Empowerment of Business Community

Exploring Cross-LoC Trade Potential of Azad Jammu and Kashmir

Atiq-ur-Rehman

1: Background

The experience of trade between two parts of the divided Kashmir has been more successful than the expectations. Despite the harsh political circumstances, unavailability of infrastructure and other facilities, and a very short list of tradable items; the current volume of trade is impressive. During October 2008 to November 2011, the total volume of trade across the LoC has been 15,187[1] million Pakistani Rupees of which the goods worth 8,441 million have been exported from AJK to IAK whereas goods worth 6745 million have been imported from IAK to AJK. The average amount of trade per week is close to 100 million Pakistani rupees, with average trade volume of about 150 Metric Tons.

The trade has shown substantial growth despite being on barter terms without proper communication channels, absence of banking system and limited number of trade days as well as tradable goods. In the background of this success, there is an increasing demand of further facilitation of trade across the line. People on both sides of the LoC are asking to open new trade points and expand the lists of tradable items.

At this point, it becomes important to explore the trade potential with currently available trade options as well as the potential if the trade facilities are increased. This study is an attempt to explore the trade potential of the western side of LoC to highlight the economic dividends of softening this line.

2: History of trade through AJK

The analysis of historical record on trade in Kashmir reveals that the intra Kashmir trade links were not very strong in early history. Due to the topography of Kashmir region, consisting mainly of mountainous areas, the trade between different parts of Kashmir was not so easy. As pointed out by Kira[2], wheeled carriages were not available in Kashmir except for few routes. We especially do not find any evidences of significant trade activities between the areas now identified as AJK and IAK. During 18th and 19th centuries, the trade activities of Kashmir grew rapidly. The demand of Kashmiri Shawls increased rapidly in Europe; therefore the count of shawl looms touched 24000 in 1813[3]. Most of these shawls were exported to different cities of sub-continent and Europe via Srinagar, Muzaffarabad, and Rawalpindi route.

However, the role of Muzaffarabad city at that time was that of a gateway. We find some historical snapshots of Muzaffarabad city in Kashmir Gazetteer[4] which reports the situation of Muzaffarabad city in mid of 19th century. At that time, there were about 500 merchants in the city. The Kashmir Gazetteer reports considerable trade of Muzaffarabad with Punjab, but no trade between Muzaffarabad and Srinagar or other cities of Kashmir was reported. Other cities of AJK which are now developed as the trade centers did not enjoy this status a century ago.

The detailed overview of all noticeable towns of the 19th century is available in Kashmir gazetteer. We do not find any significant trade activities between the other cities of AJK and IAK. This does not refer to zero volume of intra-Kashmir trade, however, due to formidable ways of communication between cities and villages of Kashmir; the people of remote areas were bound to utilize their local resources for livelihood and the share of traded items in their routine usage was very small.

However, the two most important trade routes joining Kashmir valley with the rest of the world, i.e. the Srinagar Muzaffarabad route and Jammu Sialkot route passed through the areas now included in Azad Jammu &Kashmir. Therefore, the status of AJK was that of a gateway, linking Kashmir with the rest of world.

3: Role of AJK in recent trade

After partition is 1947, the most frequently used trade route of Kashmir i.e. the Rawalpindi-Srinagar road ceased to function and all the trade activities between Azad Kashmir and Indian Administered Kashmir suddenly disappeared. The trade between two parts of the divided Kashmir got reopened in October 2008 as a continuation of confidence building measures between India and Pakistan. The analysis of statistics of recent cross LoC trade reveals some interesting facts about the trade which are discussed below:

a. The overall trade balance seems to be favoring AJK, contrary to what one would have expected. The total exports of AJK are 8441 million rupees whereas exports of IAK are 6745 million rupees. Thus, the exports of AJK are 25% more than that of IAK. This is despite the fact that in 2010, IAK authorities banned the import of certain items which were previously included in the list of tradable items. For example, Kira reports a ban on the import of Moongi in 2010 which was one of the major exports of AJK[5].

b. There are certain items in the trade list which are being traded in both directions, from AJK to IAK and from IAK to AJK. For example, embroidered cloth items of about 166 million are exported from IAK to AJK and same amount (of what??) having approximate value of 20 million is exported from AJK to IAK. The data on items with dual directions of trade flow is given below:

 

Exports of IAK

Exports of AJK

Sr. No.

