Malaysia, Pakistan to conclude FTA talks by mid-2006

Malaysia, Pakistan to conclude FTA talks by mid-2006

By RUPA DAMODARAN

January 2 2006

MALAYSIA and Pakistan are expecting to conclude negotiations on a bilateral free trade agreement (FTA) by mid-2006, the Ministry of International Trade and Industry Ministry (Miti) said.

It will replace the Agreement on the Early Harvest Programme (EHP) for the FTA between Malaysia and Pakistan - the first between two member countries of the Organisation of Islamic Conference (OIC), implemented on January 1.

The EHP, which expires on March 31 2007, (or when the FTA comes into force) was signed by International Trade and Industry Minister Datuk Seri Rafidah Aziz and Pakistan Minister for Privatisation and Investment Dr Abdul Hafeez Shaikh in Kuala Lumpur on October 1.

It covers selected products with Most Favoured Nation (MFN) tariffs of 10 per cent and below and upon implementation products with MFN tariffs of 5 per cent will be eliminated while that of 10 per cent will be accorded a margin of preference of 50 per cent.

Under the EHP, Pakistan’s offer covers 5.49 per cent of the import value or RM146.3 million involving 125 tariff lines while Malaysia’s offer covers 114 tariff lines covering import value of RM22.1 million or 10.97 per cent of its total imports from Pakistan.

The products cover imports from Malaysia such as machinery, mechanical equipment and appliances (36.6 per cent), plastic and chemical products and imports from Pakistan such as textile and clothing (95.3 per cent).

Before the FTA comes into force, Miti said, the Interim Rules of Origin will be applied to the products covered and this involves a 40 per cent local content rule, while product specific rules would be applied to textile and clothing and jewellery.

In 2004, total trade between Malaysia and Pakistan amounted to RM2.87 billion, of which exports amounted RM2.66 billion and imports at RM206 million.

Total trade during January-October 2005 amounted to RM2.55 billion with exports at RM2.37 billion and imports at RM178 million.

Malaysia’s major exports to Pakistan are palm oil and palm oil products (57.8 per cent of total exports), carboxylic and derivatives (9.3 per cent), margarine and shortening (3.4 per cent) and telecommunications equipment (2.7 per cent).

Malaysia’s major imports from Pakistan are fresh, chilled and frozen fish (22.7 per cent of total imports), rice (22.4 per cent), textile yarn (7.6 per cent), fabrics, woven, man-made textile material (7.5 per cent) and woven cotton fabrics (4.8 per cent).

Malaysia’s investment in Pakistan during the period 1999-September 2005 amounted to RM720 million, in the form of equity investment and investments in joint-venture projects.

Malaysian companies have made investments in power generation, bulking storage facility for vegetable oils, property development and oil and gas exploration.

Approved investments from Pakistan in Malaysia during the period 2004 to September 2005 amounted to RM3.2 million in textiles and textile products, food manufacturing and leather and leather products.

Miti said since the EHP aims to deliver benefits to the private sector of both countries ahead of the FTA, Malaysian exporters should utilise it to increase and strengthen market for their exports in Pakistan.

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source: Business Times