Fruitful Economic Ties

Russia is a unique emerging market, in the sense that being the nucleus of a former super power shows more anomalies. How this peculiar emerging market integrates itself into the regional economy is a significant story

Since 1953, when the first trade agreement took place, seven long-term agreements were signed between the India and Russia up to the collapse of the USSR. This bilateral trade as we know was conducted through a specific system of trade and payment, called Rupee Trade System based on annual plans. Important point of the system was payments in non-convertible currency. The trade turnover between the two countries increased from less than Rs. 2 Crores in 1953 to about 8,000 Crores in 1990-91. In 1990-91 more than 16 per cent of Indian exports went to USSR and about 6 per cent imports came from it.

It is evident that Indo-Russian trade has declined substantially in the last thirteen years. There were some signs of an upward swing in the middle of nineties, but this trend was again reversed, partly by financial crisis in Russia. In recent years, bilateral trade with Russia is less than 1.5 per cent of total Indian trade . Only about 1.5 per cent Indian exports enter Russia and only about 1 percent imports come from Russia. Throughout the nineties, trade balance is in favour of India. These statistics, however, do not reveal the full story. Many imports from Russia, particularly metal, metal scrap, fertilizers, paper and paper products are sourced through international suppliers. So they do not reflect in these figures. Similarly many Indian goods enter Russia via "Shuttle trade" or through third countries.

Main items of traditional exports from India are tea, ready-made garments, drugs and pharmaceuticals, coffee, tobacco, rice leather goods etc. Recently some non-traditional items have also shown some growth. The Confederation of Indian Industry (CII) expects Indian pharmaceutical exports to Russia to rise steeply by about 60 per cent in the next three to four years. Traditional imports from Russia include fertilizer, iron and steel, non-ferrous metals, newsprint, synthetic rubber, chemicals etc.

Although it can be argued that under new circumstances, business in both the countries is no more the business of the governments. Therefore, it is up to the private sector to take advantage of conditions created by these agreements. Despite this, these high level visits could have been used more effectively to promote Indian economic interests in Russia. Compare to India, Russians have done good business during these visits. Russia has comparative advantage in arms industry, and India has purchased arms worth billions of dollars during these visits. Four annual summit meetings in the last four years of were good opportunities where some special bilateral economic relationship could have been created, even under entirely different circumstances.

Pakistan:

During the initial years of the emergence of Russian Federation (RF), political issues hampered the materialization of mutually beneficial relationship between the two countries. Yet, during the last 14 years, Pakistan exhibited a keen desire to open a new chapter in bilateral relationship. The visit of the Prime Minister of Pakistan to Moscow in 1998 was an ample manifestation of Pakistan’s efforts in this regard. Later, the President of Pakistan visited Moscow in 2003 to provide a new impetus to these efforts. His visit was especially significant as it was undertaken after the disappearance of political irritants bothering Russian leadership since the emergence of Russian Federation. Also, Pakistan expressed its readiness to address other Russian concerns. The leadership of the two countries has all along expressed the need for enhanced economic cooperation.

The volume of trade between the two countries reached US$ 300 to 400 million during the existence of the Union of Soviet Socialist Republics (USSR) but it has considerably decreased during the post Soviet era. In December 2004, Russian Consul General in Karachi, Mr. Vladimir P. Mikhaylov, addressing members of Pakistan Textile Exporters Association (PTEA) said, Russian imports were only US$ 17 billion against a potential of US$ 60 billion. Bilateral trade between the two countries is unsatisfactory. Pakistan’s exports to Russia are only US$ 20 million and imports from Russia stand at US$ 135 million. PTEA Chairman Mian Faiq Jawed said that, at present Pakistan’s exports constitute only 0.22% of the total imports of Russian Federation. In comparison Russian-Indian trade turnover is estimated to reach US$ 5 billion by 2005.

On the brighter side, Pakistan and Russian Federation have laid the institutional foundations in the form of bilateral agreements for enhancing economic cooperation. During the visit of Prime Minister Nawaz Sharif to the Russian Federation in April 1999, an Agreement was signed between Pakistan and Russian Federation for the establishment of an Intergovernmental Comm-ission for Economic, Scientific, Technical and Cultural Cooperation. Minister for Finance is the Co-Chair person from the Pakistan side. The establishment of the Commission is a step forward. This will help devise a workable mechanism for strengthening cooperation, identifying specific areas and projects for the purpose, and monitoring progress. Projects need to be carefully identified for taking full advantage of this forum. Joint ventures employing Russian technologies or large procurements with repayment through Pakistani goods could be considered.

Russian automobile manufacturers have already visited Pakistan and have expressed keen interest in undertaking manufacture of Automobiles in Pakistan39. The main Russian automobile manufacturers interested in investing in Pakistan are, Lada (to manufacture cars of 1300 cc), Samara (to manufacture cars of 800 cc), Nova group (to manufacture 800 cc cars)40. There is also a proposal by Russian concerns Chelyabinsk and Traktorexport for manufacture of Russian tractors in Pakistan. A delegation of Russian heavy mechanical industry has also visited Pakistan and has explored investment opportunities in Pakistan’s heavy industry. Pakistan is especially interested in their help in upgrading Heavy Mechanical Complex (HMC) Taxila, Pakistan Machine Tool Factory Karachi, value addition to Textile sector, automobile manufacturing with transfer of technology, as well as expansion of PSM.

The Inhibitors

There are several issues which inhibit flourishing of bilateral economic relations. Some of the factors are:

Nepal:

Entrepreneurs from Russia participated in the Nepal Investment Forum held in Kathmandu in November 1992. Some letters of intent were signed at that time. During the days of Perestroika and largely after the collapse of the USSR many Nepalese nationals who had come to Russia as students have started to engage themselves in business. Lately they are trying to gather themselves under the umbrella of Russia (CIS)-Nepal Chamber of Commerce and Industry. The establishment of business organization is a positive step towards the development of bilateral economic relations.

There are some possibilities of trade between Nepal and Russia. In this connection a four members delegation from the National Trading Limited (NTL) led by Mr. Chandi Prasad Shrestha, Chairman of the NTL as well as Joint Secretary at the Ministry of Commerce, Industry and Supplies visited Russia on September 3-5, 2000 in order to explore the possibilities of bilateral trade. Similarly, a business delegation from the Nepal-Russia Chamber of Commerce and Industry visited Russia on September 11-14, 2000 with the same objective. Russian technology on Hydro Electricity and Light and Medium Industries are suitable for Nepal. In recent years some private airline companies of Nepal have purchased Russian Helicopters for civilian purposes. Besides, Russian Chemical Fertilizers and Metals can be available in very competitive prices in Nepal. Nepalese side can export Carpets and Tea in Russia. There is also a long-term potentiality in the field of Tourism. Nepal is participating in some Tourism fares in Russia since past few year.

Many projects were completed in Nepal under the Russian assistance including Panauti Hydro project, Janakpur Cigarette Factory, Sugar factory, Agricultural tools factory, Portion of East-West Highway and some other projects. By 1980s our two countries reached the peak of economic cooperation. Following the disintegration of the Soviet Union in 1991 the assistance from the Russian Federation has been decreased, but we did manage to retain our economic presence in certain spheres.

For instance, Nepalese air companies extensively use Russian Mi-17 helicopters, which proved to be a reliable means of transportation in Nepal. However we have to admit that the potential of the Nepal-Russia cooperation is still far from being fully exhausted.

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