Name of the Item

Price in Millions

Name of Item

Price in Millions

1

Carpets and Rugs

5.7

Carpets and Rugs

348.226

2

Wall Hangings

9.6

Wall Hanging

29.5

3

Namdas

19.7

Namdas

18.7

4

Gabbas

2.8

Gabbas

40.2

5

Embroidered Items

166.725

Embroidered Items

20.079

6

Fresh fruits and vegetables

5213.3

Fresh fruits and vegetables

2006.84

7

Dry fruits including walnuts

1123.528

Dry fruits including walnuts

1808.933

8

Honey

4.8

Honey

110.9

9

Shawls and Stoles

4.7

Shawls and Stoles

13.4

10

Dhania, Moongi, Imli and Black Mushrooms

12.07

Moongi and Imli and Black Mushrooms

1392.4

11

Medicinal Herbs

50.57

Medicinal Herbs

38.989

c. The list of exports of AJK includes certain items which have been considered a specialty of Indian Administered Kashmir for centuries. For example Gabba is among the classic products of the Kashmir valley, yet the exports of Gabba from AJK to IAK are three times more than the imports.

d. Among the exports of AJK, there is a reasonable quantity of items which are either produced or can be produced in AJK. For example, the export of dry fruits including walnut amounts 1800 million rupees and AJK is rich in producing walnuts. The annual production of walnuts is about 30,000 tons[6]. The trade of furniture including walnut furniture has been 2000 million for years and there is a very good infrastructure of producing furniture in AJK.

There are about 226 industrial units in AJK producing furniture mainly the walnut furniture[7]. Similarly Gabbas, Namdas, Medicinal Herbs, Maize and Maize products, Black Mushrooms, Carpets and Rugs, Wall Hangings, Embroidered Items, Shawls and Stoles, are among the items produced in AJK. The experts from AJK have won have won many national competitions in producing Paper Mashie, Gabbas and Namdas[8]. The Black Mushroom is among the precious herbs produced in the Neelum and Leepa valley. Total trade of these items amounts approximately 4000 million rupees which is nearly half of the total trade from AJK side. This does not mean that all of these items were actually produced in AJK rather the local agricultural and industrial infrastructure has the capability to produce these items and if proper care is taken, AJK is capable of producing all of these items locally.

e. It is also important to note that there is reasonable number of traders who are producing goods especially for the cross LoC trade. A perception survey of the traders engaged in cross LoC trade on both sides of the LoC reveals that about 13% traders on IAK side and 18% traders on AJK side claimed to produce/grow various crops especially for the purpose of cross LoC trade. These products include embroidered items and fruits[9].

These observations have important implications regarding the future development of trade in the region. For example:

i. Despite the fact that AJK is a tiny mountainous territory with low productivity in agriculture with under developed industrial setup; the volume of trade from AJK is encouraging.

ii. The exports of AJK include certain items which are considered as a specialty of the IAK. For example, IAK has been famous for the production of shawls for centuries. Despite this fact, the ratio of the export of shawls from AJK and IAK is 2.85 to 1 respectively. This trade is possible only if the shawls exported from AJK are of a good quality and are sold at a competitive price.

iii. IAK is a big market of the goods that are produced/ producible in Azad Kashmir and it does not matter if the same item is also produced in both parts of Kashmir.

iv. Producing for exports is a good experience of the traders from AJK and same can be exercised for others who want to expand the trade with IAK.

v. The role of AJK is not only that of a gateway, the share of products from AJK is reasonable having good demand in IAK.

These implications can serve as a guide for investors who are planning to trade with IAK in future. In fact, IAK is the nearest market for the items produced/producible in Azad Kashmir and offer a great opportunity for the people on both sides of LoC to improve their economic conditions and develop people to people linkages.

4: Role of AJK in future trade

Beside the survey of items being traded currently across the line of control, the purpose of this study is to explore the potential of trade in Azad Kashmir that can be explored in future. The role of AJK in future trade can be of two types; (i) a producer and exporter to IAK (ii) a gateway for Kashmir to reach the rest of world.

The possibility of future expansion of trade in these two roles will be analyzed separately. First, we will analyze the opportunities of expansion of trade as a producer and exporter.

