Business Recorder Editorials 6th September 2026

The IWT stands

EDITORIAL: The award issued by the Hague-based Permanent Court of Arbitration (PCA) on the Indus Waters Treaty (IWT) comes as a vindication of Pakistan’s position and reinforces a fundamental principle of international law: treaties cannot simply be suspended or discarded unilaterally. The ruling provides important legal clarity, declaring that the IWT “remains fully in force” and that India must observe its obligations under the treaty, including those governing the design and operation of its hydroelectric projects on the Western Rivers.

Pakistan has consistently maintained that the IWT provides a rules-based framework for governing the use of the Indus, Jhelum and Chenab rivers, and that disputes over hydroelectric projects must be addressed through the mechanisms established by the treaty. The agreement has survived wars, political crises and decades of hostility between the two countries. Its remarkable durability demonstrated that even deeply adversarial neighbours can preserve mechanisms of cooperation when vital shared resources are at stake; unfortunately, however, that principle was challenged when the Modi government unilaterally placed the treaty in “abeyance”.

For Pakistan, the stakes could hardly be higher. The country depends on the Indus River system for agriculture, food security, hydropower and the livelihoods of millions of people. Any attempt to use water as a political or strategic instrument therefore carries consequences far beyond a conventional diplomatic dispute. Islamabad has already made clear that any attempt by India to block or stop Pakistan’s share of the Indus waters would constitute an “act of war”. Given these stakes, the PCA’s reaffirmation of the treaty’s continuing validity is particularly significant.

The court’s findings also undercut several arguments advanced by India to justify its decision. It found that Pakistan’s alleged failure to agree to modifications of the treaty did not constitute a material breach, noting that the IWT did not oblige Pakistan to enter such negotiations. Nor, the court concluded, could India’s allegations concerning terrorism provide a legal basis for suspending the treaty, which specifically governs the two countries’ rights and obligations regarding the Indus waters.

The interim measures concerning the Ratle hydroelectric project are equally important. By restricting certain construction activities until 90 days after the neutral expert’s final decision, expected in 2027, the PCA has sought to ensure that the dispute is not prejudiced by irreversible developments. Pakistan has long raised legitimate concerns about the design and operation of Indian projects on the Western Rivers. This legal vindication should not lead to complacency. The government’s stated willingness to explore a pathway back to engagement under the treaty is therefore important. Courts can clarify legal obligations; they cannot replace sustained diplomacy and institutional cooperation.

India’s rejection of the PCA’s jurisdiction is unfortunate, but does not diminish the significance of the ruling. If international agreements are to have meaning, states cannot be permitted to accept treaty obligations when convenient and disregard them when circumstances change.

Pakistan must now consolidate its legal position, closely monitor developments on the Western Rivers, pursue the neutral-expert process and press for the restoration of meaningful institutional engagement. The Indus Waters Treaty has endured because it provides rules for managing disagreement. It must not become another casualty of India-Pakistan tensions.

Auto imports under personal baggage

EDITORIAL: The Personal Baggage Scheme for used vehicle imports has finally been abolished after the government concluded that a facility meant for overseas Pakistanis was being misused for commercial purposes. The Economic Coordination Committee and federal cabinet have approved the change, while the Gift and Transfer of Residence schemes will continue under tighter conditions. This is a sensible correction to a system whose concessions had increasingly become vulnerable to exploitation by people they were never designed to benefit.

There was always a legitimate case for allowing overseas Pakistanis returning home, or sending vehicles to their families, reasonable facilities to do so. The problem arose when preferential arrangements intended for genuine personal use created opportunities for commercial activity to enter through the back door. Once traders can effectively access concessions designed for individuals, the distinction between facilitation and commercial import begins to disappear, while those operating through regular channels are left facing a distorted playing field.

The government is therefore right to close the Personal Baggage route rather than continue tolerating its abuse. It is equally sensible that it has retained the Gift and Transfer of Residence schemes instead of indiscriminately eliminating every facility available to overseas Pakistanis. The revised rules attempt to separate genuine beneficiaries from commercial operators by making eligibility more stringent.

The import interval under the retained schemes has been increased from two years to three, imported vehicles will remain non-transferable for one year, and the minimum stay-abroad requirement has been raised to three years with at least 850 cumulative days overseas. Vehicles must also meet the minimum safety, environmental and regulatory standards applicable to commercial imports of used vehicles. These conditions should make it considerably harder to use individual eligibility as a convenient vehicle for organised commercial imports.

But tightening rules achieves little if enforcement remains weak. Pakistan has no shortage of regulations that look impressive on paper and become remarkably flexible once commercial incentives and administrative discretion enter the picture. The authorities must therefore monitor the Gift and Transfer of Residence schemes closely to ensure that the business previously conducted through Personal Baggage does not simply migrate to the remaining channels.

That means identifying unusual patterns, enforcing the one-year restriction on transfer and ensuring that eligibility requirements are verified rather than treated as another documentary formality. If organised commercial interests begin using proxies or other arrangements to circumvent the revised rules, the government should close those loopholes quickly. Otherwise, this reform will merely change the paperwork accompanying the same business.

There is also a broader principle involved. Concessions granted for a specific public purpose should benefit the people for whom they were created. When they become commercial opportunities for unrelated parties, they distort markets, create opportunities for rent-seeking, and undermine confidence in the policy itself. Allowing such arrangements to continue simply because abuse has become established practice would be no justification at all.

The commerce ministry says it is still too early to determine how the changes will affect overall vehicle imports, although it expects imports could decline. That impact should be monitored, along with the functioning of the two surviving schemes, so future policy can be based on evidence rather than lobbying from competing interests.

For once, the government has recognised a loophole and moved to close it; the real test now is whether the baggage stays checked, or simply finds another way through customs.