India-Pakistan Hostility Kills Trade on Kashmir Border

Policemen escorting a vehicle carrying goods from Muzaffarabad, capital of Pakistani-controlled Kashmir, to Uri in Indian-administered Kashmir on Oct. 21, 2008.

On Oct. 21, 2008, a caravan of trucks decorated with garlands crossed a tiny bridge over a stream in Kashmir and made history. Aman Setu, or Peace Bridge, is on the Line of Control, the volatile, disputed border dividing the Indian and Pakistani-controlled parts of Kashmir. The last time a civilian vehicle had crossed that bridge was before India and Pakistan fought their first war over Kashmir in October 1947, before the lines of control were drawn.

The goods trucks, which began their journey in Baramulla in Kashmir Valley, drove 90 kilometers (56 miles) to Chakothi in Pakistan-controlled-Kashmir. A photograph from the last town near the Line of Control in the valley captured the elation of the Kashmiris: Abdul Rehman Shagoo, a businessman from Baramulla, is hanging from the door of his garlanded pickup truck. He wears a sheepskin cap and a wide smile. Mr. Shagoo’s truck, loaded with onions, was one of the first to cross the bridge over the Line of Control.

Five years later, Mr. Shagoo, 72, is a grim, distraught man. Hostilities between India and Pakistan, clashes between their armies on the Line of Control, and rigid, absurd rules have destroyed the trade across the Line of Control and led to massive losses for Kashmiri traders. “We thought it is a great step forward,” said Mr. Shagoo. “But the government policies surrounding the trade have turned many of us into beggars.”

After several years of diplomatic talks aimed at ameliorating relations and moving toward a resolution of the Kashmir dispute, India and Pakistan made the startling decision to run a bus service in April 2005 between Srinagar and Muzaffarabad that allowed Kashmiris on either side of the Line of Control to visit relatives on the other side. In September 2008, the two countries followed it up with a decision to allow trade between the two parts of Kashmir.

A Joint Working Group on cross-Line of Control Confidence Building Measures established the modalities of the trade. The trade was to be conducted on Tuesdays and Wednesdays, and 25 trucks from both sides would cross the Line of Control on each day.  A list of 21 goods that the two sides could barter was made, which included carpets, shawls, sandals, wooden furniture, vegetables, and fruits.

“When the announcement came, the authorities soon told us we can’t give or take money and that we could only exchange goods for goods,” Mr. Shagoo said. “It was an almost impossible proposition, but we went ahead with it, kept it going because of our historical, emotional ties with people on the other side of Kashmir.”

India and Pakistan decided on the medieval system of barter as the mode of trade across the disputed border because no Indian bank has operated in Pakistan and no Pakistani bank has a branch in India since 1965. Between 1947 and 1965, trade relations between India and Pakistan were relatively better. Indian banks operated out of Pakistan, and Pakistani banks operated out of India. After the 1965 India-Pakistan war, the banks were seized as enemy properties. Trade began to die.

India and Pakistan also refused to allow the Kashmiri traders to travel across the Line of Control to meet the businessmen they traded with on the other side of the divide. The deals are made through a relative in the other Kashmir. They make the business arrangements mostly through Skype conversations. Although a small number of traders have been granted visas to travel across the Line of Control, the difficulty of getting a visa makes it a daunting task for small-scale traders.

Men walking past the check point center at the Line of Control in Chakothi, Pakistan-occupied Kashmir, on Sept. 18.

India established a Trade Facilitation Center at Salamabad village in Uri disctrict near the Line of Control. At the trade center, the officials issue a certificate that the goods being traded fall within the agreed 21 categories. Without the certificate, no goods can cross the border. The trade center also approves the goods coming from Pakistan-controlled-Kashmir before a trader from the Indian-controlled-Kashmir can take possession. “Every time, the officials would make excuses, and I had to bribe them with 10,000 rupees to get the goods passed,” said Mr. Shagoo.

Initially the traders made some profits, but the difficult of doing business was followed by diminishing returns. “I took a bank loan against some property I had and started doing the trade,” said Mr. Shagoo. He got a visa and visited Pakistan-controlled-Kashmir, where he entered into a business arrangement with some relatives.

