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Malaysia may export palm oil to Pakistan under FTA

This narrowing down of differences on palm oil and textile products led to the conclusion of the much awaited FTA at a technical level meeting held in Kula Lumpur last week. This would be the Pakistan's third bilateral arrangement after Sri Lanka and China.

The treaty is estimated to enhance the volume of bilateral trade between Pakistan and Malaysia to at least $5 billion in the next five years from less than a billion dollar at present. The bilateral trade will, however, be highly tilted in Malaysia's favour.

Pakistan exports are expected to surge to $1.5 billion from current $70 million, while the import bill would easily cross the mark of $3 billion from $700 million because of greater import of palm oil.

A diplomatic source said under the treaty, Pakistani textile products will be the major beneficiary to enhance its share in the Malaysian market. The duty on all Pakistani textile products of chapter 52 to 60 will be scaled down to zero per cent within five years from current maximum 25 per cent after the implementation of the agreement.

The total export of Pakistan to Malaysia constitutes more than 64 per cent of textile exports. Pakistani textile products are facing a tough competition from Thailand and Indonesia in the Malaysian market due to the Asean treaty. For Asean members, the customs duty ranges around five per cent while it ranges between 20 and 25 per cent for non-Asean countries.

On the other hand, Pakistan has agreed to offer 15 per cent reduction in import duty on palm oil within a period of five years. The five per cent reduction in duty would come into effect with the implementation of the agreement. The remaining 10 per cent reduction in import duty would be spread at a span of five years with annual reduction of two per cent.

Pakistan has also committed with Malaysia that Islamabad would not offer this concession to any other country on palm oil imports under any arrangement. The palm oil constitutes more than 70 per cent share of the Malaysian total exports to Pakistan. Both sides also agreed to reduce customs duty to zero per cent on fruits and vegetables on reciprocal basis with the rules of origin wholly produced. Pakistani fruits like citrus, mangoes, dates and kinoos would get more market access in the Malaysian market. Maximum duty on mangoes can only be reduced to five percent, while the rice would attract zero customs duty under the agreement.