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Indonesia offers Pakistan better market access

Updated January 19, 2018

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Fruit sellers in Jakarta wait for customers. Pakistan could enter the vast markets for agricultural produce in Indonesia with an amended PTA.
Fruit sellers in Jakarta wait for customers. Pakistan could enter the vast markets for agricultural produce in Indonesia with an amended PTA.

ISLAMABAD: The Indonesian government has unilaterally agreed to provide Pakistani products with deeper market access under the preferential trade agreement (PTA), which will help reduce the negative trade balance between the two courtiers, a government official claimed on Thursday.

“We have renegotiated with Indon­esia the provision about reducing duties on 20 items to zero per cent,” the senior official of the Ministry of Commerce told Dawn.

The Indonesian president is scheduled to arrive in Pakistan on Jan 25 to sign the amendments to the PTA, a source in the Foreign Office confirmed.

The official did not disclose the names of these products. He said the PTA was not properly negotiated and did not provide for any market access to Pakistani goods.

“We have urged the Indonesian government to reciprocate market access for Pakistani products to which they have agreed,” the official said.

According to the source, the products on which duty will be reduced include agricultural produce, manufacturing products and fruits.

Pakistan and Indonesia signed the PTA in 2012. It came into operation in 2013. Pakistan’s exports to Indonesia posted a negative growth while imports rose by over $1bn in the past three years.

The senior official of the commerce ministry said that imports from Indonesia increased, but not in absolute terms. The increase was the result of a diversion of palm oil imports from Malaysia.

However, overall bilateral trade also increased.

Pakistan’s exports to Indonesia were $196m in 2012-13. Exports in the second year of the PTA (2014-15) marginally increased to $143m. However, exports fell to $130m in 2015-16. Similarly, export proceeds were recorded at $138m in 2016-17.

But contrary to this, imports from Indonesia were recorded at $1.7bn in 2013-14. They edged up to $2.3bn in 2016-17, reflecting an increase of 26pc.

Data shows Pakistan’s exports to Indonesia have dropped since the implementation of the PTA. Indon­esia’s exports have almost doubled post-PTA.

In August 2017, the Indonesian government expanded the quota and period for the import of Pakistani kinno. The period was changed to December-April from January-April.

According to the source, the decision to offer a fresh duty reduction on 20 items will be in addition to compensating Pakistani exporters of leading products.

Pakistan already shared a list of products with the Indonesian government in the last three review meetings of the PTA. Islamabad has demanded that the tariff be reduced to zero per cent on two lines of textiles, knitted and woven fabric, garments, broken rice, mangoes, meat and meat products etc.

Asked about the advantages of the PTA, the senior commerce ministry official claimed that these agreements are required in today’s global trading environment where most of Pakistan’s competitors enjoy greater market access through such pacts.

“We need to negotiate these better rather than shying away from them. Shying away from PTAs will limit market access to our exporters. We have acquired such expertise and software where we can run models of our trade with different negotiating options in PTAs and free trade agreements,” the official added.

Published in Dawn, January 19th, 2018