KARACHI – Pakistan and Sri Lanka are set to revise the existing Free Trade Agreement (FTA) as part of a bid to drastically enhance the volume of bilateral trade by $2.0 billion by the next year.
Existing trade volume stands at around $300 million between the two South Asian countries during the last five years. It is deemed an insignificant amount, despite the FTA being in place for the last five years. The agreement needed to be revised to include more items from both sides to boost the trade volume, sources said.
Though there was a positive growth in bilateral trade since the advent of the FTA, originally introduced in 2002 and implemented in 2005; the pace of growth has been unsatisfactory. Both countries are likely to hold a ministerial level meeting soon to exchange the proposals for including further items in the agreed list, sources said adding that the ministry of commerce was working on the issue.
During the first six months of the financial year 2010-2011, Pakistan’s exports to Colombo grew to $116 million compared to $106 million during the corresponding period last financial year with positive growth of 9.26 percent.
Despite the FTA, trade between Pakistan and Sri Lanka remains limited, especially when compared to the foreign country’s $ 2.5 billion annual bilateral trade with India. The existing export quota of agro-based products from Pakistan including rice, potato, and others are not adequate under the FTA while on the other hand Sri Lanka is importing agro commodities from India, sources said.
However there were opportunities to enhance the bilateral trade through including more items in the FTA and making joint ventures in food processing, seafood, fruits and vegetables, ship-breaking, value added textile products, sports, surgical goods and pharmaceutical products. According to sources, Pakistani onion which has great demand in Sri Lanka was not included in FTA while some important sea food products were also neglected in the FTA.
Two other important items or subjects of trade were pharmaceutical products and the trade of services. Pakistani Pharmaceutical products enjoy strong demand in Sri Lanka while both countries are also trying to kick start the trade of services.
On the other hand, Sri Lanka has also an opportunity to increase its share of the lucrative tea market in Pakistan as it had lost almost 60 percent share since the same products from Kenya had developed a strong hold over the huge market in Pakistan, sources said.
According to sources, Pakistan and Sri Lanka are lucrative investment destinations for exporters of both countries; as on the one hand, Pakistan provides a gateway to resource-rich Central Asian States while on the other hand, Sri Lanka enjoyed duty free access to huge European Union and Indian markets. Under the FTA, Pakistan gives 206 products from Sri Lanka duty free access while Sri Lanka provides 102 items of Pakistan with similar status in reciprocation.
Despite the agreement, the bilateral trade of two countries forms less than one per cent of their total level of trade.
