* Customs duty reduced on import of 5,921 items

01/01/2008 (The Daily Times, Pakistan), Islamabad - Pakistan and Malaysia are set to enter into a free trade arrangement (FTA) from New Year today under Malaysia-Pakistan Closer Economic Partnership Agreement (MPCEPA) 2008-2014.

In this regard, Federal Board of Revenue (FBR) on Monday announced customs duty reduction on import of 5,921 items under tariff reduction schedule spanned 2008-2014 agreed between the two countries. The ministry of commerce, in this regard, has notified MPCEPA Determination of Origin of Goods Rules, 2007 to facilitate bilateral trade under the agreed framework.

For trade in goods Pakistan has eliminated tariff on 23 percent of the current imports from Malaysia. On the other hand Malaysia will eliminate tariff on 78 percent of imports from Pakistan.

The agreement is an initiative by the government of Pakistan to secure market for its export products in Malaysia and deepen the economic and trade relationship with an important member of the region.

Pakistan has decided to reduce tariff on palm oil by 10 percent MOP on January 01, 2008. The prices of palm oil in the international market have witnessed an unprecedented increase. During the last one year its price has increased from $400 to $900 PMT. It is likely to reach $1,000 by the end of this year. There will, however, be no reduction on the rates of sales tax/federal excise duty levied at 15 percent and withholding tax charged at 2 percent on the imported palm oil.

Pakistan has given market access to Malaysia on basic raw materials, intermediate goods and machinery. Pakistan has obtained market access for its core export products like fruits and vegetables, seafood, beverages, confectionary, biscuits, gems and jewellery, cotton yarn, cotton fabric, blankets, bed linen, other home textile products and tents and tarpaulins, medicaments and surgical instruments etc.

Under the tariff reduction schedule import duty on crude oil from January 1, 2008 to be reduced to Rs 8,100 per MT and from January 2014 Rs 7,650 per MT. Palm stearin from January 1, 2008 Rs 8,145 per MT and from January 1, 2014 onwards Rs 7,692.5 per MT. Import duty on import of RBD palm oil from January 1, 2008 Rs 9,720 per MT and from January 2014 Rs 9,180 per MT. Palm olein’s import duty from January 1, 2008 and from January 2014 Rs 7,692.5 per MT. Margarine, excluding liquid margarine from January 1, 2008 Rs 1,0260 per MT and from January 2014 onwards Rs 8,640 per MT.

The issued notification SRO 1261 (I)/2007 stated that in case the rate of customs-duty specified in columns of Table-I and specified in columns of Table-II, as the case may be, is higher than the rate of customs-duty specified in the first schedule to the said act, the lower rate of customs-duty shall be applicable: Provided further that the goods shall be imported in conformity with the ‘MPCEPA Determination of Origin of Goods Rules, 2007’ notified by the ministry of commerce vide notification SRO 1205(I)/2007 read with the Import Policy Order as notified by the ministry of commerce, from time to time.

Pakistan and Malaysia Comprehensive Free Trade Agreement (FTA) was signed at Kuala Lumpur Malaysia. FTA is the first bilateral FTA between two Muslim Countries - members of OIC. This agreement is Pakistan’s first comprehensive FTA incorporating trade in goods, trade in services, investment and economic co-operation and Malaysia’s first bilateral FTA with any south Asian country. This agreement shall provide a strong foothold to Pakistan in the ASEAN region and help Pakistan achieve summit level partnership with ASEAN.

Exports from Pakistan were being subjected to higher tariff in Malaysia as compared to similar goods exported from ASEAN member countries. Resultantly, Pakistan was losing market in Malaysia for its core export product. This agreement would provide a level playing field to Pakistani products in Malaysian market.

In trade in services, both countries have provided WTO plus market accesses to each other. In the field of computer and IT related services, Islamic Banking, Islamic Insurance (Takaful) Pakistan has secured 100 percent equity in Malaysia. Market access in services provided by both countries will impact positively on investment and trade in goods. Mutual recognition arrangements are also apart of the FTA. These arrangements will provide a framework for accreditation of education institution and academic programme and facilitate the effective and efficient delivery of services. The agreement also contains a chapter on investment to facilitate entrepreneurs of both countries.