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Malaysia signs FTA with Pakistan

BERNAMA | 12 November 2007

Malaysia signs FTA with Pakistan


Malaysia and Pakistan have signed a trade pact, Malaysia’s first bilateral free trade agreement (FTA) with a member of the Organisation of Islamic Conference (OIC).

The Malaysia-Pakistan Closer Economic Partnership (MPCEPA) was signed by International Trade and Industry Minister Datuk Seri Rafidah Aziz and High Commissioner of Pakistan Tahir Mahmood Qazi.

The agreement will come into force January 1 next year, a statement today from the Ministry of International Trade and Industry (MITI) said.

It will further strengthen trade and investment and bilateral economic and industrial cooperation on a long term basis between Malaysia and Pakistan.

Both countries concluded talks in October 2005, and began implementing in January last year an Early Harvest Programme (EHP) for trade in goods comprising Malaysia’s offer of tariff cuts on 140 tariff lines and Pakistan’s offer of tariff cuts on 124 tariff lines. This was to accelerate trade benefits ahead of the MPCEPA.

Malaysia’s export of EHP products in 2006 to Pakistan totalled RM44.87 million.

The FTA agreement encompasses liberalisation in trade in goods and services, investment, as well as bilateral technical cooperation and capacity building in areas such as sanitary and phytosanitary measures, intellectual property protection, construction, tourism, healthcare and telecommunications.

For trade in goods, both Malaysia and Pakistan will progressively reduce or eliminate tariffs on agricultural and industrial products.

Malaysia will eliminate import duty by 2012, on 74.5 per cent of tariff lines, comprising 77.3 per cent of imports from Pakistan with a value of RM152.7 million in 2006; and reduce import tariffs over a period of five to seven years, on 18 per cent of tariff lines with a value of RM5.95 million in 2006.

In turn, Pakistan will eliminate duties by 2012, on 43.2 per cent of tariff lines involving agricultural and industrial imports from Malaysia worth RM633.7 million in 2006.

It will also reduce import duty on seven palm oil tariff lines by up to 15 per cent Margin of Preference (MoP) with 10 per cent cut in 2008 and an additional fivr per cent in 2010 involving 48.8 per cent of exports with a value of RM1.3 billion in 2006 and 41.3 per cent tariff lines, over a period of five to seven years comprising imports with a value of RM489 million in 2006.

Last year, Malaysia’s total trade with Pakistan amounted to RM3.306 billion comprising exports worth RM3.089 billion and imports RM217 million.

Trade during January to September 2007 amounted to RM3.243 billion comprising exports of RM3.016 billion and imports RM227.3 million.

Major exports to Pakistan last year were palm oil and products, chemical products, electrical and electronic products, machinery and parts, and textiles and clothing.

Meanwhile, major imports from Pakistan in 2006 were textiles and clothing, fresh and frozen seafood, cereals including rice, electrical and electronic products and chemicals and chemical products.

Among the products that will benefit from duty elimination and reduction include fruits, natural rubber, leather, tea, cocoa and coffee, processed food, machinery and equipment, chemicals and chemical products, plastics and pharmaceuticals.

MITI also said there is further opportunity to broaden the product coverage and accelerate tariff liberalisation when Malaysia and Pakistan enter into another round of negotiations in 2009.

The MPCEPA will also facilitate trade through closer collaboration and greater information exchange in the areas of standards, including the establishment of mutual recognition arrangements (MRAs) on testing and conformity assessment procedures.

MRAs will help reduce cost and improve market access for goods and services subjected to standards and technical regulations; and issues relating to the implementation of sanitary and phytosanitary (SPS) measures imposed on agricultural products of trade interest to both sides.

On services, Malaysia’s offer to Pakistan include more favourable commitments than those made under the World Trade Organization (WTO) such as in engineering, tourism, construction, telecommunications, health services, architectural services, accountancy and professional and business services.

Malaysia also pledged new commitments in selected sectors such as maritime transport, franchise and energy and gas services as well as commitments in financial services.

These involve new licenses on Islamic Banking and Takaful to qualified Pakistan financial institutions which undertake businesses in international currencies in Malaysia and for insurance companies to establish representative offices in Malaysia and employ Pakistan expatriates in these entities.

In turn, Pakistan is offering maximum foreign equity participation of 60 per cent in all sectors; no limitations on the number of Malaysians employed per organisation; and sectors of interest to Malaysia include professional services, construction and related engineering services, education services and telecommunication services.

On investment, the agreement also provides a framework which enhances the predictability and transparency for facilitating cross-border investment between the two countries through commitments on national treatment, most-favoured-nation treatment (MFN) and enhanced protection of investors and investment.

It also recognises each other’s sensitivities and development needs and allows for flexibilities in scheduling the commitments.

Cumulative Malaysian investments in Pakistan as at 2006 amounted to RM651 million which include investments in power generation, property development, construction, telecommunications, palm oil processing, and oil exploration.

Meanwhile, Pakistan’s cumulative investment in Malaysia in manufacturing projects as of August 2007 totalled RM49.2 million and are mainly in food processing, textiles and textile product, wood and wood products, chemicals and chemical products, transport equipment and rubber products.

Malaysia and Pakistan have also agreed to undertake joint tourism promotion and marketing through trade fairs and sales missions and share experiences in research and development.

Malaysia has also offered to share expertise and technical know-how in skills training and certification, and use of rubber bearings in the construction of buildings in earthquake prone areas.

In healthcare, Pakistan will provide technical support in academic staff/lecturers in healthcare training institutions such as medical, dental, pharmacy and nursing as well as in telecommunications - cooperation in human resource development (policy and regulatory) and manufacturing of telecommunication equipment.

They will also be exchange of information and cooperation among enforcement agencies and educational institutions in order to give sharper focus to intellectual property rights protection.

They also agreed on a comprehensive set of WTO-based dispute settlement procedures which would enable any differences on the interpretation or implementation of the agreement to be resolved quickly.

MITI said the existing bilateral trade agreement, Investment Guarantee Agreement and the Early Harvest Programme will be effectively replaced by the more comprehensive and substantive new pact.

Both countries will review the MPCEPA every five years.

The text of the MPCEPA and schedules of goods and services offers are available on MITI’s website at

 source: New Straits Times