Turkish investors wary of impending FTA with Pakistan

Say if trade deal signed, several local Turkish manufacturers face closure


Salman Siddiqui April 06, 2017
PHOTO: REUTERS

KARACHI: Turkish investors in Pakistan’s manufacturing sector have raised reservations over the liberalisation of trade between the two countries ahead of the next round of talks for the finalisation of the Free Trade Agreement (FTA).

According to investors, if the FTA goes forward without protecting the country’s manufacturing sector, then Pakistan would suffer massive reductions in its foreign direct investment (FDI).

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The companies which are wary of trade agreement between Pakistan and Turkey include manufacturers from different areas such as automotive parts, consumer goods, home appliances and baby diapers.

The revelation was made by the Sindh Board of Investment, a provincial institute, which aims to attract foreign investment, in a letter to Sindh Chief Minister Murad Ali Shah where it said that the FTA may cause closure of a Turkish company, Ontex Pakistan, in the country.

The foreign-owned subsidiary was established in 2011 and has so far invested $18 million in a baby diapers manufacturing plant in Pakistan. According to a source, the company has recently expanded its productions at Port Qasim with the aim of exporting Pakistani products in regional markets.

In the letter, which has been forwarded to the federal government, it has been argued that Pakistan has signed six FTAs and Preferential Trade Agreements (PTAs) since 2006, but none of them have so far benefited the country.

“Although these trade agreements were meant to mutually benefit trading partners, Pakistan has not benefitted from any of these,” the letter said.

“More specifically, FTA with China led to an increase in trade deficit from $2.9 billion to $4.1 billion, FTA with Malaysia led to an increase in trade deficit from $1.6 billion to $1.9 billion and PTA with Indonesia led to an increase in trade deficit from $800 million to $1 billion,” the letter added.

The letter urged the government to protect industries and recommended a thorough empirical analysis of the impact on Pakistan’s industries if the FTA with Turkey is to be ratified.

Meanwhile, an investment consultant to the governments and firms in private sector in Europe, North America and Australia, Ameen Jan said that the FTA should be ratified in a way that it supports manufacturing, FDI and exports from Pakistan.

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“The government should bring down tariffs to zero for import of raw materials into Pakistan in the FTA instead of allowing zero-rated import of finished goods of those products made in the country,” he said.

Pakistan has so far held five rounds of talks with Turkey for the FTA and the next round might appear to be the final one.

Published in The Express Tribune, April 6th, 2017.

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COMMENTS (2)

basheer | 4 years ago | Reply >Pakistan has so far held five rounds of talks with Turkey for the FTA and the next round might appear to be the final one. And now is the time they decide to speak up about it? Why are they protesting at the 11th hour? They should have made their case before the start of negotiations. To determine whether an FTA has been good for Pakistan it is not enough to look at the import and export numbers. You also have to consider the benefits that acrue to consumers due to cheaper imported products. The standard of living improves. The lower cost of living helps firms too because it reduces their cost of labour. FTAs also help us allocate our scarce resources better. There is no point in specializing in industries where we have no competitive advantage. When you remove trade barriers you get to see the true state of things. You realize where there is potential for specialization and where there isn't.
Zahid Qadeer | 4 years ago | Reply If there is no benefit of FTA to the country rather it is hurting the indegenous manufacuring in Pakistan then why top beuarocracy running after FTAs. Protect country's industry otherwise its too late
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