After years of lengthy negotiation, Indonesia and Pakistan finally signed on Friday the Preferential Trade Agreement (PTA) at Jakarta. A statement issued by the Commerce Ministry said that the Minister of Trade of Indonesia Gita Wirjawan, and Ambassador of Pakistan Sanaullah signed the agreement. The federal cabinet on November 2, 2011 had approved the signing and ratification of PTA between the two countries.
Commerce Minister Makhdoom Amin Fahim was scheduled to travel to Jakarta to sign the agreement. However due to the session of the parliament, the Prime Minister authorized the Pakistan Ambassador in Jakarta to sign the PTA on behalf of the government.
The agreement will enter into force 30 days after the date on which the parties exchange written notifications for completion of their respective legal procedures. Pakistan has completed all its internal formalities to implement PTA, while Indonesia is in the process of completing its codal formalities. The diplomatic note will be exchanged by the parties as soon and the formalities are completed by Indonesia.
Pakistan and Indonesia signed the Comprehensive Economic Partnership Agreement (CEPA) in November 2005 on the occasion of the visit of the President of Indonesia. Under the provisions of CEPA, both countries, in 2006, commenced negotiations to conclude a PTA. The agreement would ultimately create a Free Trade Area between the two countries. Both countries successfully concluded the negotiations process during the 8th round of negotiations held on 16th September, 2011 in Jakarta, where Pakistan delegation was led by Secretary Commerce Zafar Mahmood.
Under the Agreement, Indonesia agreed to offer market access to Pakistan on 216 tariff lines on preferential rate. Indonesian offer list include the products of export interest of Pakistan including fresh fruits, cotton yarn, cotton fabrics, readymade garments, fans including ceiling, table, pedestal, sports goods, including badminton and lawn tennis rackets, leather goods and other industrial products. Indonesia also offered market access to Kinnow from Pakistan at zero per cent which will provide a level playing field to this product in the Indonesian market.
Pakistan’s offer list to Indonesia under the Agreement includes a total of 287 tariff lines for market access at preferential tariff. Pakistan also agreed to provide the same treatment on palm oil products from Indonesia as provided to Malaysia under Pak-Malaysia FTA. It means Pakistan will import palm oil from Indonesia at 15 per cent Margin of Preference (MoP) rate.
Pakistan has been importing palm oil and its products from Malaysia and Indonesia. The preferential market access provided by Pakistan to Indonesian palm products will have a positive impact on the overall economy of the country. It is expected that this will result in saving approximately $ 300 million of foreign exchange of Pakistan. It will also help in decreasing the prices of vegetable ghee, cooking oil in the country which are going beyond the reach of common man and will create competition in the market which will discourage monopolistic trends.
