Business Times

Sri Lanka not exploring enough potential of Pakistani markets

By Quintus Perera

The Sri Lankan business community is apparently sitting on a gold mine, without exploring or exploiting, where the huge Pakistani market is concerned. Ms Mariam Saeed, Charge d’ Affairs, Pakistan High Commission in Sri Lanka, speaking on “Potential areas for further development of Trade and Investment between Sri Lanka and Pakistan” at the seminar ‘Maximizing Benefits of Pakistan – Sri Lanka Free Trade Agreement’(PSFTA) pointed at a tremendous lot of trade and investment activities that could be promoted between the two countries under PSFTA and that it is an opportune time for exporters and manufacturers of Sri Lanka to penetrate this market.

The seminar was held on Thursday in Colombo by the Sri Lanka Pakistan Business Council.
She said the Pakistan market is massive and a huge market with 180 million consumers and noted that trade between the two countries have definitely increased after Sri Lanka Pakistan FTA. She explained as to why the true potential has not been realized now, attributing it to business people not properly understanding the process.

Ms Saeed said that there are misconceptions over FTAs and observed that FTAs are set up to facilitate trade and investment and cut down delays. She said that reference to Pakistan benefitting more and thus there is a trade imbalance favourable to Pakistan is a misconception.

She said that Sri Lanka imports 79% of textiles from Pakistan and Sri Lanka is using these textiles as raw material for the garment industry and with value addition they are exported to European and other countries while the fact that the raw material is bought at cheap prices is forgotten. She said ‘You are getting our raw material very cheap’ and thus the trade imbalance is a misconception.

She said that most of the imports and exports take place between the two ports of Colombo and Karachi. But she urged the Sri Lankan Business community to look beyond Karachi and to explore other products in other places in Pakistan which is very vast.

Ms Saeed said that there were no proper market surveys on the products and markets in Pakistan, highlighting that there are many products and concessions if the market is properly assessed.
Accepting the contentions of Dr Saman Kelegama, Executive Director, Institute of Policy Studies, that Sri Lanka Pakistan trade is still confined to traditional items, Ms Saeed said it is very important that they must explore non-traditional items. She said that Pakistan has new strategic products to be involved in trade and investment. Linkages among companies of the two countries should be established. She said Pakistan has an abundance of land and natural resources, trained workforce, strong entrepreneurship and a large domestic market. Economic outlook, investment policies, and its location as a regional hub are all important for trade and investment.

She invited Sri Lankans to open factories in Pakistan where there could be duty free concessions and to embark on possible collaborative projects. She said that Sri Lanka has a well established gem industry and thus Sri Lankan gem industry investors could obtain vast areas of land in Pakistan, the mined gems could be exported. She said “It is a very good opportunity for the Sri Lankan Gem Industry.

She told the business community in Sri Lanka: “We have enough room for you to utilize”. Dr Saman Kelegama, speaking on “Making Best use of Pakistan Sri Lanka Free Trade Agreement” said that Pakistan is the third largest tea importing nation in the world. In 1975 close to 67 % of Pakistani tea imports came from Sri Lanka but by 1998 it declined to 7 % and to 2.6 % by 2003.

He said that the decline was a result of Kenyan tea gradually making in-roads to the Pakistani market. In 1975, the quantity of tea imported from Kenya stood at 11 % of Pakistan’s tea imports but increased to 60 % in 1998 and to 64 % by 2003.

The sudden increase of Kenyan tea was a result of an aggressive marketing campaign by a powerful multinational company operating in Pakistan which owns a number of tea estates in Kenya. The campaign was conducted to change the preferences of Pakistani consumers from normal tea to CTC teas.

He said that under the FTA, 10,000 metric tons of tea per year is allowed duty free entry to Pakistan. In order to capture the lost market using the new opportunity, Sri Lanka needs to engage in an aggressive campaign in Pakistan to change the preferenceof the consumers to normal tea and indicated that the private sector has to play a major role with the support of the government to conduct this marketing campaign.

He said that another major concession available under the FTA is for the apparel sector, where for a defined 21 categories of Sri Lankan apparel products, 200,000 pieces are granted 35 % duty preference without rules of origin on fabric usage and said that this market could be expoited by taking a serious look at the Pakistan market.

Dr Kelegama said that at present, there is a rubber cartel consisting of Thailand, India and Malaysia operating in the Pakistani market and rubber prices are relatively high owing to this factor. In this context, Sri Lankan raw rubber exporters have a major opportunity to capture a larger share of the Pakistani market.

Speaking of prospects, he said that trade stimulation between the two countries via the FTA will naturally trigger more investment and services exchanges. Investment will stimulate more trade in both goods and services. Once this happens a decision can be taken whether it is necessary to move towards a CEPA.

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