Abstract
This chapter discusses trends in services in India and Pakistan and assesses the feasibility of developing trade and investment relations between the two countries in services. In both countries, services contribute significantly to output, but India has outperformed Pakistan on services growth, trade, and investment flows. Competitiveness indicators suggest potential in IT services for India and in communications, transport, and IT services for Pakistan. Services trends in the two countries suggest possibilities for collaboration and commercial relations through various modes of supply, including the potential to collaborate through FDI. However, bilateral engagement in services is currently very limited. It is concentrated in a few areas and differs from the overall composition of their services trade and competitiveness, suggesting the presence of barriers specific to this bilateral relationship.
An examination of specific services captures the prospects and challenges. In IT services, there is a scope to engage through collaboration and tie-ups between Indian and Pakistani firms. In health services, there is a potential for expanding medical tourism trade, cross-border investment telemedicine, and collaboration in research and training. In tourism services, both countries can leverage their social and cultural ties and focus on specific segments and target groups. However, there are numerous challenges to developing bilateral services relations in terms of visas, transport connectivity, the business environment, and political tensions. To move forward, an incremental, confidence-building approach is required, with private sector support along with political will and commitment at the highest levels.
The author is grateful to Kirthiga Balasubramaniam for her research assistance toward this study.
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Notes
- 1.
Since government services account for a very small part of India’s services trade, excluding this segment does not change the composition of India’s services export basket much.
- 2.
Similar bilateral services trade data for India is not publicly available.
- 3.
India, until recently, did not permit Pakistani citizens or entities incorporated in Pakistan to invest in India.
- 4.
- 5.
The discussion in this section is based on P@SHA (2013) http://pasha.org.pk/ict-industry/facts-figures/ and the Pakistan Software Export website, http://www.pseb.org.pk/item/industry_overview.
- 6.
Foreigners coming on an M-visa have to register within 14 days of their arrival with the local FRRO.
- 7.
The Indian Medical Council Act notifies medical degrees from Bangladesh, Nepal, Sri Lanka, and Pakistan under the reciprocal arrangement provision. This means that these countries recognize medical qualifications from notified Indian colleges and universities.
- 8.
According to a leading Indian practitioner, there is scope to institute a regional Medicare system where reimbursements are scheduled transparently and rates are fixed for different procedures and treatments for each country in the region. Medical tourism would also get a boost in the region if regional insurance players recognize payments in each other’s markets and there are bank-to-bank guarantees in the region.
- 9.
Some potential segments would be transplant surgery, infertility medicine, joint replacements, and treatments for cardiac, eye, dental, urological, and gastrointestinal problems.
- 10.
For more details on visa regulations, see High Commission of India in Islamabad http://www.india.org.pk/.
- 11.
The WTO’s Trade Policy review for Pakistan notes that the major remaining investment limitations include the following: poor coordination and collaboration between relevant regulatory bodies, duplication of requisite permissions, inadequate implementation of incentives and their non-competitiveness compared to those offered by regional governments, an improper domestic arbitration framework to resolve commercial disputes, and lengthy and time-consuming judicial procedures. There have been several cases of foreign investors having difficulties enforcing contracts with domestic partners. Investors also remain discouraged by political instability, sectarian violence, weak infrastructure, high crime rates, and corruption. See, WTO (2008) and WTO (2011).
- 12.
SATIS was signed at the 16th SAARC Summit in 2010. Its architecture resembles that of GATS in terms of its provisions, carve-outs, and scheduling modalities. The objective is progressive liberalization of services, with a positive list approach and request-offer negotiations, in line with national policy objectives, the level of development, and the size of the economies.
- 13.
The discussion in this section is based on Chanda (2011), Chapter 10.
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Chanda, R. (2015). Trade in Services Between India and Pakistan. In: Taneja, N., Pohit, S. (eds) India-Pakistan Trade. Springer, New Delhi. https://doi.org/10.1007/978-81-322-1949-1_6
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