COLOMBO: Pakistan and Sri Lanka have the potential to increase bilateral trade over six times from the current $380 million to $2.7 billion by just effectively utilising their Free Trade Agreement (FTA), a study has revealed.
The Pakistan Business Council (PBC), a not-for-profit research-based business advocacy forum that represents Pakistan’s 47 largest businesses, conducted the study titled “An assessment of the Pakistan-Sri Lanka Free Trade Agreement”.
According to the study, despite favourable terms in the FTA and healthy export markets, both countries have failed to improve bilateral trade. “Pakistan and Sri Lanka boast of strong political ties and this makes current low trade volumes more alarming.”
Inability to establish connections between business communities and policies of the two countries are the major problems hindering commerce.
“There is a misconception in both countries about the trade potential because of which neither country views the other as a priority market despite abundance of opportunities,” it noted.
Absence of regular visits of trade delegations and single-country exhibitions has led to weak business links between business communities of the two countries.
One of the major complaints of Pakistani exporters is the lack of interaction with their Sri Lankan counterparts that has affected the identification of more opportunities and strengthening of current partnerships, the study says.
The study recommends frequent exchange of trade delegations and holding of single-country exhibitions to lay the groundwork for stronger trade ties. It also urges the two countries to grant on-arrival visas to facilitate the interaction required to boost trade.
Sri Lanka was the first country with which Pakistan signed FTA in 2002, which came into effect in 2005. The terms of the agreement were comprehensive and granted 100% immediate concession to major Pakistani export goods such as cotton and cement and major Sri Lankan export products such as rubber and coconut products.
Pakistan’s exports to Sri Lanka grew from $154 million in 2004 to $316 million in 2013, an increase of 105% in nine years. Pakistan only accounted for 1.7% of total Sri Lankan imports from the world in 2013.
On the other hand, Sri Lankan exports to Pakistan grew from $46 million to $63 million, an increase of just 37% during the period. Sri Lanka had only 0.14% share in Pakistani imports from around the world in 2013.
What is worrisome is that both countries are still trading in the same products in which they were dealing prior to the FTA while most tariff lines continue to show zero trade. This is in stark contrast to Sri Lanka’s trade relations with India and China where a significant and fast-paced growth has been achieved.
Trade between Sri Lanka and India grew from just $658 million in 2000 to $3.6 billion in 2013, an increase of 450% in 13 years since the two countries signed the FTA in 2000. With China, bilateral trade also exceeded $3 billion in 2013.
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