LAHORE: Bilateral trade between Pakistan and Sri Lanka which reached $460 million in 2018 had potential to cross $2.7 billion if governments on both sides improved the Pakistan-Sri Lanka Free Trade Agreement (PSFTA) and removed major impediments in tariff rationalisation, a SAARC study said.
“Realizing full Potential of Pakistan Sri Lanka Free Trade Agreement” carried out by SAARC Chamber of Commerce and Industry said that bilateral trade had significantly increased to $460 million in 2018 from $212 million in 2005; however, it was still much below the potential of $2.7 billion.
It said that huge potential existed for developing partnerships in trade, investment and industry within various sectors and areas of mutual interest, including textiles, construction materials, agro processing, and pharmaceuticals industry.
Since the inception of PSFTA, trade between the two countries has shown an upward trend. The FTA between Pakistan and Sri Lanka was signed in August 2002 and came into effect in July 2005. The terms of the FTA were comprehensive and granted 100 percent immediate concession to Pakistan and Sri Lanka’s major export products.
In 2018, Pakistan’s exports to Sri Lanka reached to $357 million, while Sri Lanka’s exports to Pakistan reached $105 million leading to a trade surplus of $252 million in Pakistan’s favour. However, in real terms, Pakistan’s share fell and only slightly increased in 2018.
The study finds out that the current trade between both countries is not entirely encouraging, but both countries have markets for each other’s primary products. Pakistan is an important market for tea products, which also happens to be a top Sri Lankan export item, and Pakistan is also a significant importer of copra and rubber, both items are important Sri Lankan exports. Similarly, Sri Lanka is an important market for textile products, machinery, and pharmaceuticals along with other products that Pakistan records significant exports in. Therefore, there exists a huge trade potential between both countries if the FTA is utilised properly.