ISLAMABAD, Nov 12: Commerce ministry has announced to reduce customs duty on import of palm oil from Malaysia by 10 per cent on margin of preference (MOP) basis from January 1, 2008 under the free trade agreement (FTA) signed between the two countries in Kula Lumpur on Monday.

This negligible reduction, however, is unlikely to help in arresting the steady increase in the price of edible oil in local market. The average share of taxes in per kg ghee price reached to around Rs25 at retail level owing to increase in palm oil price in international market.

An official announcement of the ministry issued here on Monday said the price of palm oil in the international market had witnessed an unprecedented increase reaching to $900 per ton from $400 during the last one year and was likely to hit $1,000 per ton by the end of this year.

“There will, however, be no reduction on the rates of sales tax, federal excise duty levied at 15 per cent and withholding tax charged at two per cent on the imported palm oil,” the ministry added.

The announcement said it was Pakistan’s first comprehensive free trade agreement with any OIC member state and Malaysia’s first FTA with any South Asian country. The treaty covers trade in goods, services, investment and economic cooperation.

This FTA would provide a strong foothold to Pakistan in the Asean region and help achieve summit level partnership with Association of Southeast Asian Nations. Asean also has an operational FTA with China under exports from Beijing will get preferential treatment in Malaysia.

Asean is also negotiation FTAs with Japan, Australia, New Zealand, South Korea and India. Further Malaysia is negotiating bilateral FTAs with USA, India and Japan.

Exports from Pakistan were being subjected to higher tariff in Malaysia as compared to similar goods exported from Asean member countries. Resultantly, Pakistan was losing market in Malaysia for its core export product.

“This agreement would provide a level-playing field to Pakistani products in Malaysian market,” the announcement added.

Pakistan has given market access to Malaysia on basic raw materials, intermediate goods and machinery. Pakistan has obtained market access for its core export products like fruits and vegetables, seafood, beverages, confectionary, biscuits, gems and jewellery, cotton yarn, cotton fabric, blankets, bedlinen, other home textile products and tents and tarpaulins, medicaments and surgical instruments etc.