The Pakistan Business Council has expressed its concerns over the pace at which the government was moving to finalise a Comprehensive Economic Partnership Agreement (Cepa) with the United Arab Emirates.
“The PBC believes that the agreement would be counterproductive for Pakistani industry unless the concerns are not fully addressed,” said the council in the statement. The PBC listed seven points as concerns.
The council said that there was a “basic flaw” in the trade data used by the commerce ministry to identify tariff lines, which would be part of Pakistan’s concession list to the UAE. “It ignores domestic industry which is manufacturing for the local market and paying taxes and employing Pakistanis.”
The trade data does not reflect domestic manufacturing capacity or the potential to scale it up to minimise import reliance, it added.
The proposed CEPA would bring 80% of the tariff lines to zero in 10 years-time, and though this would be done in four phases, “it ignores the differences” in both the quality and cost of inputs including power available to UAE manufacturers as opposed to Pakistani firms.
“Not only do UAE manufacturers have access to globally competitive infrastructure, they are also able to source raw materials from global suppliers at a fraction of the cost at which the same imported raw materials are available locally to Pakistani manufacturers,” it said and warned that without careful evaluation of such factors, Cepa would amount to offshoring manufacturing.
It added that the UAE government has been actively pursuing industrialisation as a national policy, with an aim to reduce dependence on fossil fuels. The manufacturing industry is thus a priority for theUAE government and hence benefits from a number of “hidden subsidies”.
The council lamented that unfortunately, the opposite was true in Pakistan where manufacturing carries a disproportionate burden of taxes, and suffers from poor infrastructure and excessive bureaucratic control.
“UAEs’ Non-Tariff Barriers do not appear to be getting the attention that they deserve,” it said and called for ensuring that Pakistani standards and test results of Pakistani laboratories were accepted by the UAE authorities, otherwise local exporters would be at a disadvantage even if they have tariff preference.
It went on to add that any new agreement must provide for electronic data interchange to ensure that export and import values match each other to check under-invoicing.
The council further stressed the need for a high level of transparency on import values, as well as local value addition. Clarity was required on sourcing of such inputs from countries from which “Pakistan does not allow” direct imports.
“Services need to be a part of the CEPA. Free movement of labour and the ability of Pakistani professionals to practice in the UAE without the need for additional examinations should be ensured,” stated the PBC.
