Arsalan Ali

Pakistan can enhance its exports to Sri Lanka by promoting local brands, addressing non-tariff barriers, and supporting exporters in establishing distribution networks while encouraging the use of formal banking channels, according to the Trade Development Authority of Pakistan (TDAP). Exports from Pakistan to Sri Lanka remained at $222.855 million during the first nine months (July-March) of the current fiscal year FY23. Data from the State Bank of Pakistan shows that two-way trade volume during 9MFY23 was $261.34 million, with the trade balance in favour of Pakistan.

TDAP highlighted the significant potential of bilateral trade between Pakistan and Sri Lanka, estimated at $1 billion. TDAP stated that potential export items from Pakistan to Sri Lanka include a range of products, such as cement, denim and cotton fabrics, medicaments and surgical instruments, paper products, silk and synthetic textiles, knitwear, fertilisers, towels, bed wear, cutlery, leather goods, sports gloves, and footwear.

The Pakistan-Sri Lanka Free Trade Agreement (PSLFTA), which came into effect on June 12, 2005, offers low tariff restrictions for Pakistani exports in the Sri Lankan market. However, the presence of non-tariff barriers, including para tariffs, nation-building tax (NBT), value-added tax (VAT), ports and airport development levy (PAL), special commodity levy (SCL), and compliance issues related to health, safety, and sanitary standards, increases the cost of imported items.

TDAP pointed out that as a result, non-tariff barriers have overshadowed the positive impacts of tariff rationalisation under the PSLFTA and have been a major impediment to the performance of Pakistani exports. Pakistan and Sri Lanka can further increase their bilateral trade to $2.5 billion if the free trade agreement is utilised to the fullest, TDAP said. According to TDAP, facilitating Pakistani exporters to establish a distribution network in Sri Lanka will help to improve export competitiveness.

International trade data from the United Nations COMTRADE database shows that Pakistan’s major exports to Sri Lanka include cotton, salt, sulphur, plaster, lime, cement, edible vegetables, certain roots and tubers, knitted or crocheted fabrics, and pharmaceutical products. On the other hand, Pakistan’s imports from Sri Lanka include vegetable products, vessels, rubber, medium-density fibreboards, and coconut.

The Pakistan Business Council (PBC) has identified trade disputes as a major and recurring issue between Pakistan and Sri Lanka. The PBC attributed this to a preference for informal trade practices, as many traders in both countries do not use formal banking channels. Non-tariff barriers and a shortage of shipping containers were also cited as factors that impede trade between the two nations, the PBC said. To address these challenges, the PBC has urged the chambers of commerce in both countries to work closely and facilitate prompt resolution of trade issues. Additionally, the PBC emphasised the need to raise awareness among traders on the importance of utilising formal banking channels.

Credit: Independent News Pakistan-WealthPk