Lanka-Pakistan FTA widening

Ministry of Industry and Commerce Secretary T.M.K.B. Tennekoon (left) and High Commissioner of Pakistan to Colombo Maj General Syed Shakeel Hussain (right) look on as Minister of Commerce of Pakistan Minister Engr. Khuram Dastgir Khan (second from right) receives the official souvenir from Minister of Industry and Commerce Rishad Bathiudeen at the bilateral trade talks session yesterday

Pakistani Commerce Minister Engr. Khuram Dastgir Khan (left side, third from left) leads the Pakistani team (at left) while Minister of Industry and Commerce Rishad Bathiudeen (third from right, right side) makes his opening remarks leading the Lankan team at the bilateral trade talks session yesterday

Sri Lanka-Pakistan bilateral trade is positioned for a new high in the aftermath of an official bilateral trade meet which closed successfully yesterday in Colombo. As a result, the historic Pakistan-Sri Lanka Free Trade Agreement (PSFTA) is now set to expand significantly.

“The impetus to this economic engagement also comes from the fact that Prime Minister Nawaz Shariff is scheduled to begin the new year 2016 with his first visit to Colombo. The coming eight to 10 weeks are very challenging and exciting for our bilateral trade. The forthcoming change to the historic PSFTA is a new phase in our bilateral economic engagement. It deepens our economic and trade relationship creating this new phase in our engagement,” said Minister of Commerce of Pakistan Engr. Khuram Dastgir Khan yesterday, addressing the bilateral trade meeting between Sri Lanka and Pakistan held at The Kingsbury. 

Joining Khan for this in-depth trade session were High Commissioner of Pakistan to Colombo Maj. General Syed Shakeel Hussain, Deputy High Commissioner of Pakistan in Sri Lanka Dr. Sarfraz Ahmed Khan Sipra, Pakistani Commerce officials and several Pakistani business delegates who accompanied Khan. The Sri Lankan side led by Bathiudeen was joined by Ministry of Industry and Commerce Secretary T.M.K.B. Tennekoon, Department of Commerce Director General Sonali Wijeratne, EDB Chairperson Indira Malwatte, officials from Customs, BoI, Treasury, ICTA, and other relevant line ministries such as Ministries of Agriculture, Strategic Development and International Trade and Foreign Affairs. 

“Sri Lanka and Pakistan are friends; it comes from our heart. This friendship should now become a deep and longstanding economic partnership. I congratulate Minister Bathiudeen for inviting me to Sri Lanka in this regard. Both Minister Bathiudeen and I will convey to all our respective departments in bilateral trade that these initiatives and this trade relationship between us is special and we want them to ring-fence it from temporary considerations,” said Pakistan Commerce Minister Khan.

He added: “Many sensitivities can arise but we need to realise that this is a relationship for long term, particularly in terms of new challenges that have arisen in the form of mega regional trade agreements such as the recent Trans Pacific Partnership (TPP); we need to understand that we cannot wait for too long to deepen our bilateral engagement, otherwise our markets will be taken by competitors. We have to conclude our bilateral arrangements and then go for joint ventures in both countries so that we start exporting to third countries-in that we both join together in both value chains and supply chains to export to third countries. 

“We offer to Sri Lanka our confluence of being able to give access to South Asia, Central Asia and West Asia while Sri Lanka opens the East Asian trade doors for Pakistan. That’s the broader foundation of this relationship! We need to give administrative solutions for short term trade issues and also longer term agreements formalising our short term understanding. Minister Bathiudeen and I have a lot of work in the few weeks left till Prime Minister Shariff’s visit to ensure to our leaderships that we can offer substantive steps to formalise and sign during the visit. A wider range of items under FTA are to be offered duty free and many items with quotas would become quota free and duty free. Another reason for the excitement is due to Pakistan holding the Single Country Exhibition after a lapse of many years in Colombo in January 2016, coinciding with Prime Minister Shariff’s visit.”

At present, more than 4,000 product lines from Sri Lanka have duty free access to Pakistani market under the Pakistan-Sri Lanka FTA. This number of product lines is expected to expand as per Pakistani Minister Khan’s announcement on 11 November.  

Minister Bathiudeen, in his brief opening remarks, said: “The multi-faceted relationship between our two nations has added more value and strength by your arrival. There is no doubt that greater economic integration between our two nations should be welcomed. In this context, we should strive to maximize our trade potential under existing FTA that will eventually guide and compel us to go to the next level in trade and investment. The value of our total trade that stood at $ 97 million in 2001 increased to peak levels by 2013 recording $ 462 m. But we believe there is great unrealised trade potential between the two countries despite the FTA and it is time we move forward. We identified some trade issues and Pakistani High Commission too submitted some issues for today’s discussions.”

The value of total Lanka-Pakistan bilateral trade that stood at $97 m in 2001 increased to peak levels by 2013 to $ 462 m and in 2014 levelled at $354 m. Since the start of the FTA, Sri Lanka-Pakistan overall trade has surged by four times, exports to Pakistan have increased threefold while imports from Pakistan have grown fourfold. 

Pakistan is now the second largest export destination for Sri Lanka in South Asia accounting for 10% of Sri Lanka’s exports to South Asia. Sri Lanka’s exports to Pakistan totalled $ 74.25 m in 2014 while imports from Pakistan stood at $279.59 m in the same year. Despite steady growth, except in 2014, the balance of trade remains mostly in favour of Pakistan.

The first-ever FTA Pakistan signed with any foreign economy was with Sri Lanka in 2002, which came into force in 2005.