Pakistan's exports to Indonesia have seen a tremendous increase of 86 percent in the first four months of 2017 on year-on-year basis. Pakistan exported goods amounting to $91 million in first four months of 2017 as compared to $49 million in 2016.
This upsurge in exports is predominantly due to Pakistan's Kinnow exports to Indonesia, which have shown good growth during the first four months of the current calendar year. Exports of Kinnow during this period reached $48 million in 2017 as compared to $20 million in 2016.
This phenomenal increase in one season alone is a result of concerted efforts by various departments of Government of Pakistan including Embassy of Pakistan, Jakarta, Indonesia, Trade Development Authority of Pakistan (TDAP) and Kinnow exporters. Pakistan convinced Indonesian Ministry of Trade and Ministry of Agriculture to lift the ban on imports of Kinnow from Pakistan for the first four months of the year, whereas last year the ban was lifted for merely three months.
Participation in various exhibitions and trade shows in Indonesia sponsored by the Ministry of Commerce and TDAP considerably helped fresh fruit exporters to successfully enter the Indonesian market. Increase in exports to Indonesia has come at a time when the overall export situation of the country is far from satisfactory.
Apart from Kinnow, products like raw cotton, 100% broken rice, woven fabric, sardine fish, leather and copper scrap, are also showing positive trends and most likely 2017 will end with very high export growth trends in these commodities.
The two countries signed a Preferential Trade Agreement (PTA) in 2012 which became operational in 2013. Pakistan's exports to Indonesia were $156 million in 2016 which had a huge potential for growth.
Indonesia exports $2 billion worth of items to Pakistan. Pakistan's exports to Indonesia face hurdles due to arbitrary implementation of Technical Barriers to Trade by the Indonesian authorities. Recently, due to its successful commercial diplomacy, Pakistan has been able to relax one such unwanted barrier and Pakistan's exports of Kinnows to Indonesia rose exponentially.
Pakistan and Indonesia are in the process of reviewing their PTA. Third meeting in this regard is scheduled to be held in August, 2017. During previous review meetings, both sides shared the lists of their concerns regarding the implementation of PTA during the first three years and agreed to take necessary steps to address those concerns.
Malaysia is watching this review process very closely. It is important to remember that due to the PTA between Pakistan & Indonesia in 2012, Malaysia lost substantial part of its palm oil trade to Indonesia.
Malaysia is continuously pursuing further expansion of its FTA with Pakistan. The first meeting of FTA review exercise has already been held in Islamabad. Reportedly Malaysia is willing to offer Pakistan more concessions on items of its prime interest in exchange for further concessions on palm oil. This would help Malaysia regain its lost share of exports of Palm oil to Pakistan, which at the moment is estimated at $2 billion and has further potential to grow.
Last year, Pakistan had indicated that it would impose Non-Tariff Measures (NTMs) on Indonesia on a reciprocal basis aimed at making import of palm oil more restrictive like Jakarta did with Islamabad.
"As Indonesia is reluctant to provide required market access to our goods, Pakistan will consider imposing reciprocal NTMs to convey the message to the Indonesian side that the current arrangement can not be allowed to continue indefinitely," said an official. Commerce Ministry will hold negotiations with Indonesia on video call probably next month and urge reciprocal incentives on trade.
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