Pakistan and Sri Lanka are going to review the implications of the existing Free Trade Agreement (FTA) next month to enhance bilateral trade. Concerns regarding the implementation status of the Pak-Sri Lanka FTA and its implication on bilateral trade will be discussed in the forth coming Joint Ministerial Commission (JMC) scheduled to be held in Islamabad during the first week of July 2011, sources in the Ministry of Commerce (MoC) told Pakistan Today.
As the trade volume between the two countries has not recorded a significant increase during the last six years of the FTA, both countries are interested to review the agreement, and other duty structures to help bilateral trade, sources in the ministry said. They also added that Pakistan exports a lot of items to India indirectly through Sri Lanka.
The ministry of commerce, which has undertaken a study on the implication of the agreement on exports and over all trade with South Asian States, is interested to introduce more products in the export list in order to increase the worth of bilateral trade from $300 million. The growth in trade after the FTA, which was made in 2002 and implemented in 2005, was from $158 million to $300 million in the last five years.
According to the data of Federal Bureau of Statistics during the first six months of the financial year 2010-2011, Pakistan’s exports to Colombo increased to $116 million compared to $106 million during the corresponding period last financial year showing a positive growth of 9.26 per cent.
Apart from enhancing bilateral trade, Pakistan is also interested in having a market share in India through Sri Lanka as the latter has FTA with Delhi with trade volume exceeding $2.5 billion.
According to a report by Pakistan Institute of Trade and Development (PITAD) Pakistan’s exports to Sri Lanka rose by 41 per cent, reaching a level of $216 million in 2009, whereas Pakistan’s imports from Sri Lanka fell by 5.7 per cent to $55.79 million in 2009, compared to imports worth $59.18 million in 2005. The report further said that Pakistan’s top products in the Sri Lankan market included woven cotton fabrics, knitted fabrics, cement, basmati rice, potatoes, cumin, pharmaceuticals, tubes and pipes. Sri Lanka’s top performing products in Pakistan included betel leaves, rubber and coconut. Tea, a major product for Sri Lanka, failed to achieve export growth despite receiving trade preference.
According to the report Pakistan’s main competitor in the Sri Lankan market is India, which has an FTA with Sri Lanka. Pakistan and India directly compete in the Sri Lankan market for cotton fabrics, knitted fabrics, denim, cement, tubes and pipes.
The quantum of India’s exports to Sri Lanka is higher than Pakistan in most categories. However, after availing preferences under the Pak-Sri Lanka FTA, Pakistan has been able to make inroads and erode India’s share. The study also recommends that Islamabad should negotiate the expansion of the quota allocated by Sri Lanka for basmati rice and potatoes. Pakistan should also seek access for broken rice, onions, maize, ceramic sinks and ethyl alcohol which are currently on Sri Lanka s “No Concession List”. The study also suggests that the process of issuing Certificates of Origin to Pakistani exporters should be simplified.