Indonesia-Pakistan FTA Finally Enters Into Effect

The Preferential Trade Agreement (PTA) between Indonesia and Pakistan, which was signed in February last year, came into effect from September 1 following the signing of an additional Mutual Recognition Agreement (MRA) in which Indonesia recognized Pakistan as a pest-free area for kinnow.

In November 2005, Pakistan and Indonesia completed a comprehensive economic partnership agreement, one of the provisions of which was that the countries, in 2006, commenced negotiations to conclude a PTA. The latter agreement was after the two countries had successfully concluded the final eighth round of negotiations held 1n September 2011.

Under the PTA, Indonesia will offer market access to Pakistan for 216 products at preferential rates, including fresh fruits, cotton yarn, cotton fabrics, ready-made garments, sports items and leather goods. Pakistan's PTA offer list to Indonesia includes a total of 287 tariff lines at preferential tariffs, and it also agreed to give the same treatment to Indonesian palm oil products as provided to Malaysia under the Pakistan-Malaysia free trade agreement (FTA).

In addition, Indonesia will cancel its tariffs on imports from Pakistan of the regionally-important citrus fruit, kinnow (a type of mandarin), creating a level-playing field in the Indonesian market for this product, which is produced in both Pakistan and India. The latter has a completed FTA with the Association of Southeast Asian Nations, of which Indonesia is a member, and therefore India already receives zero tariffs for kinnow exported to Indonesia.

Completion of the MRA between Indonesia and Pakistan has now removed the non-tariff barriers being faced by Pakistani exports of kinnow to Indonesia and to allow the entry of the fruit through the port in Jakarta.

It is hoped that, following the coming into effect of the PTA, total trade between the two countries will reach USD2bn next year, and that improved trade relations will lead to movement towards the next target for Pakistan, the completion of a full bilateral FTA with Indonesia.

Source: Tax News