTTE affair, but SL is not happy and wants Indian involvement. In the past, when we wanted to be involved, SL cried big brother. I dont think India can make its neighbours happy much - there will be complaints whether we get involved or not in their affairs - we should not even have that as a goal.

Regarding Bollywood, I am happy with the current state of affairs. Bollywood producers can make money today only from the Indian market or from the Indian diaspora and therefore make movies that cater to our tastes. If the Paki market opened to them, then they would have to cater to that market as well. Pak establishment is also happy with current state of affairs as they are defending Pak ideology by keeping our movies out. Pak people are happy as they are able to view movies anyway on pirated VCDs. It is only Pak theatre owners and Bollywood producers who lose out - so what? Also, as things stand, most Bollywood movies are funded by Indian mafia. Do you want Paki mafia/terrorists to profit from it as well?

Dost-Mitter (#71):

I can think of couple of reasons that you probably did not factor in your equations.

India has achieved world parity in certain products and services (skill surplus services, technology, textile, and automobile parts). Wheras region`s countries, like India in the past, due to distortions in the economic structure, have been relying on inferior products and services and paying higher prices. India can easily provide world class products and services at cheaper prices, if the distortions and barriers are removed. Romair once told me that an engineers trained in Oracle in India are cheaper and more plentiful than in Paksitan.

Skill Surplus Services, Tehcnology, Textile, and Automobile parts are major drivers for India`s GDP growth over the next fifteen years. The free trade in the region will add about 20% more trade to India. India like anyother capitalist economy (now strangely China is included too), can never sit on the laurels that it has enough market and does not need more.

Free-trade will benefit Pakistan and others in the region too. For example, Pakistan`s dry fruit industry in or around Quetta would have benefitted tremendously if it had free access to ten times the market that captive Pakistan provided. The profits would have flowed into this underdeveloped region and growers and processing industry would have developed providing more jobs.

Bollywood is an example of profits from larger market. While Lahore`s film industry is an example of failure of protectionism and banning Bollywood. Infact, they did not ban Bollywood, they banned the competition. As a result Lahore film industry had to create competing infrastructure for 1/10 the market which could yield only smaller profits. If the barriers are removed, Pakistani talent can participate in Bollywood, bring profits and wealth back into Pakistan, and create complementary infrasturcture and profitable industry.

Does this not sound familiar with India`s IT industry, and achieved in less than ten (10) years?

I can give more examples, if you wish, however, absorbtion of Benelux in EU illustrate my point quite well.

The commonwealth of inter-dependent infrastructure to generate more profits and jobs efficiently, all members benefit. The destruction caused by war and acrimonious relations get a limit also. Absorbtion of Eastern European (previously communist) countries is a good case in point.

The signs are in new global economic order for knowledge economy. The transtion rests on the paradigm of creating bigger and more efficient economies. My yard stick for more efficient economy is more profits and more jobs at reduced cost and shorter time. If I can illustrate that old way of thinking is akin to that I want to serve only a small part of the village, even though I can serve the entire village. Why would leave the rest for a competitor to come and potentially destroy you. There are no barriers to entry.

Today, it is like global village, why carry the fracturous lines from the past. Let new paradigm redraw what is the best. Today and tomorrows global village can deliver services, capital and labor even faster than within an older village that was possible only a few years ago. Entire global village can be served, then why would Intel or Microsoft not serve it and leave for the competition. No nation can or society can ignore these changes or the changes will make them obsolete and extinct like Dodo Bird.

Anil Kapuria