Pak-Indonesia ink PTA to boost trade

Islamabad—Pakistan and Indonesia on Friday signed the Preferential Trade Agreement (PTA) as the first step to achieve a Free Trade Agreement as the final goal to boost trade and investment relations between the two brotherly countries. According to a message received here from Jakarta (Indonesia) Minister of Trade of Indonesia, Gita Wirjawan, and Ambassador of Pakistan to Indonesia, Sanaullah, signed the Preferential Trade Agreement (PTA) between Indonesia and Pakistan.

Pakistan and Indonesia earlier also signed the Framework on Comprehensive Economic Partnership (FACEP) in November 2005 on the occasion of the visit of the President of Indonesia to Pakistan. Under the provisions of FACEP, both countries agreed to commence with PTA negotiations as the first step to achieve Free Trade Agreement as the final goal.

The strategic value of Pakistan for Indonesia is because Pakistan is the second largest economy in the South Asia region after India and one of the emerging markets in the world. For Pakistan, Indonesia is a brotherly Islamic country and an important member of ASEAN and Pakistan is keen to deepen its economic and trade relations in the Asia Pacific region.

Minister Gita put it aptly when he stated that: “Going beyond bilateral gains, we believe that stronger relations between Indonesia and Pakistan also allow both countries to benefit from overall market optimism of the Asian region.”

Meanwhile, Ambassador Sanaullah stated that “both sides have agreed to provide market access by granting tariff concessions and removing non-tariff barriers and also help both countries to match the economic and trade relations to their true potential.”

Under the PTA, Indonesia has agreed to offer market access to Pakistan on 216 tariff lines on preferential rate. The Indonesian offer list includes the products of export interest of Pakistan including fresh fruits, cotton yarn, cotton fabrics, readymade garments, fans (ceiling, table, pedestal) sports goods (badminton and lawn tennis rackets), leather goods and other industrial products.

Indonesia has also offered market access to Kinow (mandarin) and oranges from Pakistan at 0%, which will provide a level playing field to this product in the Indonesian market. Pakistan’s offer list to Indonesia under the Agreement includes a total of 287 tariff lines for market access at preferential tariff. This includes Edible palm oil products (crude oil, palm stearin, RBD palm oil, Palm Olein, crude oil of palm kernel), sugar confectionary, cocoa product, HS 33, HS 34, consumer goods (toothpaste, soap, deodorant), chemicals (polyacetals polycarbonates, sorbitol), tableware, kitchenware, rubber products, wood products, glassware products, and electronic products. Among Pakistan’s concession is the same preferential treatment on edible palm oil products from Indonesia as provided to Malaysia under Pakistan Malaysia Free Trade Agreement.

Thereby Indonesia will export edible palm oil products at 15% margin of preference on the applied Most Favoured Nation (MFN) tariff. The Agreement shall enter into force 30 days after the date on which the Parties exchange written notifications for completion of their respective legal procedures. According to a statistics, trade between Indonesia and Pakistan in 2010 amounted to US$ 787.4 million, with a declining trend of -2.33 % for the past five years.

However, the trade performance showed a strong recovery in the period of January- November of 2011, booked the amount of US$ 1.018 billion and representing a 50.18 % year-on-year growth.