December 15, 2006	Friday	Ziqa'ad 23, 1427

ISLAMABAD, Dec 14: As talks on free trade agreement (FTA) remain inconclusive, Pakistan and Malaysia have extended operation of the early harvest programme (EHP) — zero rate of duty on selected items — for a period of three months, which was due to expire by March 31 next.

A senior official in the commerce ministry told Dawn on Thursday that the decision was reached, in principle, between the two countries in the eight rounds of talks on FTA held recently in Kuala Lumpur. A formal notification would be issued shortly, he added.

Pakistan and Malaysia had signed EHP in October 2005, which came into effect from Jan 1, 2006. Under the programme, the two countries granted reduced tariffs on 125 and 114 export items, respectively. The initiative was scheduled to expire upon implementation of the FTA, or on March 31, 2007, whichever was earlier.

This showed that the extension in the EHP was made following failure of the two sides to develop consensus on certain issues of the proposed FTA, which delayed the implementation of the agreement.

It is likely that the two sides would now announce the implementation of the FTA from July 1, 2007. At the same time, Pakistan would also notify the implementation of the already signed FTA with China to become operational from July 1, 2007.

When contacted, head of the Pakistani the trade negotiating team, Joint Secretary Shahid Bashir confirmed to Dawn that an understanding to this effect had been reached at higher level during the recent meeting in Malaysia.

When asked about the delay in FTA, Mr Bashir said that proper interaction with stakeholders on all the issues needed more time before making any commitment.

He said the ministry wanted to take all on boards before making any offer in tariff reduction or market access for investment and service providers under the proposed agreement.

He said the FTA with Malaysia would cover all issues ranging from products coverage to investment and services sector. It would be the first-ever bilateral FTA of any two members of the OIC.

When asked about the need of the FTA with Malaysia, the chief negotiator replied that Pakistani textile products were facing tough competition from Thailand and Indonesia in the Malaysian market due to the ASEAN treaty.

He said that for Asean members the customs duty ranges around five per cent while it ranges between 20 to 25 per cent for non-Asean countries.

He said the proposed treaty would provide a level playing field to Pakistani products in the shape of reducing the customs duty to the level of Asean member countries.

Pakistan’s EHP offer to Malaysia involves 125 tariff lines for machinery, mechanical equipment and appliances constituting 36 per cent of the total EHP value. It also included plastic products (30.08 per cent); chemical products (20.2 per cent); rubber and rubber products (six per cent); and timber products (5.4 per cent).

Malaysia’s offer to Pakistan includes 114 tariff lines. The products included textile and clothing (95.3 per cent of the total EHP value); agricultural products (4.7 per cent); and jewellery.