Partnering Pakistan

By Cheranka Mendis 

Trade volume between Sri Lanka and Pakistan can easily surpass the US$ 1 billion mark if the countries work at improving business relations by making maximum use of the agreements that have been signed over the years.

Sri Lanka’s second largest trading partner in the SAARC region, Pakistan, which accounts to 0.7% of total exports in value terms, has been marked as the 26th export destination for the country. According to statistics by the EDB, by October this year trade between the two countries amounted to US$ 345.14 million.

Even though the balance of trade weighs favourably towards Pakistan, where Sri Lanka has spent US$ 283.16 million during the said period for imports and exports to Pakistan amount to US$ 61.98, the countries have much to benefit if the current agreements are exploited to its maximum.

The necessary institutional infrastructure for promotion has already been implemented in the form of a Free Trade Agreement (FTA) on goods, a Bilateral Investment Treaty and an MOU on Customs Cooperation.

The business framework exists, said High Commissioner of Pakistan Semma Ilahi Balcoh. Claiming that local businessmen and investors still had apprehensions about trade with Pakistan, Balcoh pointed out that nearly half of the value chain between the countries was raw material exports, which have much scope for development. “Sri Lankan traders can benefit from raw material from Pakistan,” she said.

“Rice, vegetables, fruits, etc. that can be imported from Pakistan at a lower cost can help reduce food inflation in Sri Lanka,” Balcoh expressed. “People are not looking at this; taste and quality of Pakistani food is much better than what you get here. I would encourage looking at this supply area, which is closer and cheaper. Logistics costs would be less than importing from Western countries and the shelf life would be longer.”

The country hopes to open up its mango business to Sri Lanka as well. Stating that Pakistani mangoes were the best in the world, she noted that there were quarantine issue previously relating to imports of mangoes to Sri Lanka.

“We successful export mangoes to a number of countries, including Japan, USA and the EU. What is important is that we will pose no threat to the local suppliers as our season is different to the local one.”

There is also potential to export local fruits such as papayas to Pakistan.

There are many joint venture possibilities as well. Citing examples, Balcoh stated that ventures could be formed in the timber and furniture industry where Sri Lanka could supply the quality timber and Pakistan could provide the craftsmanship. Sri Lanka can also benefit from Special Economic Zones coming up in Pakistan which offer various concessions for investors. Sugar and cement industries also stand to benefit from strengthening ties between the countries.

On business and investor apprehension on the security situation, Balcoh noted: “Conflict prevails anywhere. Security threats have different dimensions. You have gone through this for 30 years. You should understand it better than any other country that life goes on no matter what and you need to support us.”

She said: “The World Bank recognised us as the 83rd business friendly country in the world based on the recent performances. We have also been noted as the first most business friendly location in the region.”

“Possibilities of trade between countries are much wider than the limited trade currently going on,” EDB Chairman Janaka Ratnayake said. “What is important is to diversify exports and to explore beyond the traditional trade of rubber, tea and betel leaves.”

Ratnayake stated that Sri Lanka could also use the FTA between Pakistan and China to explore the growing Chinese market. However, Sri Lanka could possibly look forward to a FTA tie-up with China, he said. Discussions are currently taking place and issues are being ironed out, he added.

From Sri Lanka’s side, the EDB has planned several trade promotion events between the countries in 2012. Among the plans is an invitation to Pakistan to lead a trade delegation to Expo 2012 to be held in March and a delegation of exporters and investors from Sri Lanka to go to Pakistan.

EDB also hopes to conduct a series of seminars to create awareness, mini exhibitions for women entrepreneurs from both countries, single country exhibitions and trade fair participation.

“Pakistan and Sri Lanka enjoy a strong and long-standing bilateral and multifaceted relationship, including economic cooperation. Sri Lanka considers Pakistan as a true friend who stood with the people of Sri Lanka during the difficult times.

EDB is quite willing to join hands with the High Commission of Pakistan in Sri Lanka to expand volume of trade between the two countries to further strengthen the long standing commercial ties for mutual benefit.”

“There is untapped, vast potential for enhancing trade using the tariff concessions available under the Pakistan-Sri Lanka Free Trade Agreement. Despite the concessions available under the FTA, Sri Lanka’s exports to Pakistan accounted for less than 1% of total exports of the country,” Ratnayake said.