4.1: AJK as a Producer and Exporter

In the light of discussion on the current trade statistics, the expectations about future of trade between two parts of the divided Kashmir are quite optimistic. The trade potential can be better analyzed by dividing the discussion into following categories:

a. Potential of trade with respect to the current list of tradable items

b.Potential of Trade if the list of tradable items is extended. This category can be further divided into two sub-categories

i.The items that are currently being produced

ii.The items that can be produced in near future.

These categories are shown in the following diagram:

The potential of trade is discussed separately for each category in the following paragraphs.

4.1.1: Potential of Trade given the current list of tradable item

If we look at the list of tradable items, we can find following items having reasonable production in AJK.

1. Precious Stones: One of the biggest economic resources of AJK is the production of precious stones. The extraction of many of the precious stones and minerals has not been started yet. However, there are certain stones whose production and exports is already in progress. Among these stones is Ruby, whose reserves are about 50,000 kilograms as per estimates of Azad Kashmir Mineral and Industrial Development Council[10]. With the assistance of UNDP, this stone have been introduced in the World market as “Kashmir Ruby”[11] during the international gem shows held at Tucson, USA, and in the gem markets of Thailand, Switzerland and UK[12].

2. These promotional activities established “Kashmir Ruby” as a highly desirable unique gemstone across the world. Being a big tourist attraction for the people all over the world, IAK can serve as a big market of these stones. Similarly, the extraction and marketing of Marble is already in progress in Azad Kashmir. There are about 50 million ton reserves of Marble in AJK[13]. These reserves are present at a very small distance from Teetwal-Chalyana crossing point at LOC and can be exported to Tangdhar, Kupwara, Baramullah and the rest of Kashmir.

3. Fruits: Most of the fruits in AJK and IAK are common; however the fruits which grow at high altitude are more abundantly available in Azad Kashmir. Among the dry fruits, the walnut export has been promising. Beside walnuts, the cherry produced in high altitude valleys of AJK is famous for its quality and taste. Unfortunately, the preservation technology for this fruit is not available in AJK, and without preservation, life of this fruit is very short. If the arrangement for preservation of cherry can be made, cherry can be an important item in the trade list.

4. Potato: The high altitude valleys are very suitable for the production of potato. The topography and soil of the Neelum and Leepa Valley are quite similar to that of the Kaghan Valley[14]. The Kaghan Valley produces potato in a very large quantity. The production of potato can be increased many times by introducing incentives and providing the required technical assistance. This item can take an important place in the exports of AJK.

5. Vegetables: There are a number of vegetables in AJK having unique quality and taste, not present in the vegetables of other areas. For example Karam, Shaljam (turnip) of the wild vegetables. The exports of vegetables can be increased with little care and attention.

6. Handicrafts: The art of handicrafts in AJK is a descendent of the handicraft of IAK. In 1947 and during the later years, a lot of people migrated from IAK to AJK who brought their tradition of manufacturing with them. These people had not only kept alive the art of handicrafts, but they made several innovations in this art. A large number of these artists are working in markets of Pakistan including Rawalpindi, Sialkot and Lahore, and many of these are residing in various cities of AJK. It is because of these artists that there is a reasonable share of handicrafts in the exports of AJK. Azad Kashmir is equipped with necessary God gifted natural resources and manpower with requisite expertise, therefore the production and exports of the handicrafts can be increased by little care and attention.

7. Gabba/Namda: Despite the fact that Gabba and Namda are considered a typical product of IAK especially Srinagar, a considerable amount of these products is also exported from AJK side. The experts from AJK have been winning national awards in production of Gabba and Namda for many years. With little concern and effort, the production can be increased for which IAK can serve as a big market.

8. Foam and Textile Industries: There are three large scale manufacturing units of Foam mattresses and a number of plastic industries working in Mirpur, Azad Kashmir whose production are currently exported to the northern cities of Pakistan. Since foam and mattresses are allowed to be traded in the current list of tradable items, this item can take an important place in the export list. Similarly, there are a number of textile mills in AJK[15]. Not only the production from these mills can be exported but also these industries can also provide raw material for various exportable items including handicrafts, Gabba/Namda and embroidered items.

