ISLAMABAD, May 9: Talks between Pakistan and Malaysia remained inconclusive on narrowing down differences on some crucial parts of the proposed free trade agreement (FTA), which is likely to delay the implementation of the treaty, officials told Dawn.

The outstanding issue which delayed the conclusion of the agreement was the demand of the Malaysian delegation from Pakistan to reduce duty on palm oil and its products.

The Malaysian delegation reiterated their position during their three-day stay in Pakistan that concession on textile to Pakistani exporters will only be granted once Islamabad agrees to their proposal on palm oil under the treaty.

Talking to Dawn following the conclusion of the meeting of trade negotiating teams of the two countries, Pakistan’s chief trade negotiator Shahid Bashir said that the sub-committees have agreed on chapters of services, rules of origin, trade remedies, investment and dispute settlement.

The two sides also cleared the draft text agreement from legal point of view.

Mr Bashir said the two sides have agreed to hold the next session in third week of May at Kula Lumpur to bridge differences on the remaining articles of the treaty before Prime Minister Shaukat Aziz’s visit to Malaysia.

The prime minister is scheduled to visit Malaysia for participation in World Islamic Economic Forum and Pakistan Malaysia Business Forum.

This visit is going to be a make or break for the finalisation of the agreement this year.

"We would exchange some information electronically before the next meeting on some parts of the agreement," he said and added "the remaining issues will hopefully be resolved in the upcoming technical committee of the two sides."

He said the two sides also exchanged the text on the investment chapter of the agreement. He said substantial progress had been made in the services chapter and investment area of the agreement. The sub-committee also finalised the rules of origin of the agreement.

"We would discuss all these issues with the relevant stakeholders. We are optimistic about the conclusion of the agreement in the next meeting," he added.

An official source privy to the meeting told this scribe that Pakistan seemed reluctant to give any reduction in duty on palm oil, which is one of the major revenue spinners for the country.

The sources said that Malaysian authorities have linked market access for Pakistani textile products with reduction in import duty on palm oil.

This means that as textile products constitute more than 64 per cent of Pakistan's total exports, so then what else Islamabad can export to Malaysia under the agreement.

Pakistani textile products are facing a tough competition from Thailand and Indonesia in the Malaysian market due to the Asean treaty.

For Asean members, the customs duty ranges around five per cent while it ranges between 20 and 25 per cent for non-Asean countries.

This means that in case textile products are not given market access, the FTA agreement would become meaningless for Pakistani exporters as it would not provide a level-playing field to Pakistani products in the shape of reducing the customs duty to the level of Asean member countries.

Pakistan and Malaysia have already 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.