THIS week a delegation consisting of heads of leading Pakistani business houses are visiting India. They are being hosted by the Confederation of Indian Industries (CII) and will meet ministers and senior officials of the Indian government.

At the heart of their conversations is an intriguing and innovative proposal — the formation of a joint business council that can act as a dispute-resolution body for Indian and Pakistani businesses engaged in bilateral trade.

This marks a genuine departure from the traditional reliance on bureaucracies and is a significant step forward in building mutual trust that has been deficient for quite a long time between the two countries.

A week ago the president of Pakistan ratified a liberalised visa agreement that will allow for more rational business travel between both nations.

India and Pakistan have also recently signed agreements addressing three key issues that have long plagued business in the region: standards and testing, custom clearance and dispute resolution.

A few months ago, India removed the restrictions on Indians investing in Pakistan and vice versa. In April, an integrated border post check between Attari and Wagah was inaugurated with modern facilities that will allow many more trucks to cross the border daily.

India has reduced the number of items that are prohibited for import from Pakistan by 30 per cent. Pakistan, in turn, abolished a list which severely restricted the number of items that could be imported from India.

It has been replaced by a list that is much more flexible and the government hopes that even these constraints will be phased out by December 2012.

We believe that these encouraging developments need to be reinforced by other measures that can help to strengthen relations between our two countries.

Over the last decade, India and Pakistan, the two largest economies of South Asia, have succeeded in more than doubling their per capita income. Both economies have also managed to sustain a growth trajectory.

The Confederation of Indian Industry noted in its 2011 report that both nations implemented significant economic reforms that have opened up their economies and brought about rapid growth, more than doubling the size of each economy in the last 10 years.

Yet, according to a study conducted by Pradeep Mehta for the Pakistan Institute of Legislative Development And Transparency earlier this year, intra-regional trade hovers at a paltry five per cent of the total trade between all countries of South Asia. By choosing to take the lead in liberalising their import regimes, India and Pakistan could set an example for other countries in South Asia to follow.

Unofficial trade between India and Pakistan is estimated at approximately $2 billion per year. This does not include trade via Dubai in which the products’ port of origin is often relabelled. Better trade relations between the two countries can directly improve the economic and political environment of the whole South Asian region.

While the discussion on normalising economic relations between India and Pakistan has focused on trade liberalisation, the potential for business initiatives extends far beyond trade.

Quantum change will come when investments begin to flow between the two countries. Cross-border investments could result in joint ventures accompanied by an exchange of workers and managers. Bilateral relations could then become literally ‘cemented’, as each country makes capital commitments in the other.

There remains much more that can be done. Efforts can be made to substitute more neutral policies for the current domestic tax, tariff and subsidy policies that distort incentives for production and trade in both countries.

Basic changes that can expedite border crossings, allow more trade through land routes, open new border points for trade and open banking branches in both nations, are long overdue.

In 2006, India and Pakistan outlined potential routes for rail and road transportation between the two countries across the Munabao-Khokrapar border, a new shipping protocol and the deregulation of air services. We need to implement these suggestions as soon as possible.

India has become a global centre for medical treatment and ‘medical tourism’, which is available to people from all over the world but still inaccessible to Pakistanis.