The News International (Pakistan) | 19 February 2007
Pak-Malaysia free trade talks hit snags
By Aftab Maken
ISLAMABAD: The ongoing dialogue between Pakistan and Malaysia on a free trade agreement (FTA) has hit snags as the main stakeholders in the country strongly oppose the proposed 20 per cent cut in tariff on the import of palm oil as demanded by Malaysia.
According to a senior official of the Ministry of Food, Agriculture and Livestock, vegetable oil extractors have objected to the duty reduction fearing it would deal a severe blow to the local industry.
“Vegetable oil extractors are against the reduction in import duty on palm oil while vanaspati ghee manufacturers are in favour of a duty cut, as international prices of palm oil have touched a record high level,” the official said.
During the visit of Malaysian prime minister to Pakistan in November 2006, Malaysia said if Pakistani authorities did not accept 20 per cent reduction in import duty on palm oil, then no free trade accord would be finalised.
Malaysia wants the reduction of 20 per cent regulatory and customs duty on the import of crude palm oil (CPO) at any cost.
Currently, Pakistan is charging a fixed Rs9,550 per ton regulatory and customs duty on CPO import in addition to 15 per cent sales tax, but refineries are allowed to import CPO at a duty of Rs9,000 per ton.
The Ministry of Industries and Production has already proposed to the Economic Coordination Committee of the cabinet to approve a cut in import duty on palm olein. The Ministry of Commerce also supported the move.
However, the Ministry of Food, Agriculture and Livestock only wanted a 10 per cent reduction in duty, as it believed a big reduction would hurt domestic production of vegetable oil, which accounted for nearly 15 per cent of the total consumption in Pakistan, the official said.
Pakistan is the world’s fourth largest consumer of vegetable oil with a demand of 2.5 million tonnes, 85 per cent of which is covered by imports, mostly Malaysian palm oil and olein. Only 15 per cent of the demand is met from domestic sources.
Official estimates suggest Pakistan imports 1.6 million tonnes of palm oil from Malaysia annually, majority of which is refined palm olein. The prices of palm oil have shot up in the international market, pushing the rates up in the local market.
Currently, trade volume between Pakistan and Malaysia stands at $600 million, which is expected to increase to $1 billion.