Govt fails to consult private sector on PTA

Deal with Turkey can worsen balance of payments through rising imports

KARACHI:

Businessmen say that Pakistani authorities are finalising the Preferential Trade Agreement (PTA) with Turkey without consulting the private sector that can be detrimental for the local market.

The government of Pakistan is expected to sign a PTA with Turkey on August 12, 2022. Employers’ Federation of Pakistan (EFP) President Ismail Suttar revealed that as part of the agreement, Pakistan has agreed to give duty exemptions to Turkey on almost 220 products whereas Turkey has given exemption on around 120 products.

However, the Ministry of Commerce has failed to reach out to the private sector for consultation on the PTA. “They destroyed the local industry with a similar disadvantageous agreement with China,” he said.

UNISAME Chairman Zulfikar Thaver said that PTAs are always welcome but benefits must be equal to both countries. In the case of Turkey, there is a need to examine the import-export items of both the countries.

Turkish industries are more advanced than those in Pakistan and Turkey would only be interested in textiles, rice and a few other commodities, he said.

“Turkey will be interested in exporting many finished goods and this can be a setback to our manufacturing units,” he explained.

Suttar said that without consultation with the private sector, the PTA with Turkey could prove to be counterproductive for Pakistan’s economy. This was seen before as well when the Pakistan-China Free Trade Agreement was signed and Pakistan was never able to realise the true potential of the agreement.

In contrast, China was able to export a considerably higher volume of products to Pakistan, thereby worsening the country’s balance of payments (BOP) position.

The Ministry of Commerce has not reached out to the private sector, nor the apex trade bodies (EFP and FPCCI). The country is going through an economic crisis because of which a PTA without consultation with the private sector could end up making the economy worse off as a result of rising imports, he added.

Arif Habib Limited (AHL) Head of Research Tahir Abbas said the government should take all relevant stakeholders on board before finalising a PTA with Turkey.

Taking the private sector on board will help the government in maximising exports with targeted products and markets while also preventing dumping of goods from foreign countries into Pakistan, he said.

Suttar emphasised that it is imperative for Pakistan to remain internationally competitive in sectors that the country has a competitive advantage in. If the agreement does not include the right products, then it can prove harmful to Pakistan’s trade balance and economy.

He said that the PTA will adversely impact several Pakistan-based companies as their products may become uncompetitive as compared to Turkish products that will enjoy duty exemptions. Currently, Pakistan is in need of favourable trade agreements to boost the balance of payments position.

Taurus Securities Head of Research Mustafa Mustansir said PTAs have their benefits and drawbacks. In essence, PTAs relax all trade barriers between countries, especially tariffs and duties.

Successful PTAs occur between countries which enjoy comparative advantage in goods and services, which they can mutually exchange for collective benefit. Therefore, some consultation should have taken place with the private sector to determine whether Pakistani exports have a commercially feasible market in Turkey or not. Arif Habib Commodities CEO Ahsan Mehanti said PTAs penetrate local markets against business interests of producers in their home country. Ideally, the private sector needs to be consulted and products that are in shortage should be part of agreement, he said.

Suttar said that the country can no longer afford to have trade agreements that would be unfavourable for industries and result in a sharp rise in the country’s import bill.

Published in The Express Tribune, August 11^th, 2022.

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