4.1.2: Potential of Trade if the list of tradable items is extended

The previous section mentions only the things which are allowed for trade as per existing list of tradable items. There is an increasing demand of the expansion of the tradable items on both sides of the line of control. The following section surveys the items which can be exported to IAK if the list is expanded.

Poultry: The environment of Azad Kashmir is feasible for the poultry farming; therefore a lot of people become engaged in this business. Currently, there are about 770 poultry farms in AJK[16]; this business is emerging as the largest industry in Azad Kashmir. Therefore, the export capacity of this business is also huge. The small scale commercial poultry production is the most suitable and easiest source of income for many rural communities. This area has suitable environment for the establishment of hatchery units along with poultry farms to provide suitable dual purpose poultry breed for both eggs and meat production which could also resist the climate and environmental conditions in AJK.

Livestock: Livestock is an integral part of AJK’s rural economy and more than 88% rural population is directly or indirectly involved in livestock/poultry production. It is not only a tradition for poor farmers but also the main source of livelihood for them. The State of AJK has diversified agro-ecological zones having environment conducive for rearing different livestock. There are two live stock research centers and several livestock advisory/health centers located in AJK which can help in increasing the production of livestock. Therefore, with little concern, awareness and effort, the production of livestock can be upgraded for exports.

Mineral Based Industries

The Kashmir Valley on both sides of LoC is enriched with lot of mineral resources. In past, because of communication problems, these resources could not be explored. Nowadays, the far off valleys on both sides of the LoC are linked with the major cities, making it possible to utilize these mineral resources. Having diversity of deposits on various places, the two sides of LoC can have exchange of these resources to get the industrial output at their doorstep with very low transportation cost. These resources can help in the transition of economy towards industrialization and construction. The detailed analysis for production capacity of cement is presented in this paper, whereas for remaining minerals, only the minerals deposits and their usage are mentioned below.

Cement

For all development projects, cement plays a vital role in construction. Fortunately, extensive reserves of cement material have been found near Muzaffarabad city. The evaluation studies established the fact that about 32 million tons of limestone, 5 million tons shale and 3.5 million tons of gypsum are present in the area. The raw material has been proved suitable' for the establishment of a cement plant having capacity of 500 tons/day for a period of over 100 years.

Other mineral Reserves

Below is a brief survey of the mineral deposits available in AJK and their utility. Only the deposits with initial feasibility study and high utility are being surveyed.

Name

Estimated Quantity

Usage

Graphite

1 million tons

Lead Pencils, Electrical Instruments

Bentonite

4 million tons

Oil drilling, foundry and steel works and oil refining.

Granite

289 million tons

Building Stone

Bauxite

5 million tons

High Temperature Firebricks

Fireclay

5 million tons

High Temperature Firebricks

Gypsum

4 million tons

pencil manufacturing, dry battery cells

Source: Investment Opportunities in Azad Kashmir, Department Of Industries & Commerce, Azad Govt. Of The State Of Jammu And Kashmir

Many other deposits which have not been explored yet, are not mentioned in the above list.

Industrial Output:

There are several other industries working successfully in Azad Kashmir, particularly in Mirpur. These include polypropylene, synthetic yarn, motorbikes, vegetable ghee, soap, cosmetics, marble, ready-made garments, matches, rosin, turpentine and scooter industries. The detail of these industrial units is as under:

Name

Nos.

Name

Nos.

Flour Mills

10

Food Industry & Beverage

108

Shoe Industries

02

Paper Mills

04

Scooter/Ricksaw (Vespa)

02

Plastic industries

03

Printing Press

35

Steel re-rolling & Furnaces

08

PVC Pipe

43

Cosmetics

03

Steel Works

174

RCC pipe Industries

32

Source: official Website of Planning and development Department, Govt of AJK

The successful operations of these industries imply that AJK has necessary human resources for operating these industries. Products of these industries are currently exported to northern cities of Pakistan which can be redirected to the other side of LoC.

