Trade Winds

Pak­istan, China to soften bank open­ing rules

Enterprise - - Contents -

Pak­istan and China have agreed to re- ne­go­ti­ate tar­iff re­duc­tion on trad­able goods un­der the free trade agree­ment (FTA).

Dur­ing the third meet­ing of the sec­ond phase of FTA ne­go­ti­a­tions held in Is­lam­abad from Jan 6 to 8, both coun­tries also agreed to soften up re­quire­ments to set up bank branches on re­cip­ro­cal ba­sis.

Ad­di­tional Sec­re­tary Min­istry of Com­merce Robina Ather and Deputy Di­rec­tor Gen­eral of Min­istry of Com­merce, China, Yao Wen­liang led their re­spec­tive sides.

Pak­istan’s bi­lat­eral trade deficit with China has bal­looned by over 60 per cent de­spite a free- trade deal struck in 2006 amid as­sur­ances that it would help Pak­istan boost ex­ports to China.

China posted a mas­sive $ 3.974 bil­lion trade sur­plus with Pak­istan in 2012- 13, an in­crease of around $1bn from $2.955bn in 2006-07. Ac­cord­ing to com­merce min­istry’s data, bi­lat­eral trade had dou­bled to $9.28bn in 2012-13 from $4.10bn in 2006- 07, but was highly in Beijing’s favour.

The FTA was im­ple­mented from July 1, 2007. The in­vest­ment part of the agree­ment was ef­fec­tive from Oct 15, 2008 and ser­vices agree­ment from Oct 10, 2009, re­spec­tively.

As per the agreed min­utes, both sides have now reached an un­der­stand­ing that the tar­iff re­duc­tion modal­i­ties ( TRMs) of the sec­ond phase of the FTA will be in­de­pen­dent of the first phase TRMs.

Both sides of­fered their re­spec­tive TRM sched­ule and it was agreed that of­fers will be dis­cussed fur­ther in the next meet­ing of the FTA ne­go­ti­a­tions to be held in Beijing at the end of March.

Pak­istan and China also agreed to try their best to nar­row down their gap be­tween both TRMs, and to fur­ther an­a­lyse th­ese of­fers in­clud­ing the trig­ger mech­a­nism for spe­cial safe­guard mea­sures and give their rec­om­men­da­tions by mid-Fe­bru­ary. The ne­go­ti­a­tions made a great head­way in the bank­ing sec­tor as well.

As per the un­der­stand­ing reached be­tween the two coun­tries, as­set re­quire­ment for es­tab­lish­ing a branch would be re­duced to $15bn from $ 20bn, for all Pak­istani banks, at the end of the year prior to the sub­mis­sion of the ap­pli­ca­tion.

Pak­istani banks would be al­lowed to business in the Chi­nese cur­rency, yuan ( or ren­minbi), after one year of their business in China.

The limit was pre­vi­ously three years. The re­quire­ment for hav­ing been prof­itable for two con­sec­u­tive years prior to the ap­pli­ca­tion is also re­moved.

Presently, the in­ward re­mit­tance/ LC is routed through for­eign banks. How­ever, the fi­nan­cial trans­ac­tions would be routed through the Pak­istani banks once they are opened in China. It is ex­pected that a sub­stan­tial amount of money would move through Pak­istani banks which would help boost coun­try’s re­serves and GDP.

Beijing’s in­vest­ments for the Pak­istan-China Eco­nomic Cor­ri­dor will also be chan­nelised through th­ese banks.

Both coun­tries also agreed to ad­dress is­sued re­lated to san­i­tary phy­tosan­i­tary ( SPS) or tech­ni­cal bar­ri­ers to trade ( TBT). In this re­gard, the names of fo­cal per­sons and rel­e­vant de­part­ments would be ex­changed by endJan­uary and meet­ing of an SPS and TBT com­mit­tee may be held be­fore next FTA meet­ing.

Chi­nese side also agreed to con­sider Pak­istani ex­porters’ con­cerns re­gard­ing the in­spec­tion and quar­an­tine process of rape­seed meal and canola seed.

It was no­ticed that the trade fig­ures quoted by both sides dif­fered greatly. Both sides agreed that a study may be con­ducted to find out the rea­sons for this dis­crep­ancy and the out­come of the study would be shared by the end of this month.

In eval­u­at­ing the first phase of FTA, both sides raised con­cerns re­gard­ing in­suf­fi­cient util­i­sa­tion of con­ces­sions, in­flu­ence to lo­cal in­dus­try as a re­sult of con­ces­sions and mis­use of cer­tifi­cate of ori­gin which could be ad­dressed in the sec­ond phase.

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