How to increase trade between Pakistan and Sri Lanka

By Nasria Naffin

The Pakistan Sri Lanka Free Trade Agreement (PSFTA) was officially implemented on June 12th, 2005. Since the Agreement went into effect, there has been a discernible increase in the amount of trade that has taken place. In March 2009, Pakistan fulfilled its final commitment to phase out tariffs, and as a result, Sri Lanka now has access to duty-free markets for more than 4,500 different products. In November of 2010, Sri Lanka also finished fulfilling all her commitments related to the phasing out process.

During the same time period in 2010, Sri Lanka's exports to Pakistan totaled US$ 26 million. However, during the same time period in 2011, those exports increased to US$ 34 million, representing a growth of 30.8%. This rise was primarily the result of a significant increase in exports during the same time period in both 2011 and 2010, including natural rubber, vegetable products, desiccated coconut, new pneumatic tires, MDF boards, dried leguminous vegetables, copra, natural graphite, woven fabric, and many others.

However, the exports of certain products, such as oil cake and other solid residues, sewing thread of man-made staple fibers, tea, nutmeg, pepper, rubber strips, coconut oil and its fractions, and so on, have recorded decreases during the period of January to May in 2011 in comparison to the same time period in 2010. After the PSFTA was implemented, a wide variety of recently developed goods began to make their way into the Pakistani market. Compared to the number of Certificates of Origin issued under the PSFTA during the same period in 2010, a total of 2,352 Certificates of Origin were issued under the PSFTA during the months of January through May of 2011.

After two rounds of negotiations, in January 2008 in Colombo and in May 2008 in Islamabad, the proposed comprehensive economic cooperation arrangement with Pakistan is currently at a standstill. However, at the Pre-JEC meeting in March 2011, the Sri Lankan and Pakistani sides concurred that the 10th Session of the JEC should also be used to discuss the future course of action that should be taken with regard to the proposed CEPA.

Sri Lanka and Pakistan have strong, long-standing trade and economic ties. In the SAARC region, Pakistan ranks as Sri Lanka's second-largest trading partner. Sri Lanka was the first nation to sign a free trade agreement with Pakistan. Bilateral trade has significantly increased, especially since the Pakistan-Sri Lanka Free Trade Agreement came into effect.

in 2005 (PSFTA). The total value of trade between the two nations increased from US$158,000,000 in 2005 to US$508,000,000 in 2018. The trade gap has grown significantly over time, and the balance of trade (BOT) has always favored Pakistan.

Desiccated coconut, MDF boards, betel leaves, bulk tea, textile items, industrial and surgical gloves, crepe and sheet rubber, cartons, boxes, and bags, copra, coconut oil, ekels, woven fabrics, animal feed, etc. are some of the main exports from Sri Lanka to Pakistan.

Portland cement, medications, potatoes, woven fabrics, pipes and tubes, bedside tables, kitchenware, toiletries, rice, denim fabric, fish, and other goods are among the main imports from Pakistan to Sri Lanka.

This significant increase in bilateral trade, which has been observed particularly since the FTA's implementation, reflects the potential for both countries to increase the two-way trade further already taking place.

The level of bilateral investment between the two nations is very low. There are currently a few projects being carried out in Sri Lanka by Pakistani investors in sectors such as chemicals, rubber, plastic, apparel manufacturing, leather products, food, beverages, etc. The business community in Pakistan and Sri Lanka is becoming more interested in taking advantage of opportunities that are opening up in a variety of sectors, but closer collaboration is now required if they are to be taken advantage of.

Steal, pharmaceutical, plastic, sugar, poultry, and other industries in Pakistan have a competitive edge over those in Sri Lanka in these same industries. Whereas Pakistan could not, Sri Lankan industries can cooperate with these industry sectors and increase their exports to other regions by taking advantage of their preferential market access, particularly thanks to all the free trade agreements Sri Lanka has signed.

Business people and industrialists from Sri Lanka should research these sectors and any potential advantages in market access, and they should work with Pakistani sectors to grow their companies.

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