Pakistan-RI Trade Could Reach $2 Billion

Jakarta, Indonesia | March 29, 2010 by D-8 Secretariat

With the signing of the PTA, Pakistan-RI trade relation can reach volume of $2 billion from the current $800 million

Backed by solid political and historical ties, Pakistan and Indonesia will enjoy stronger economic relations in the coming years, with bilateral trade growing to US$2 billion from the current $800 million per year, the Pakistani envoy says, as reported by the Indonesian media, the Jakarta Post.

In an interview Monday with The Jakarta Post, Pakistani Ambassador to Indonesia Sanaullah, who took up his post in January, said current bilateral investment and trade relations did not reflect the long-standing “excellent political relations” between his country and Indonesia, Southeast Asia’s biggest economy.

“We don’t have any tension at all in our political relations,” he said.

“In fact, we have strong historical ties stretching from the Sukarno era back in the 50s and 60s. We have so much in common, such as a shared religion, culture and even cuisine that can be used as foundation for our relations.”

A number of Pakistani soldiers even fought in Indonesia’s struggle for independence, Sanaullah added.

He said the shared values were reflected in both countries’ similar stance on international problems, including the Middle East conflict, climate change and terrorism, with solid cooperation exhibited at the United Nations and the Organization of Islamic Conference over many issues.

Like Indonesia, Pakistan is a staunch supporter for a two-state solution to the Palestine-Israel conflict, Ambassador Sanaullah said.

“We would like to translate all those commonalities into stronger investment and trade ties,” he said.

“We hope to sign the preferential trade agreement [PTA] within the next three or four months.”

The deal, he went on, would allow both countries to boost their own exports, with Indonesia especially being able to increase its export of crude palm oil (CPO) to Pakistan, while the latter maximized its exports of textiles, carpets, chemicals and leather goods.

“With the signing of the PTA, we can reach bilateral trade volume of $2 billion from the current $800 million,” Sanaullah predicted.

“The agreement is also a first step toward negotiating a broader free trade agreement [FTA].”

The ambassador added some pending issues, including a disagreement on tariffs for certain products, needed to be ironed out to before any such agreement could be signed.

The Indonesian government said late last year it would seek to expedite negotiations on the PTA with Pakistan, with Trade Minister Mari Elka Pangestu adding the two governments had only a few issues left to sort out.

The ministry has identified these as the tariffs on CPO and kino.

Sanaullah said the urgency for the PTA was evident in the decline in the overall bilateral trade value of Pakistan and Indonesia, from $1 billion in 2007 to $800 million in 2008, because tariff disagreements had discouraged the export of CPO from Indonesia to Pakistan.

The Trade Ministry says Indonesia’s share of the Pakistani CPO market dropped from 50 percent in 2007 to 28 percent in 2008.

The Indonesian Agriculture Ministry says Pakistan has imposed import duties of Rp 9,100 a ton on CPO and its derivatives from Indonesia, and 10 percent less on identical products from Malaysia because of a
trade agreement between the two countries.

Indonesia’s CPO and CPO-based products contribute between $400 million and $450 million to Indonesia’s total exports to Pakistan, the Trade Ministry says.

Pakistan, for its part, says Indonesia’s higher tariffs have disrupted its exports of oranges to the country.

Elsewhere, Sanaullah said more Pakistani businesses were investing in Indonesia.

“Although we don’t have the exact figure, many will be surprised at the level of investment of Pakistani firms here once we come out with the data,” he said.

Sanaullah said he planned to bring together Indonesian and Pakistani businesspeople more frequently to nurture business opportunities.

“I believe that only through more contacts between businesspeople can we expect a higher level of trade and investment,” he said.

Photosource: The Telegraph, UK.

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