**There is a need to support trade facilitation to complement the trade liberalization (e.g. removal of the delay in payment between exporter and importer by introducing online banking, acceptance of digital signature on cross-border trade documents, etc.).** Trade facilitation landscape of the region is not impressive when one considers ‘behind the border’ issues. Among the major causes of high trade transaction costs are the number of cumbersome and complex cross-border trading practices, which also increase the possibility of corruption. Goods carried by road are subject largely to transshipment and manual checking at the border, which imposes serious impediments to trade. The situation is further compounded by lack of harmonization of technical standards. Significant reductions in transaction costs will be critical to the bilateral trade cooperation’s effectiveness. Therefore, to reduce trade-related transaction costs, governments must collaborate on a trade facilitation agenda that encompasses procedures, regulations and processes that impose costs on cross-border commercial transactions (e.g. customs, standards, movement of people, etc.). Trade facilitation reforms such as the simplification and harmonization of customs procedures or the improvement of border infrastructure and management systems would increase countries’ capacity to trade, and would assist traders in India and Pakistan to compete with or integrate into global supply chains. Such reforms would also increase customs efficiency, improve revenue collection, reduce corruption, promote foreign investment and lower the various transactions costs involved in getting goods to market.

**The CGE modeling simulations in this study show that improved trade facilitation would increase the volume of trade between India and Pakistan by reducing the transaction costs of trade, making exports more competitive and imports less expensive; however, South Asian countries are way behind their global peers in logistics and trading across border measures.** While India has successfully reduced the time taken to export, exporting a consignment in Pakistan still takes about 21days. On the positive side, Pakistan beats India and other South Asian countries with lowest cost of exports in the region. In case of export time, preparation of documents takes most of the times needed for export in South Asia except for Maldives and Nepal where time needed for customs and ports and inland transit, respectively, outweigh document preparation time. Electronic submission of trade documents would reduce the transaction time and cost drastically. Therefore, reduction of transaction time through simplification and harmonization of documentation and electronic submission should be the priority.<sup>22</sup>

**Trade between India and Pakistan is constrained by the poor condition of infrastructure, congestion, high costs, and lengthy delays, and these problems are particularly severe at the India-Pakistan border crossings** . India and Pakistan have 3,323 km of land border that demarcates the Indian states of Punjab, Rajasthan and Gujarat from the Pakistani provinces of Punjab and Sindh. However, they lack adequate trade transportation links.<sup>23</sup> In addition to the

> 22 To support the trade flows between the two countries, India’s Integrated Check Post (ICP) at Attari-Wagh border, inaugurated on 13 April 2012, is a correct step forward. In regards to physical infrastructure, the Wagah bordercontrol facilities must be greatly expanded. Specifically, sophisticated X-ray machines through which trucks can pass quickly should be a top priority, warehousing is needed at Attari, and several new train stations need to be built. On the Line of Control in Jammu and Kashmir, the government should also invest heavily in all forms of tradeenhancing infrastructure.

> 23 Annex 8 provides the existing trade links between India and Pakistan.

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