Ejaz Mir, a young entrepreneur, lives in a small town at the border of Kashmir, which is divided into an Indian and a Pakistani side. Whenever the tensions between both nuclear powers escalate over their borders, shadows of war and clouds of fear hover over this town.

Since childhood, this young trader has been witnessing shells falling, wounded civilians and the destruction of hospitals, schools and business structures in his surrounding area. However, when in 2002 India and Pakistan decided to establish travel and business links between the two divided parts of Kashmir, after 60 years of lack of communication, he finally regained hopes of rebuilding his stagnant business.

Barter trade

The complexity of these business procedures generates several difficulties for traders.
Mir‘s small firm deals with importing and exporting goods between the Indian and Pakistani regions of Kashmir through trans-border trade. Today, this young entrepreneur deals with a peculiar business method. He sends and receives goods across the border, but no money is involved. The entire business procedure depends on bartering.

The complexity of these business procedures generates several difficulties for traders. India and Pakistan have allowed Kashmiri traders to merchandise only 21 items through the trans-border trading system. They have approved a list of tradable commodities like vegetables, spices, locally-made handicrafts and so on.

Traders say that the governments of India and Pakistan can revoke any commodity from the approved list of products and goods, even if these items have already been transported to the other side of the border. This engenders waste as the material is abandoned, and its owners therefore suffer from important financial losses.

Financial disputes

Traders accuse Pakistani officials of regularly seizing their loaded trucks, thus violating national trade laws.

They allow us to carry out the trade when we pay them kickbacks, but now they have seized our trade goods worth millions of Rupees - complains Ejaz Mir.
Traders have nevertheless shown their willingness to pay any legal tariffs if necessary. “We can pay the government if it introduces any mechanism for the collection of tax”, says Sheikh Walid Rasool, a trader.

Intra-Kashmir trade is one of the confidence-building measures (CBM) that resulted from the 2004 peace agreement between India and Pakistan, which both control the Himalayan state of Jammu and Kashmir.

Traders consider this trade free from any tax or duty which India and Pakistan levy on their international borders. Pakistani trading authorities say that Cross Line of Control (LoC) Trade aims at encouraging trade between the Kashmiri businessmen of Pakistan and India. Therefore, goods of Indian provenance imported through the Cross LoC Trade, must be consumed within the non-tariff area of Pakistani Kashmir and cannot be sold and consumed in the tariff areas of Pakistan.

Communication and logistic barriers

Besides suffering from complex financial and administrative troubles, traders from both countries also face some outrageous communication restrictions in their business dealings. There is a ban on international direct dialling in Kashmir, which impedes traders to talk with their counterparts freely. There are a few hotlines installed in the Trade Facilitation Centre (TFC), but traders’ phone conversations are monitored by government functionaries, who describe it as ‘essential for security purposes’. The lack of free communication causes major strategic business problems and disputes.

Sometimes, these traders suffer from payments default by their counterparts. Sateesh Kumar, who is based in Srinagar, a city in the Indian-administrated part of Kashmir, abandoned his business a year ago when his Pakistani counterpart failed to make his payments:

I can’t chase my defaulter because we don’t have any means for that and there is therefore no possibility of resolving the issue. I would not have to face this situation if they provided us with the possibility to do business through bank or cash payments
In this barter system, traders have no guarantee of equal return and recovery of differential amounts from their counterparts across the LoC. Indeed, some Pakistani traders also complain about similar problems of payment failure. Officials admit that the complex payment system involved in these trading procedures is creating discrepancies amongst the business community.

“Neither India nor Pakistan’s governments have any control over the payment processes, therefore, when these divergences arise, neither of them takes the responsibility to resolve these issues, and this should change,” believes Brigadier (r) Ismail, head of the Travel and Trade Authority.

He supported the traders’ demand of increasing the trade list and the number of trucks to carry commodities.

Currently, the Indian government allows only 25 vehicles from the Taitrinote-Chakan-Da-Bagh crossing point and 50 from Chakothi, Amman (Peace) Bridge. The Indian region of Kashmir has a bigger market and a more important consumption of goods than the Pakistani part, hence traders demand an increase in the number of vehicles from the Pakistani side.

A group of Kashmiri Peace Traders at the Line of Control.

New developments

Trade relations between New Delhi and Islamabad have recently gone through remarkable transformations. Besides trade exhibitions, business-to-business networking and other joint ventures, both governments are considering the possibility of opening bank branches in each other's countries to utilize mutual human and financial resources. However, distrust and fear still prevail when considering geostrategic affairs like Kashmir or information-sharing about nuclear weapons. As a result, India rejected the Pakistani proposal of moving artillery greater than 130 millimetres at least 30 kilometres away from the Line of Control. Indeed, India is still cautious about the alleged infiltration of Pakistani-sponsored militants into Indian-administered Kashmir.

Both countries accuse each other of having violated the cease fire that they agreed to in 2003. Militancy erupted in Indian-administered Kashmir in 1989. India blames Pakistan for fuelling Kashmir’s unrest and sponsoring insurgency in the region. Islamabad denies this and considers Jammu and Kashmir a disputed territory.

The benefits of the Kashmir trading scheme

Trans-LoC trade has contributed to the improvement of social, economic and human ties
In 2011 goods dominated over guns across the Line of Control in Kashmir. The Indian Parliament, which received a deadly attack by militants in 2001, was informed by Defence Minister A K Antony that 68 militants attempted to infiltrate through the Line of Control (LoC) in September and October 2011, as compared to 85 such attempts during the corresponding period in 2010.

On the other hand, the volume of trans-LoC trade increased surprisingly during this period. According to officials from Indian Kashmir, about 8000 trucks crossed over the LoC and 7000 trucks came from the Pakistani side of Kashmir in 2011, compared to 3798 trucks driving down the LoC from the Chakothi border in 2010.

The trans-LoC trade has contributed to the improvement of social, economic and human ties between the divided regions of Kashmir, and has also strengthened Indo-Pak trade realisation.

“It is cultivating seeds of harmony, trust and mutual respect between Pakistani and Indian traders”, maintains Mr. Pawan Anand , President of the Traders Association in Jammu and Kashmir.

“Cross LoC trade has changed the socio-economic status of many people. And we believe it will bring more optimistic transformations in the future.”

Trade has indeed left some positive and hopeful imprints upon the conflict-ridden society of Kashmir, where it is fostering mutual trust and sustainable peace.