Pakistan today welcomed India's decision to allow Pakistani Foreign Direct Investment, saying the move will create goodwill and give a boost to efforts to normalise bilateral relations.
Foreign Office spokesman Moazzam Khan welcomed the Indian government's decision to allow Pakistani investments in all areas except defence, space and atomic energy.
The move will benefit Pakistani investors and industrialists, he said.
We hope this decision will be fruitful for the people of both countries," Khan told the media.
Majyd Aziz, a leading Karachi-based businessman with interests in minerals and shipping, described the Indian government's decision as a "progressive step and a good initiative but not a landmark development".
"Pakistani industrialists are already able to invest in the Indian market through companies based in places like Dubai and Singapore. It will take some time for direct investments to happen," Aziz told PTI on phone from Karachi.
"It would be a landmark development if the Reserve Bank of India removes Pakistan-specific clauses and allows Indian businessmen to invest in Pakistan," he said.
However, he acknowledged that steps like India's decision to allow Pakistani investments would eventually lead to the normalisation of relations in all spheres.
A statement issued by India's Commerce Ministry yesterday said the government had reviewed its policy and "decided to permit a citizen of Pakistan or an entity incorporated in Pakistan to make investments in India".
The statement said investments would not be allowed in defence, space and atomic energy, and all propositions would have to be notified to Indian authorities.
Both Aziz and Abid Qaiyum Suleri, executive director of the Islamabad-based think tank Sustainable Development Policy Institute, said India and Pakistan would have to take a series of steps to facilitate investments and trade.
"You have to make the foundations stronger. Why is the focus currently on trade through the Wagah land border? The two sides should allow goods to be shipped from Karachi to Mumbai as it more beneficial for businessmen," said Aziz.
At the same time, the Pakistan government should take steps to reopen its consulate in the Indian financial hub of Mumbai to facilitate businessmen, he said.
Suleri, who has closely tracked India-Pakistan trade relations, said regional economic integration would get a boost if there is connectivity.
"Connectivity includes the visa regime, direct flights between cities like Islamabad and Mumbai and even simple things like cross-border roaming mobile phone services," he told PTI.
"If Pakistani businessmen can go and invest in Bangladesh and Egypt, there is no reason for them not to invest in India if there is the right environment," he said. Suleri described the Indian government's decision as one of a series of "substantial small steps that will improve bilateral relations and regional stability".
He noted that Pakistan had switched to a negative list regime for trade with India in the run-up to giving the neighbouring country Most Favoured Nation-status. "All this will lead to the broader goal of SAFTA, where we should be looking at things like a 'made in South Asia' tag instead of competing in producing similar products," Suleri said.
The decision to accept FDI from Pakistan was taken in April when the Commerce Ministers of the two countries met in New Delhi. They also discussed ways to ease the visa regime for businessmen and the possibility of allowing banks from both countries to open branches.
Official bilateral trade is a little more than $2 billion though unofficial trade through third countries is estimated at about $10 billion.