Indonesia, Pakistan Preferential Trade Agreement effective from January

Jakarta: After long negotiations, Indonesia and Pakistan have signed an agreement on preferential trade that will go into force in January. Indonesian Deputy Trade Minister Mahendra Siregar said the agreement, the product of seven rounds of discussions, would bring advantages to both nations and serve as a foundation for more solid economic and trade cooperation.

“We are upbeat that this agreement will open ways to raise the volume of our bilateral trade, which will benefit both of us and can be realized soon,” he said according to Jakarta Post. The Preferential Trade Agreement (PTA) was signed late Friday at his office in Jakarta. Mahendra added that the deal would also help Indonesia anticipate future developments in a more-challenging global economy and diversify its export markets to increase its resilience amid the current economic slowdown.

Talks on the PTA, which started in 2005, were delayed as Indonesia and Pakistan could not find a common ground on tariff reductions for several commodities, including for both nations’ principal export commodities: Indonesian palm oil and Pakistani kino oranges. Zafar Mahmood, the secretary of Pakistan’s Ministry of Commerce, said he expected that Pakistani businesses would increase exports to Southeast Asia’s largest economy under the PTA, including textile exports.

“We want to look towards Indonesia and the East, because most of their exports are now to the European Union and to America. We want them to concentrate more on Asian countries because these are the future markets.” Mahmood said that he expected to take a further step to broader economic integration by beginning talks with his Indonesia on a free trade agreement (FTA) in early 2012.

Fadhil Hasan, chairman of the Indonesian Palm Oil Producers Association (Gapki), said he welcomed the agreement, expecting that palm oil exports would rebound under the PTA to their pre-2007 level of around US$560 million, when Indonesian palm oil had a commanding 55 percent market share in Pakistan. “With the PTA, our palm oil will be more competitive and we’ll be able to raise our market share. Although it may take time to build our networks again and penetrate the market,” Fadhil told.

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