Mr. Shagoo began sending his goods to his business partners in Pakistan-controlled-Kashmir. His business partners took advantage of the distances and lack of communication between them and refused to keep up their part of the barter. He is waiting for them to send the goods they had promised. He has not been able to get a visa to travel to Pakistan-controlled-Kashmir to confront his business partners. “I have lost about 80 lakh rupees (8 million rupees, or $129,704). No goods have come in return. I have been waiting for two years for the goods trucks to arrive, but they have not come,” said Mr. Shagoo. “I live off my wife’s pension.”

Despite its perilous existence within the usually bitter and hostile politics between the two countries, the cross-Line of Control trade has recorded an impressive economic potential over the last five years. According to a report by Conciliation Resources, a nonprofit organization based in London, the trade has continuously grown to register monetary value worth $340 million in four years since its start.

But that potential has been threatened by a recent Indian government order banning every Kashmiri who has a relative on the Pakistan-controlled-Kashmir from participating in the cross-Line of Control trade. The traders came to know of this when on a late August day, Asif Lone, chairman of the Salamabad-Chakothi Trade Union, received a letter at his home in Baramulla from officials at the facilitation center, stating that some traders have been “debarred” from engaging in the trade.

On the following day, he was given the documents of the order issued by the senior superintendent of the Criminal Investigation Department, the intelligence wing of the state police in India, which named the 42 blacklisted traders. The document also listed their addresses and parentage and stated a reason for their ban in the “remarks” section.

One excerpt: “Khazir Mohammad Dar-the subject is aged about 55 years, qualification 8^th and a businessman by profession. There is nothing against him from the criminal/militancy point of view. However, son of the subject namely Mushtaq Ahmed Dar has exfiltrated to PoK in year 1996 and is still there. He is taking care of his trade across. Therefore his name maybe debarred from the traders list.” The list goes on, quoting similar remarks next to each of the 42 names.

“If you had to blacklist people, you should have done that five years ago and made it clear that people who have relatives on the Pakistani side cannot engage in the trade,” a trader based in Baramulla told me. “Then nobody would have done this trade. With whom can we do the trade if we cannot do it with our relatives? We don’t know Pakistanis. Five years ago, the Indian government said that they want to engage young people in it.”

As India claims the Pakistan-controlled-Kashmir as its own, the Indian government views the trade between the two Kashmirs as between two parts of India. And India does not want goods produced in Pakistan to be part of this trade. In August, officials at the Salamabad trade center received an order from the Indian Ministry of Finance that only goods made in the Pakistan-controlled part of Kashmir should be brought into the Indian Trade Facilitation Center as part of the cross-Line of Control trade.

The decision by India’s Ministry of Finance practically puts an end to the trade. According to the Kashmiri traders, Pakistan-controlled-Kashmir does not produce anything radically different from the local produce in Indian-controlled part. Most of the trade across the Line of Control had consisted of goods produced across India and Pakistan.

“If they ban goods that come from rest of Pakistan, then there will be hardly anything left to trade,” Akhter Hussain, a trader based in Baramulla, told me. Mr. Hussain gave up on the cross-border trade after suffering major losses a few years earlier.

The traders allege that issuing of the order has led to more corruption by officials at the facilitation center. There is no mechanism currently in place to determine whether the received goods are from Pakistani-administered Kashmir or not. The officials determine this merely on the basis of doubt. The traders say that many get the clearance by bribing the officials.

The sudden imposition of this rule after five years has shocked the traders. “This is a clear violation of standard operating procedures agreed upon by both the governments when the trade was started,” said Mubeen Shah, the chairman of the Jammu and Kashmir Joint Chamber of Commerce and Industry, the first formal joint establishment across the Line of Control. The procedures of trade, according to agreement between India and Pakistan, cannot be unilaterally amended by either country.

“I personally have a feeling that starting this trade was just a diplomatic gimmick to tell the world that we are doing this,” said Mr. Shah. “It was not about providing a genuine opportunity to Kashmiris that could contribute to peace.”