Pakistan-Malaysia Free Trade Agreement: progress in closer partnership in D-8

Kuala Lumpur, Malaysia | December 02, 2007 by D-8 Secretariat

The Comprehensive Free Trade Agreement (FTA) for Closer Economic Partnership between Pakistan and Malaysia was approved by the Cabinet on 6th November, 2007. It was signed on 08-11-2007 at Kuala Lumpur Malaysia. Lt-Gen (Retd) Tahir Mahmud Qazi, Pakistan’s High Commissioner to Malaysia, signed the Agreement on behalf of the Government of Pakistan and Her Excellency Rafidah Aziz, Minister of International Trade & Industry (MITI), Government of Malaysia represented her government. Mr Shahid Bashir, Joint Secretary and Abdul Qadir Memon, Deputy Secretary Ministry of Commerce were also present at the time of the signing of the Agreement.

This agreement is adding to another FTA between D-8 member states, i.e Egypt and Turkey that has entered into effect since March 2007 after ratified by both countries’ parliements. This Agreement is Pakistan’s first comprehensive FTA incorporating trade in goods, trade in services, investment and Economic Co-operation and Malaysia’s first bilateral FTA with any south Asian country.

The negotiations with Malaysia on a comprehensive FTA started in early 2005. The Early Harvest was successfully negotiated and signed in December 2005 during the visit of Prime Minister Shaukat Aziz to Malaysia in which both countries provided market access to a limited number of products. After the implementation of the Early Harvest, Pakistan’s negotiating team under the leadership of the Ministry of Commerce and comprising all the stakeholder ministries continued the negotiation to conclude the Agreement.

The Agreement is a timely initiative by the Government of Pakistan to secure market for its export products in Malaysia and deepen the economic and trade relationship with an important member of the region.

For trade in Goods Pakistan will eliminate tariff on 43.2% of the current imports from Malaysia by 2012. On the other hand Malaysia will eliminate tariff on 78% of imports from Pakistan.

Pakistan will reduce tariff on 7 palm oil tariff lines by 15 per cent Margin of Preference (MoP) that is 10 per cent in 2008 and an additional 5 per cent in 2010. There will, however, be no reduction on the rates of sales tax / Federal excise duty levied at 15% and withholding tax charged @ 2% on the imported palm oil.

To qualify for preferential treatment, the goods have to satisfy the Rules of Origin.

In trade in services, both countries have provided WTO plus market accesses to each other. In the field of computer and I.T related services, Islamic Banking, Islamic Insurance (Takaful) Pakistan has secured 100% equity in Malaysia. Market access in services provided by both countries will impact positively on investment and trade in goods. Mutual recognition arrangements are also apart of the FTA. These arrangements will provide a framework for accreditation of education institution and academic programme and facilitate the effective and efficient delivery of services.

The Agreement also contains a chapter on investment to facilitate entrepreneurs of both countries. The incentives available to both countries will not be available to investors from other countries and the bilateral investment treaty signed by Pakistan will have no impact on the investment provisions under the FTA.

News/photosource:  Ministry of Commerce, Government of Pakistan.

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