Indonesia has issued a formal notification for the correction of Indonesia-Pakistan Preferential Trade Agreement (IP-PTA) by offering immediate market access for 20 products of Pakistan’s prime interest.
The priority products included mangoes, broken rice, ethanol, tobacco, yarn and fabric, home textile, terry towel, apparel and knitwear.
A memorandum of understanding to amend the Preferential Trade Agreement between the two countries was signed during the visit of the Indonesian president in January 2018. Following this, a meeting was held between the Indonesian trade minister and Commerce Secretary Younas Dagha on the sidelines of Shanghai Expo in 2018 wherein the latter underlined the need for correction in PTA and requested for early resolution of this issue.
The secretary also took up the issue of non-tariff barriers imposed on Pakistani agriculture products by Indonesia. Owing to the sustained efforts of the Ministry of Commerce, Indonesia has finally offered unilateral market access for Pakistani products.
IP-PTA was signed in 2012; however, it failed to help Pakistan’s exports grow in the Indonesian market. Despite the PTA, Pakistan’s exports to Indonesia showed a negative growth during the post-PTA period; the figures came down to $141 million (2016-17) from $236 million (2011-12). However, 2017-18 proved a good year for Pakistan’s exports, which jumped to $296 million.
The balance of trade was highly tilted in favour of Indonesia. At the time of the signing of the PTA, the total volume of bilateral trade was $1.6 billion, which reached $2.8 billion in 2017-18. All the growth in bilateral trade was due to an increase in Indonesia’s exports to Pakistan, which were recorded at $1,720 million in 2013-14 and increased to $2,530 million in 2017-18.
The Ministry of Commerce took up this matter with the Ministry of Trade Indonesia during review meetings of IP-PTA. Subsequently, three review meetings were held and Indonesia acknowledged concerns expressed by Pakistan regarding adverse effects of IP-PTA on Pakistan’s exports and finally agreed to unilaterally grant zero duty on 20 products of Pakistan export interest.
Formal notification of inclusion of additional tariff lines in the IP-PTA has now been issued after the approval of the president and effective from 1st March 2019.
During the previous year, Pakistan exported 200,000MT of white rice and 200,000MT of wheat to Indonesia. Recently, the Ministry of Commerce has managed to get special permission from Indonesia to export mango for the upcoming season as well.
Traditionally, Indonesia has been one of the leading export destinations for Pakistani kinnow. In wake of these new tariff concessions, exporters of denim fabric, ethanol, towel, leather and home textile products are very excited and eager to exploit the potential of the Indonesian market.
Advisor to Prime Minister on Commerce Abdul Razak Dawood thanked the Indonesian government for understanding the negative impact of the PTA on Pakistan’s trade and for addressing the issue accordingly. The advisor stated that Pakistan would review other FTAs/PTAs as well to make them more beneficial for the country.