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What Can <strong>India</strong> and <strong>Pakistan</strong> Do To Maximize the Benefits from <strong>Trade</strong>?<br />
At present, despite being a fast growth region, South Asia barely<br />
attracts any FDI inflows. But MFN status, peace and stability in the<br />
region, the rise of the middle class, favorable demographic trends, and<br />
improved governance should begin to attract FDI inflows.<br />
Increased FDI inflows will help firms in <strong>India</strong> and <strong>Pakistan</strong> exploit<br />
economies of scale through access to an enlarged market, and through<br />
increased specialization from better access to technology. In view of the<br />
bigger market size, MFN status to <strong>India</strong> would attract <strong>India</strong>n FDI to<br />
<strong>Pakistan</strong>, thereby facilitating greater specialization and intra-industry<br />
trade between the two countries.<br />
For example, the export of petroleum products from <strong>India</strong> to <strong>Pakistan</strong><br />
is one aspect of trade relations that will benefit from the new arrangement.<br />
Lakshmi Mittal, an <strong>India</strong>n steel tycoon, is currently constructing a<br />
new oil refinery in the border city of Bhatinda in <strong>India</strong>’s Punjab state, in<br />
association with <strong>India</strong>’s Hindustan Petroleum Corporation. The facility<br />
will eventually have the capacity to supply large amounts of petroleum<br />
products to northern <strong>Pakistan</strong>. Undoubtedly, more FDI flows would<br />
precipitate a huge expansion in the number of new opportunities, such<br />
as Mittal’s initiative, for trade and commercial enterprise in the region.<br />
<strong>India</strong> clearly has a desire for more bilateral investment with its western<br />
neighbor. Recently, based on an estimate provided by Pak-<strong>India</strong><br />
Business Council Chairman Noor Muhammad Kasuri, <strong>India</strong>n investors<br />
have shown a willingness to invest $20 to $50 billion in <strong>Pakistan</strong>i<br />
mining, petroleum, energy, power, and infrastructure projects. The<br />
<strong>India</strong>n private sector has also shown an eagerness to export electricity to<br />
<strong>Pakistan</strong> through the Wagah-Attari border. Additionally, once trade ties<br />
with <strong>Pakistan</strong> are strengthened, opportunities for transformational regional<br />
projects like the gas pipeline between Turkmenistan, Afghanistan,<br />
<strong>Pakistan</strong>, and <strong>India</strong> are likely to become a reality as well.<br />
referenCes<br />
Ahmed, Sadiq, Saman Kelegama, and Ejaz Ghani, eds. 2010. Promoting Economic Cooperation<br />
in South Asia: Beyond SAFTA. New Delhi: Sage Publications.<br />
Baroncelli, Eugenia. 2007. “The ‘Peace Dividend,’ SAFTA, and <strong>Pakistan</strong>-<strong>India</strong> <strong>Trade</strong>.”<br />
In The Challenges and Potential of <strong>Pakistan</strong>-<strong>India</strong> <strong>Trade</strong>, edited by Zareen Naqvi and<br />
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