Wednesday, 14th November 2007

Malaysia-Pakistan Closer Economic Partnership Agreement (MPCEPA)     Y.B. Dato' Seri Rafidah Aziz, Minister of International Trade and Industry Malaysia and HE Tahir Mahmood Qazi, High Commissioner of Pakistan to Malaysia, signed the Malaysia-Pakistan Closer Economic Partnership Agreement (MPCEPA) on 8 November 2007.   The MPCEPA, is Malaysia's first bilateral free trade agreement with a member of the Organisation of Islamic Countries (OIC). This agreement will come into force on 1 January 2008. The Agreement will further facilitate and strengthen the two-way trade and investment as well as enhance bilateral economic and industrial cooperation on a long term basis between Malaysia and Pakistan.   In October 2005, both countries concluded, and had been implementing since 1 January 2006, an Early Harvest Programme (EHP ) for trade in goods comprising of Malaysia's offer of tariff cuts on 140 tariff lines and Pakistan's offer of tariff cuts on 124 tariff lines to accelerate the trade benefits ahead of the MPCEPA. Malaysia's export of EHP products in 2006 to Pakistan totalled RM44.87 million and RM19.4 million between January to August 2007.   The MPCEPA encompasses liberalisation in trade in goods and services, investment, as well as bilateral technical cooperation and capacity building in areas such as sanitary and phytosanitary measures, intellectual property protection, construction, tourism, healthcare and telecommunications.   TRADE IN GOODS   Both Malaysia and Pakistan will progressively reduce or eliminate tariffs on agricultural and industrial products.   Malaysia will: §                     eliminate import duty by 2012, on 74.5 per cent of tariff lines, comprising 77.3 per cent of imports from Pakistan with a value of RM152.7 million in 2006; and §                     reduce import tariffs over a period of 5 to 7 years, on 18 per cent of tariff lines with a value of RM5.95 million in 2006.   Pakistan will in turn: §                    eliminate duties by 2012, on 43.2 per cent of tariff lines involving agricultural and industrial imports from Malaysia worth RM 633.7 million in 2006; and §                    reduce import duty on: §                     7 palm oil tariff lines by up to 15 per cent Margin of Preference ( MoP ) that is 10 per cent in 2008 and an additional 5 per cent in 2010 involving 48.8 per cent of exports with a value of RM1.3 billion in 2006; and §                     41.3 per cent tariff lines, over a period of 5 to 7 years comprising imports with a value of RM489 million in 2006.   Malaysia's total trade with Pakistan in 2006 amounted to RM3,306 million comprising exports worth RM3,089 million and imports RM217 million. Trade during January to September 2007 amounted to RM3,243.3 million comprising exports amounting to RM 3,016 million and imports RM227.3 million.   Major exports to Pakistan in 2006 were: §                    palm oil and products; §                    chemical products; §                    electrical and electronic products; §                    machinery and parts; and §                    textiles and clothing.   Major imports from Pakistan in 2006 were: §                    textiles and clothing; §                    fresh and frozen seafood; §                    cereals including rice; §                    electrical and electronic products; and §                    chemicals and chemical products   Malaysian exports that will benefit from duty elimination and reduction include fruits, natural rubber leather, tea, cocoa and coffee, processed food, machinery and equipment, chemicals and chemical products, plastics, pharmaceuticals, textiles, footwear, sporting goods, furniture, electrical and electronic products, medical equipment, building materials, paper products , iron and steel products and musical instruments .   There is further opportunity to broaden the product coverage and accelerate tariff liberalisation when Malaysia and Pakistan enter into another round of negotiations in 2009.   The MPCEPA will also facilitate trade through closer collaboration and greater information exchange in the areas of: §                    standards, including the establishment of mutual recognition arrangements (MRAs) on testing and conformity assessment procedures. MRAs will help reduce cost and improve market access for goods and services subjected to standards and technical regulations; and §                    issues relating to the implementation of sanitary and phytosanitary (SPS) measures imposed on agricultural products of trade interest to both sides.   SERVICES   Malaysia 's offer to Pakistan include: §                    more favourable commitments than those made under the WTO such as in: §                       engineering §                       tourism; §                       construction; §                       telecommunications; §                       health services; §                       architectural services; §                       accountancy; and §                       professional and business services   §         new commitments in selected sectors such as: §                       maritime transport; §                       franchise; and §                       energy and gas services;   §         commitments in financial services involving: §                     new licenses on Islamic Banking and Takaful to qualified Pakistan financial institutions which undertake businesses in international currencies in Malaysia; and §                     insurance companies to establish representative offices in Malaysia and employing Pakistan expatriates in these entities.   Pakistan 's offer in services to Malaysia include: §                       maximum foreign equity participation of 60 per cent in all sectors; §                       no limitations on the number of Malaysians employed per organisation; and §                       sectors of interest to Malaysia include: §                       professional services; §                       construction and related engineering services; §                       education services; and §                       telecommunication services.   INVESTMENT   The Agreement also provides a framework which enhances the predictability and transparency for facilitating cross-border investment between the two countries through commitments on national treatment, most-favoured-nation treatment (MFN), and enhanced protection of investors and investment.   It also recognises each other's sensitivities and development needs and allows for flexibilities in scheduling the commitments.   Cumulative Malaysian investments in Pakistan as at 2006 amounted to RM651 million. Malaysian investments in Pakistan include those in power generation, property development, construction, telecommunications, palm oil processing, and oil exploration.   Pakistan’s cumulative investment in Malaysia in manufacturing projects as of August 2007 totalled RM49.2 million and are mainly in food processing, textiles and textile product, wood and wood products, chemicals and chemical products, transport equipment and rubber products.   TECHNICAL COOPERATION AND CAPACITY BUILDING   Areas of cooperation and capacity building which Malaysia and Pakistan have agreed to undertake include: §                    tourism : undertake joint tourism promotion and marketing through trade fairs and sales missions and share experiences in research and development; §                    construction : Malaysia offered to share expertise and technical know-how in skills training and certification, and use of rubber bearings in the construction of buildings in earthquake prone areas; §                    healthcare : Pakistan to provide technical support in academic staff/lecturers in healthcare training institutions such as medical, dental, pharmacy and nursing; and §                    telecommunications : cooperation in human resource development (policy and regulatory) and manufacturing of telecoms equipments .   Malaysia and Pakistan will also be undertaking exchange of information and cooperation among enforcement agencies and educational institutions in order to give sharper focus to intellectual property rights protection.   Both countries have also agreed on a comprehensive set of WTO-based dispute settlement procedures which would enable any differences on the interpretation or implementation of the agreement to be resolved quickly.   The existing bilateral trade agreement, Investment Guarantee Agreement and the Early Harvest Programme will be effectively replaced by the coming into force of this more comprehensive and substantive Agreement. However, both countries agreed to review the MPCEPA every 5 years.   The Agreement provides an excellent opportunity to the business community of both countries to further expand their bilateral trade and investment linkages. In addition, the Agreement will enable the Malaysian business community to use Pakistan as the springboard to also expand their business with Pakistan's trading partners in the South Asia region. Likewise, Pakistan's business community can also leverage on Malaysia's strong business links with ASEAN and the Far East to expand their economic interest in the region.