4.2: Azad Kashmir as a gateway

As we discussed in section 1, the role of AJK in the history of trade was that of a gateway. The routes running through AJK are the shortest routes linking Kashmir with the rest of world. The distance of Srinagar from Delhi is about 876 kilometer whereas the distance of Srinagar from Rawalpindi is about 300 kilometers. Therefore, trade via AJK offers great opportunities to Kashmiris to reach the nearest world class market of Rawalpindi and Lahore via shortest possible route. Kashmiri traders can exploit the price difference between Indian and Pakistani markets if they have access to both the markets. Secondly, opening the access to Pakistani markets will extend the market for Kashmiri products.

Furthermore, the routes to the northern-most areas of IAK including Teetwal, Tangdhar, Karnah, Keran and Gurez valley pass over the high hills covered with thick snow in winter. These areas are delinked with the rest of IAK during winter. These areas are separated in the Neelum Valley, AJK by the Neelum River. These areas can have access to the facilities of life 12 months a year if the residents are allowed to travel across the line of control.

5: Concluding Remarks

The picture of trade potential painted in this article seems to be over-optimistic based on exaggeration. However, when we are talking about the future potential, we must take into account every possibility which is supported by facts and figures. How much of these possibilities can actually be converted into reality, actually depends on the will of leadership and public on both sides of Kashmir.

There are internal and external challenges in converting these possibilities into realities. The internal challenges include difference of priorities of the Govt. of Azad Jammu & Kashmir and the Indian held Kashmir. The external challenges include the passive attitude of stakeholders including the Govt. of Jammu & Kashmir and the Govt. of India. There are evidences of increments in hurdles for trade initiated by authorities on Eastern side of LoC as reported by Kira[17]. The economic and political dividends of cross LoC trade can be materialized only if every new trade related initiative leads to increased facilitation.



[1]Cross-LoC Trade Statistics released by the Trade and Travel Authority, Azad Jammu & Kashmir

[2] Altaf Hussain Kira (2011), Cross-LoC trade in Kashmir: From Line of Control to Line of Commerce, Working paper no. WP-2011-020, Indira Gandhi Institute of Development Research, Mumbai

[3] Zutshi, C. 2004. Languages of belonging: Islam, regional identity and the making of Kashmir. London: Hurst.

[4] Charles Ellison Bates, 1872, A Gazetteer of Kashmir and the adjacent districts of Kishtwar, Bhaderwah , Jammu, Naoshera, Poonch and the Valley of Kishan Ganga.

[5] Altaf Hussain Kira (2011), Cross-LoC trade in Kashmir: From Line of Control to Line of Commerce,

[6]Department of Agriculture, Government of AJK available at: www.pmajk.gov.pk/web/foodProcessing.pdf

[7] Official Website of Planning and Development Department, Govt. of AJK

[8] Daily Times, June 13, 2011, daily Times, March 24, 2012

[9] Peace Building and Economic Potential of Cross-LoC Trade, Perception survey, April 2012,

[10] Official Website of Planning and Development Department, Govt. of AJK

[11] Kashmir Diamond and Gem, http://www.kdng.pk/ruby.htm

[12]Exploration Of Ruby Deposits of Azad Kashmir, Official Website of Prime Minister of Azad Jammu & Kashmir, http://www.pmajk.gov.pk/web/mineralDev.pdf

[13]Official Website of Planning and Development Department, Govt. of AJK

[14]International Potato Center: World Potato Atlas, available at:

https://research.cip.cgiar.org/confluence/display/wpa/Pakistan

[15]Official Website of Planning and Development Department, Govt. of AJK

[16] Official Website of Planning and Development Department, Govt. of AJK

[17]Altaf Hussain Kira (2011), Cross-LoC trade in Kashmir: From Line of Control to Line of Commerce, Working paper No. WP-2011-020, Indira Gandhi Institute of Development Research, Mumbai

Explanatory Note:

This report is authored by Mr. Atiq-ur-Rehman-Assistant Professor at Pakistan Institute of Development Economics-PIDE.

This paper was written in 2012 and statistics mentioned in this study only cover the period from 2008-2011. As of today, the total volume of trade has surpassed one billion dollars but April 2019 onwards, the trade remains suspended. This study is uploaded to revive the debate on the importance of cross-LoC trade and the economic opportunities that it will deliver if allowed to prosper. The study also includes a detailed analysis of the resource and trade potential of Azad Jammu Kashmir. For the young entrepreneurs, this study has all the relevant information on what items to grow and the areas to invest in Azad Jammu Kashmir.


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