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 Post subject: Trade between Sri Lanka and Pakistan are expected to double
 Post Posted: Tue Apr 26, 2005 2:04 am 
Green Bounty

25 April 2005 20:55 hours

Trade between Sri Lanka and Pakistan are expected to double when a free trade deal between both nations kick in from mid June, a top Pakistani diplomat said Monday.

Modeled on similar lines as the Indo-Lanka free trade agreement, Sri Lanka will get immediate duty free access for 206 items into Pakistan, the second largest market in the South Asian region.
Pakistan in turn will be able to export 102 products to Sri Lanka at zero duty.

Sri Lanka is also getting preferential access for tea, betel, ceramic and apparel while Pakistan gets tariff cuts immediately for potatoes and Basmathi rice.

South Asian countries coming under the SAARC (South Asian Association for Regional Cooperation) have been working on bilateral trade deals between individual countries as the proposed SAPTA (South Asia Preferential Trade Agreement) is yet to materialise.

The Pakistani government has ratified the trade list, but Sri Lankan counterparts have yet to get cabinet approval.

"We are hoping to finalise things early next month and implement the trade agreement by mid June," Pakistan's High Commissioner for Sri Lanka Bashir Wali Mohmand told reporters.

Trade between both countries is currently tilted towards Pakistan, with Sri Lanka importing US$ 97 mn worth of goods mostly, textile fabric, chemical products and rice. For the financial year ending 2004, Pakistan imported US$ 49 mn worth of goods mostly betel leaves and nuts from Sri Lanka.

However, Mohmand says the trade numbers do not reflect Sri Lanka's military purchases from Pakistan.

Sri Lanka's Commerce Department says local businesses should also look out for opportunities in channelling trade between India and Pakistan, using Sri Lanka's separate FTA's with the two countries.

Because of trade restrictions imposed by India and Pakistan against each other, due to political tensions, the formal trade between the two regional giants only comes to around US$ 300 million.

"Sri Lanka can act as a conduit for trade between India and Pakistan," says Executive Director of the Institute of Policy Studies, Saman Kelegama.

Officials from the Pakistan High Commission in Sri Lanka, say informal trade between the borders of Pakistan and India could be as high as US$ 1 billion.

This is where Sri Lanka can step in, using the already operational Indo-Lanka FTA.

"It will help to reduce the informal trade between these countries," says Kelegama.

Immediately however, the increase in trade from the Pakistan FTA is seen as low, compared to trade with India, but trade benefits are more in Sri Lanka's favour.

"Short run static benefits of free trade are low and weighted towards Sri Lanka due to existing tax regimes in Pakistan," says Kelegama.

Sri Lanka's duties on exports from Pakistan are already lower than Pakistan duties on Sri Lankan exports.

For instance textiles, the major Sri Lanka import from Pakistan, are allowed duty free entry anyway.

Pakistan on the other hand has higher tariffs on major Sri Lankan exports – 25 percent duty on tea and copra and 20 percent on rubber.

The FTA will see most of these Pakistani tariffs come down immediately.

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