Pakistan has a tremendous potential for Sri Lankan entrepreneurs

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Pakistan has a tremendous potential for Sri Lankan entrepreneurs​

By Quintus Perera – Asian Tribune

Colombo, 07 October, (Asiantribune.com): The Pakistan - Sri Lanka Bilateral FTA (PSLFTA) that was signed in July 2002 and is in operation since 12th June 2005.

A programme ‘Maximizing Benefits of Pakistan – Sri Lanka Free Trade Agreement’(PSFTA) was held at the Ceylon Chamber of Commerce Auditorium sponsored by the Sri Lanka Pakistan Business Council.

Ms Seema Ilahi Baloch, Pakistani High Commissioner designate in Sri Lanka also graced the occasion.

Dr Saman Kelegama, Executive Director, Institute of Policy Studies speaking on “Making Best use of Pakistan Sri Lanka Fre Trade Agreement” said that Pakistan is the third largest tea importing nation in the world. In 1975, close to 67 per cent of Pakistani tea imports came from Sri Lanka. But by 1998 it has declined to 7 per cent and to 2.6 per cent by 2003.

He said that the same differential treatment like the FTA with India favourable to Sri Lanka is in-built in the PSFTA. Pakistan has offered 206 items duty free immediately after the FTA came into operation compared to 102 items by Sri Lanka and Sri Lanka has been given a 5 year period for tariff phasing out compared to 3 years for Pakistan.

He said that Sri Lanka had a trade surplus with Pakistan till 1984; however, since then there has been a trade deficit. At present, 0.6 per cent of Sri Lankan overall exports go to the Pakistani market and 0.7 per cent of Pakistani exports are destined to Sri Lanka.

Sri Lankan Exports

Dr Kelegama said that the decline in the tea exports to Pakistan was a result of Kenyan tea gradually making in-roads to the Pakistani market. In 1975, the quantity of tea imported from Kenya stood at 11 per cent of Pakistan’s tea imports, but increased to 60 per cent in 1998 and to 64 per cent by 2003. The sudden increase of Kenyan tea was a result of an aggressive marketing campaign by a powerful multinational company operating in Pakistan and which owns a number of tea estates in Kenya.

The campaign was conducted to change the preferences of Pakistani consumers from normal tea to CTC teas. As well known, Kenya is a major producer of CTC tea while countries such as Sri Lanka, China, Indonesia, etc., are major producers of bulk tea.

Under the FTA, 10,000 metric tons of tea per year is allowed duty free entry to Pakistan. In order to capture the lost market using the new opportunity, Sri Lanka needs to engage in an aggressive campaign in Pakistan to change the preference of the consumers to normal tea. If not, Sri Lanka may not be able to make use of the full quota in spite of the duty free allowance. The private sector has to play a major role with the support of the government to conduct this marketing campaign.

The duty for Betel leaves in Pakistan is about Rs. 150 per Kg. A preferential margin of 35 per cent has been granted for Sri Lanka with a quota of 1200 metric tons per annum. This is a major concession for a product that is in high demand in Pakistan with many other Betel producers such as Bangladesh competing to capture a larger share of the Pakistani market.

Another major concession available under the FTA is for the apparel sector, where for a defined 21 categories of Sri Lankan apparel products, 200,000 pieces are granted 35 per cent duty preference without rules of origin on fabric usage. It is hoped that the new opportunity offered by the PSLFTA could be exploited by the apparel sector by taking a serious look at the Pakistani market

Over 10 per cent of Sri Lankan coconut products (copra, coconut oil, brooms, and ekels) are exported to Pakistan, and Sri Lanka is the leading supplier of copra to the Pakistani market (with more than 80 per cent of the share of total copra imports of Pakistan).

He said that the immediate duty free status for copra is going to bring enormous benefits for copra exporters. Pakistan has also offered immediate duty free status for raw rubber exports from Sri Lanka. At present, there is a rubber cartel consisting of Thailand, India, and Malaysia operating in the Pakistani market and rubber prices are relatively high owing to this factor. In this context, Sri Lankan raw rubber exporters have a major opportunity to capture a larger share of the Pakistani market.

