India and Pakistan share a 3310 kilometer long border. Despite the fact that both the countries have a great potential to generate massive revenues by a legitimate across-the-border trade, there have always been political problems and obstacles, blocking this opportunity for both the countries. During the last decade, Indian and Pakistani governments tried genuinely to improve the political, social and trading relationships between the two countries. South Asian Trade agreement is one of the steps taken forward in the due course.
In the third meeting of South Asian Free Trade Agreement (Safta) Ministerial Council held on March 3, 2008 in New Delhi, India and Pakistan decided to move forward on South Asian Trade agreement. India also agreed to lift export barrier on Pakistan as soon as possible. Both the countries concluded Safta Agreement in Trade and Services in the meeting. This agreement will lead to amplify trade volume between the two countries. It will also ensure that balance of trade is maintained at an optimum level. Indian authorities also vowed to provide temporary space to aid delivery of Pakistani goods on Indian Wagah Border. India also acquired land to develop infrastructure for better trading of goods and services between the two countries. They are planning to spend by spending Rs1.5 billion on the infrastructure.
Pakistan cement industry has already been enjoying this better trading scenario between India and Pakistan since quite some time. The cement exports to India have increased many folds and Pakistan exported 0.23 million tons of cement to India in just five month. India has also approved the dealing with another 17 Pakistani cement manufacturing companies recently. It was decided that instead of one train, three trains from Pakistan would carry cement to India on daily basis. Pakistan has also upgraded the parking facilities to accommodate more than 300 trucks at Wahga border. The trading volume of cement is expected to grow tremendously in the near future.
Pakistan is looking forward to export garments, food items, electric fans, carpets, surgical instruments and pharmaceutical products to the Indian markets. They proposed 20 items for export and India would make required adjustment to facilitate their export within 60 days. Indian authorities have agreed to hold a "Made in Pakistan" exhibition in India to promote Pakistani exports.
Huge annual capital returns enjoyed by the cement sector of Pakistan during FY 2007 can also be attributed to high demand for its products in the neighboring countries, which consequently pave way for the cement exports. One can also expect this phenomenon in other sectors. If the Indian government removes the obstacle on other industries of Pakistan, they can also benefit from this decision as much as the cement sector did. Companies dealing in garments, food items, electric fans, carpets, surgical instruments and pharmaceuticals are expected to have great improvement in earnings. This improvement will ultimately have its effect on the share prices of the listed companies. Even mere news of a company winning a big export bid can make it a blue chip at the Karachi Stock Exchange. So I’ll definitely keep my eyes open for the corresponding news regarding Indo-Pak trade. Nishat Mills, Kohnoor Textile, Bannu Woollen, Millat Fans, Engro Foods, and Rafhan Maize could be included to my stock portfolio very soon.