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Sri Lanka-Pakistan trade: Minor hiccups, major hindrance

Sunday Observer, Sri Lanka

Minor hiccups, major hindrance

By Gamini Warushamana

8 November 2009

Negative trade balance is not always negative. It could be looked in a broader context said the Head of Chancery of the Pakistan High Commission in Sri Lanka Balal Akram. Referring to the negative trade balance between the countries which is favourable to Pakistan Akram said that 35 per cent of Sri Lankan imports from Pakistan are raw material for the apparel industry.

They are the best quality with lowest price. The apparel manufactured using the raw materials are exported to Europe and the US which makes positive trade balance with Sri Lanka, he said.

He was addressing a meeting of Sri Lankan traders and officials of the Pakistan High Commission in Colombo last week. The meeting was held to discuss the issues in implementing the Free Trade Agreement (FTA) between the two countries and explore the untapped potentials and opportunities in the bilateral trade.

The meeting was organised by the National Chamber of Commerce of Sri Lanka (NCCSL). At the discussion the President of the NCCSL Chandra Lal de Alwis said that after signing the FTA, trade has increased between the countries. Sri Lankan industries, especially the apparel industry benefits from the FTA and Pakistan produces high quality cotton yarn and textiles, inputs for the garment industry, Alwis said.

Once upon a time, Sri Lanka was the largest tea exporter to Pakistan but later Kenya took over the market. Betel, copra and spice exports to Pakistan has been affected due to smuggling of these products from India via Kashmir border. Rubbe, the main export from Sri Lanka to Pakistan was affected due to technical issue in HS codes, traders complained.

The Third Secretary of the Pakistan High Commission Mariam Saeed said that in an open market economy comparative advantage is the rule of the game.

She said that Sri Lankan betel exports to Pakistan was lost to India and Bangladesh after the abolition of the margin of preference.

Though Sri Lankan betel, with of high quality the Indian and Bangladesh products are cheaper and therefore in a competitive market price is also crucial, she said.

Referring to tea exports to Pakistan she said that Dilmah Tea dominates a segment of the Pakistan market especially in Karachi and Islamabad. Value added tea products from Sri Lanka has a high demand in Pakistan. Therefore, exporters should understand the market situation. Kenyan tea captured the Pakistan market because of its lower price. Another factor is that Pakistan people prefer strong tea as they use them with milk. Normally Sri Lankan tea is light and exporters should realise these specifications, she said. Saeed said, that political hiccups affect the trade between the countries despite the FTA.

For instance Pakistan produces the world’s best mango and under the FTA, Pakistan can export mango to Sri Lanka at zero duty. Dates, apple, apricot and other varieties of fruits and agro products can be imported to Sri Lanka from Pakistan at a lower price, but Sri Lanka imports these products from far away countries such as Saudi Arabia and USA at a higher price. Due to political reasons Comprehensive Preferential Trade Agreement between the two countries is held.

She said that finding complementaries will be beneficial for both countries. Entering into collaborative projects and starting on joint economic ventures will create win win situation for both countries.

The two parties agreed to have discussions on trade issues and provide information.