Potential Gains From Peace in the Af-Pak-India Region
If peace prevails in the region, the potential for economic benefits for the three countries could be tremendous. According to a study by the Strategic Foresight,(1) a think-tank, based in Mumbai:
India and Pakistan have the potential to increase the current level of trade from $1 billion to $13 billion in 5 years, given the combined population of 1.6 billion and an estimated middle class of over 350 million people with a per capita annual income of over $1,000.
1. An open border between the two countries would legalize an illicit trade estimated to be between $1 billion to $2 billion at present. This in turn would generate additional revenues for both countries.
2. Normalized relationship between India and Pakistan would allow businesses to grow on both sides of the border, thereby giving people a stake in each other’s country and the improved investment climate in Pakistan which, in turn, would allow its GDP growth rate by an estimated 2%.
3. Without open borders, commodities, sugar from Indian Punjab, had to be shipped to Iran before it arrives in Pakistani Punjab, just a few kilometers away. Indian medicine, to cite another example, will have to be shipped to Dubai on the way to Pakistan. Tea is another case of opportunities foregone.
According to a Reuters report, Pakistan imports 150 million kilograms of tea a year, making the world’s third biggest importer. But, less than 4 million Kg, below 3%, comes from India, the world’s biggest producer. Pakistan on is part is one of the largest cotton growers in the world, while India is a traditional importer. Political differences keep them from tapping into each other’s natural advantages.
4. For Afghanistan, due to Pakistan’s restrictions, India’s goods to Afghanistan have to go through Iran and Middle East, resulting in high cost of these goods at the expense of Afghan consumers. If peace between India and Pakistan is established, these goods could be shipped directly to Afghanistan through Pakistan. This would results in lower costs of goods for consumers, increased export and greater job opportunities in all three countries.
5. Normalized relations would also lead to reduced military spending by both Pakistan and India.
According to a comparative study prepared by the Strategic Foresight Group for the International Center for Peace Initiatives (ICPI), Pakistan’s defense budget since 2000 has been 3.9% and India’s has been 2.7% of their GDPs while they allocate only 4% and 6% of their respective GDPs for social development budget. The result, Pakistan ranks 144 and India ranks 127 in the UN’s Human Development Index. Currently these two countries stand among the 15 major military spending nations in the world. According to a paper by the Center for Strategic and International Studies in Washington D.C., a cut in defense spending by both countries could release at least 1% of GDP in India and 2.5% in Pakistan to be invested in education and other social development programs.
The bigger question arising out of this scenario is whether Pakistan and India are willing to forge a working relationship between them rather than treating each other as external enemies? Are they willing to think in economic terms; not in militaristic adversarial terms? Are they willing to treat each other as “friendly neighbors” and push forward mutually beneficial co-existence? At least, that is the majority of the people in these countries expressed in various opinion surveys.