ISLAMABAD, Feb 9: Pakistan and Sri Lanka on Wednesday exchanged diplomatic notes to formalize the annextures in bilateral Free Trade Agreement (FTA) with a view to its operationalization between the two countries.

The two countries also signed a protocol to the FTA covering services and investment sectors in a ceremony held in the prime minister secretariat here on Wednesday. The agreements were singed in the presence of Pakistan's Prime Minister Shaukat Aziz and Sri Lankan President Chandrika Kumaratunga.

The proposed lists of items under the annextures would now be ratified by the cabinets of the two countries and would subsequently be notified for implementations by the two governments, while the protocol would come into effect immediately.

Under the FTA agreement, both countries would reduce customs duty to zero per cent on over 310 items.

During the recent meeting of the technical experts of the two countries in Colombo, it was decided that Sri Lanka would eliminate tariff on basmati rice and potato under Tariff Rate Quota (TRQ) of 6,000 tons and 1,000 tons per annum, respectively.

While Pakistan would eliminate tariff on import of 10,000 tons of tea and reduce tariff on 1,200 tons of betal leaves by 35 per cent on the basis of margin preference.

Pakistan would undertake elimination of tariff on spices, plastic, rubber and rubber product, raw silk and yarn, precious jewellery, precious stones, wooden and cane furniture, etc. Sri Lanka would give market access to Pakistani products like oranges, dates, apples, fruit juices, welded pipes, iron and steel products, etc under the FTA.

The FTA framework agreement was signed by the two sides in 2002 during the visit of President General Pervez Musharraf to Sri Lanka.

APP adds: "It is an historic day and we hope signing of the FTA will be a turning point in our economic relations," Prime Minister Shaukat Aziz told reporters after the signing ceremony.

The Sri Lankan President Chandrika Bandaranaike Kumaratunga later addressing a Pakistan-Sri Lanka business forum said "We can now take our economic relations to a higher plane, opening a new vista of trade and investment opportunities for the business community in Pakistan and Sri Lanka."

The two sides on Wednesday signed four agreements and two Memoranda of Understanding (MoUs) including FTA.

Addressing the Business Forum, where she also witnessed the signing of an MoU between the Pakistan-Sri Lankan Business Forum and Ceylon Chamber of Commerce and Industry, President Kumaratunga said "this contains a number of positive features, which will create a"win-win" situation for Pakistan and Sri Lanka." She said the regional initiatives like SAFTA, when finalised, would co-exist with bilateral trade arrangements.

"Bilateral and regional trade liberalization will complement multilateral efforts, as they form the building blocks, rather than stumbling blocks, to trade liberalization in our region," the Sri Lankan President said.

Highlighting the salient features of FTA she said under it Sri Lanka will grant duty free access to 102 tariff lines, while Pakistan will grant Sri Lanka duty free access to 206 tariff lines.

Sri Lanka will eliminate the customs duty on 4527 tariff lines out of total tariff lines of 5224 at six-digit level, covering around 87% of tariff lines in next five years.

Pakistan, she said, has agreed to eliminate the customs tariff on 4680 tariff lines out of a total of 5224 tariff lines at six-digit level, covering around 90 per cent over a period of three years.

The elimination of customs duty will cover as much as 69 per cent of the actually traded goods between the two countries. Similarly, Pakistan will have duty free benefits for its exports of oranges, chick-peas, cumin seeds, fennel seed, motorcycles and accessories to the Sri Lankan market.

Pakistan and Sri Lanka after signing FTA would eventually move towards a Comprehensive Economic Partnership Agreement (CEPA).

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