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RI, Pakistan to conclude PTA review in February
Indonesia and Pakistan have set a goal to conclude a review of their preferential trade agreement (PTA) in February on the back of a large trade imbalance and decline in exports suffered by Pakistan in previous years
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ndonesia and Pakistan have set a goal to conclude a review of their preferential trade agreement (PTA) in February on the back of a large trade imbalance and decline in exports suffered by Pakistan in previous years.
The review began in August 2016, almost three years after the PTA came into effect on Sept. 1, 2013.
Pakistan Commerce Ministry secretary Mohammad Yousuf Dagha said the country had asked Indonesia to lower tariffs and or provide a level playing field for another “20 tariff lines of Pakistan’s prime interests” in the agreement to create more balance.
“We have shared our concerns with the Indonesian Trade Ministry regarding the implementation of the PTA, and they have showed positive intent to address our concerns,” he told The Jakarta Post on the sidelines of Expo Pakistan 2017 in Karachi recently.
The 20 requested tariff lines include fabrics, yarn, leather, leather products, tobacco, rice, fresh fruits, carpets, surgical instruments and sports goods.
Indonesia is Pakistan’s third largest export destination with a 4.4 percent market share, Trademap data shows.
Since 2013, two-way trade has increased by 14.2 percent on average annually to US$2.1 billion in 2016 from only $1.5 billion in 2012, Indonesia Trade Ministry data shows. Indonesia’s exports to Pakistan increased by 10.1 percent to $2 billion in 2016.
However, purchases from Pakistan declined by 2 percent on average annually to $157.2 million in 2016, resulting in a $1.8 billion deficit for the South Asian country.
Indonesia has long acknowledged Pakistan’s concerns. Out of 232 tariff lines lowered in the existing PTA, only 32 tariff lines can be utilized by Pakistan.
Indonesia’s Trade Ministry international trade negotiation director general Iman Pambagyo said the additional 20 tariff lines requested by the counterpart already had a 0 or 5 percent rate under the agreement.
“So what Pakistan have asked for is a level playing field,” said Iman, referring to non-trade barriers that had prevented the two-way trade from reaching a fair competition level.
“We’re now consulting with related ministries and government institutions [regarding the non-tariff barriers] so that before we go to Islamabad [Pakistan] in February, we will already have our stance,” he added.
Indonesian officials are also aware that Malaysia, Indonesia’s rival in the crude palm oil (CPO) industry, has been eyeing improved trade relations with Pakistan to export more of its palm oil.
Indonesia Chamber of Commerce and Industry (Kadin) vice chairman Mufti Hamka said various non-tariff barriers included the lengthy import recommendation from related ministries, such as from the Agriculture Ministry for rice and kinnow oranges, and the Industry Ministry for fabrics and yarns.
“We know that protection is necessary for our local products but essentially we need to have more balanced trade to sustain two-way trade in the long term,” he said.
Mufti said non-tariff barriers could be easily lifted for fruits like kinnow oranges because Indonesia had different harvest seasons to Pakistan, but for rice it would be a sensitive matter because Indonesia was a major grower.
Palm oil is Indonesia’s main export to Pakistan, followed by fruits and man-made staple fiber. Indonesia mostly imports cereals, paper related products and cotton from Pakistan.
To increase exports to Indonesia, Kadin has urged Pakistani producers to improve the quality of their produce through the use of technology and laboratory testing for quality control regarding cotton.
For other goods, like surgical instruments and sports goods, Indonesian importers needed to be more aware that their counterpart’s products could compete head-to-head with Western products, said Mufti.
