Pak-Sri Lanka trade dispute unresolved
Pakistan and Sri Lanka have yet to operationalise a bilateral dispute resolution body, nearly two decades after signing a treaty, leaving trade disputes unresolved. This could potentially harm Pakistan's exports to the island nation.
On Monday, the Ministry of Commerce informed a Senate Standing Committee on Commerce that Sri Lankan authorities were uncooperative, suggesting the issue now needs to be addressed at the political level.
Senator Anusha Rahman of the Pakistan Muslim League-Nawaz (PML-N) chaired the meeting. Initially, ministry officials implied the dispute resolution forum was effective but later admitted Sri Lanka's lack of cooperation.
"We have friendly relations with Sri Lanka and want to amicably resolve the trade disputes," said Minister for Commerce Jam Kamal.
Dr Adnan, Joint Secretary at the Ministry of Commerce, stated, "The Pakistan-Sri Lanka FTA is the only treaty that covers both government-to-government and business-to-business disputes." He added that since 2013, Pakistan has raised concerns about the dispute resolution mechanisms. It was later agreed to form a joint working group to address these issues.
The Free Trade Agreement (FTA) was signed in 2005, making it the only trade treaty between the two nations that includes a dispute resolution mechanism for commercial entities. However, Sri Lanka has yet to designate a nodal chamber and arbitration mechanism. The committee chairperson urged the Ministry of Commerce to expedite resolving this issue.
Dr Adnan also mentioned that Sri Lanka recently proposed utilising existing mechanisms such as commercial arbitration and the judicial process, as trade disputes often involve determining the rights and obligations of sellers and buyers.
In December 2022, Pakistan proposed an arbitration forum with two nominations from each side. While Sri Lanka initially agreed, it later claimed to have lost the meeting minutes, hindering progress, Adnan noted.
Due to the dysfunctional dispute resolution mechanism, Pakistani exporters have been unable to claim disputed export proceeds.
The committee was informed that Pakistan's Trade and Investment attaché had raised the issue with Sri Lanka, which advised using letters of credit (LCs) instead of bills of engagement for trade transactions.
The commerce minister indicated the need to involve Pakistan's Ministry of Foreign Affairs to address the matter at a political level.
Additionally, Senator Anusha Rahman expressed concern over the Ministry of Commerce's reluctance to accept parliamentarians' nominations to the board of the Trade Development Authority of Pakistan (TDAP), despite it being a legal requirement.
The committee scrutinised Senator Faisal Saleem Rehman's nomination to the TDAP board for the 2021-24 term. The committee demanded an explanation for why he wasn't appointed and how he was removed without notification.
Senator Saleem pointed out that despite his nomination by the Senate in 2021, neither the Ministry of Commerce nor TDAP acknowledged his membership. The additional secretary noted that the issue had been raised in the Federal Cabinet and is now under review by the Ministry of Law.
The additional secretary explained that the State-Owned Enterprises (SOE) Act prohibits parliamentarians from being appointed to the boards of SOEs. However, Senator Rahman countered, stating that TDAP is not classified as an SOE by the Ministry of Finance, accusing the commerce ministry of manipulating its status to exclude Parliament's oversight.
Senator Rahman further emphasised that the Ministry of Commerce's interpretation of the law was contradictory to the Ministry of Finance's position. She stressed the need to uphold TDAP regulations and questioned the ministry's reluctance in appointing parliamentarians to the TDAP board.
The SOE Act, 2023 only prohibits parliamentarians on the slots allocated for independent directors on TDAP board and does not apply to parliamentarians.
Commerce Minister Jam Kamal assured the committee that the issue would be resolved promptly. The committee chairperson called for a detailed report, including records of notifications, details of the TDAP chief executive during the 2021-24 period, and the names of officials responsible for the legal misinterpretation.