FTA fails to provide level playing field: Pakistan concerned over trade balance in favour of Malaysia

Pakistan and Malaysia have reviewed the Free Trade Agreement (FTA) signed in November 2007 after Islamabad raised concerns over the trade balance in favour of Malaysia, well informed sources told Business Recorder. Officials from the Ministry of Commerce, Federal Board of Revenue (FBR), Ministry of Textile Industry and Trade Development Authority of Pakistan (TDAP) are engaged with the Malaysian officials.
The Ministry of Commerce was represented by Joint Secretary, Anjum Asad Amin and Deputy Secretary, Muhammad Ashraf. The sources said the FTA was in favour of Malaysia and did not provide Pakistan a level playing field. "Pakistan has urged Malaysia to take measures to minimise the trade gap between the two countries," the sources added.
Malaysia's main concern is reduction in export of Malaysian palm oil to Pakistan after the Preferential Trade Agreement (PTA) and this issue has been raised on different occasions. "Malaysian palm oil exports to Pakistan declined from 90 per cent to almost 50 per cent," the sources added. Pak-Malaysian trade volume, which was in the range of $1.007 billion, reached all the high in 2011-12 amounting to $2.66 billion. Pakistan's exports increased by 22% whereas imports were witnessed by 161% growth.
During July-April 2012-13, Pakistan's export stood at $0.20 billion against imports of $1.75 billion, totalling it to $1.95 billion. This implies that trade balance was $1.55 billion in favour of Malaysia. Major items of exports to Malaysia from Pakistan include rice (all sorts), fish, cotton yarn and made up-articles of textile material. Major items of imports from Malaysia include palm oil, vegetable fats and oils, wood, machinery, chemical material and products, crude rubber etc.
Bilateral economic relations between Pakistan and Malaysia have always been very sound but the balance of trade remained in favour of Malaysia due to export of palm oil, rubber and timber. Economic evaluation of the FTA between Pakistan and Malaysia carried out by Pakistan Institute of Trade and Development (PITAD) a subsidiary of Commerce Ministry in 2010 maintained that bilateral trade between the two nations is growing in terms of value since MFN period (2003-05) to EHP period (2006-07) and further to the FTA period (2008-10); but expansion of trade between the two countries has not increased as much as was expected. Pakistan trade with Malaysia accounted for less than 1% of its total global trade during the MFN to EHP period and the FTA period but its import share was greater than 5.5% of Pakistan's total global imports in 2010.
Pakistan's share of exports to Malaysia under normal track rose to 21.5% in 2010 (registered highest share within other tracks), whereas the share of products exported under fast track declined from 43% in 2009 to 16.1% in 2010. Products exported by Pakistan to Malaysia under HSL had an export share of about 13.2% and in others products (the products which do not fall under the FTA) had an export share of about 45% in Pakistan's total exports to Malaysia in 2010.
But it is of policy concern that under Tariff Rate Quota (TRQ) Pakistan has not even exported single products under this category to Malaysia over the last five years, even though Malaysia has offered 17 line items, which cover mostly poultry products and TRQ of 300 tonnes offered to only one agriculture product line item ie round cabbage. Pakistan is not exporting a single product under TRQ offered by Malaysia, so there is a need to market these 17 products in Malaysia. Pakistan also needs to market its products (textile and agro-sector) which fall under the fast track & normal track with 0% duty on 75% of TL falling under the FTA.