Sri Lankan Imports

Dr Kelegama said that both textiles and pharmaceuticals are under the zero tariff band, thus the FTA will not make any difference to these two major exports of Pakistan to Sri Lanka. Sri Lanka has offered duty free status to three agricultural items, two of them under quota restrictions. 1000 metric tons of Pakistani potato per year is permitted duty free during the local off-season period, 6000 metric tons of Basmati rice per annum is permitted duty free and both apples and mandarins have been allowed duty free entry without any quota restrictions.

He said that industrial products not manufactured in Sri Lanka have been granted preferential duty under the FTA. PVC, carbon, machinery, transport items, etc., will be available from Pakistan at a cheaper cost and could effectively compete with similar goods that come to the Sri Lankan market from India.

Prospects

Dr Kelegama said that trade stimulation between the two countries via the FTA will naturally trigger more investment and services exchanges. Investment will stimulate more trade in both goods and services. Once this happens a decision can be taken whether it is necessary to move towards a CEPA.

This is the first Bilateral FTA of Pakistan and may lay the foundation for more Bilateral FTAs with other countries in the future. Sri Lanka can now afford to put less effort on SAFTA since it has already obtained access to the two major markets in South Asia, viz., India and Pakistan. Sri Lanka can also now position itself as the conduit for Indo-Pakistan trade that is happening less due to political problems centred around Pakistan not granting MFN status for about 750 Indian products.

He said that as a result, most official trade between India and Pakistan now takes place either via Singapore or Dubai. Sri Lanka can acquire the position of Dubai and Singapore for promoting Indo-Pakistan trade by encouraging Pakistani investors to open operations in Sri Lanka in order to trade with India using the ISLBFTA and vice versa. Then Sri Lanka can gradually acquire the hub status in South Asia.

Ms Mariam Saeed, Charge d’ Affairs, Pakistan High Commission in Sri Lanka, speaking on “Potential Areas for further Development of Trade and Investment between Sri Lanka and Pakistan” said that there is a tremendous lot of trade and investment activities that could be promoted between the two countries under PSFTA and it is opportune time for exporters and manufacturers of Sri Lanka to penetrate this market.

Her presentation sounded like in entirety Pakistan market is a virtual ‘Gold-mine’ to be explored and exploited by the Sri Lankan entrepreneurs.

She said that Pakistan market is so massive with 180 million consumers and it is a huge market and said that the trade between the two countries have definitely increased after signing the FTA and she traced as to why the true potential has not been realized now and she attribute it to the business people did not properly understood the process.

Ms Saeed said that there are misconceptions over FTAs but she said that FTAs are set up to facilitate trade and investment and to cut down delays. She said that there were mentioning that Pakistan is benefitting more and thus there is a trade imbalance favourable to Pakistan – a misconception.

She said that Sri Lanka is importing 79% of textiles from Pakistan and Sri Lanka is using these textiles as raw material for garment industry and with value addition they are exported to European and other countries and the fact that the raw material is bought at cheap prices is forgotten. She said “You are getting our raw material very cheap” and thus trade imbalance is a misconception.

She said that most of the imports and exports take place between the two ports of Colombo and Karachi. But she urged the Sri Lankan Business community to look beyond Karachi and to explore other products in other places in Pakistan which is very vast. Pakistan is a diverse market, Ms Saeed said.

She said that there were no proper market surveys on the products and markets in Pakistan and said that there so many products and concessions if the market is properly assessed.

V S Sidath Kumar, Deputy Director, Department of Commerce spoke on “Technical Aspects and How to Exploit Benefits of the Pakistan-Sri Lanka Trade Agreement”.

Rohitha Thilakatne, Sri Lanka Pakistan Business Council moderated the Programme.

Pakistan has a tremendous potential for Sri Lankan entrepreneurs | Asian Tribune