Pakistan Indonesia Free Trade Agreement: Boosting Economic Ties Between Two Friendly Neighbors

Pakistan and Indonesia, two of the largest economies in South Asia and Southeast Asia, respectively, have been enjoying strong diplomatic and economic relations for many decades. Both countries have been cooperating in various fields, including trade and investments, culture, education, defense, and security. In recent years, there has been a renewed focus on enhancing economic ties between the two friendly neighbors, with the signing of the Pakistan Indonesia Free Trade Agreement (PIFTA) in 2012 being a major milestone in this regard.

The PIFTA, which came into effect on September 1, 2013, is aimed at promoting bilateral trade and investment by reducing or eliminating tariffs on a wide range of goods and services between the two countries. Under the agreement, Pakistan has given duty-free access to 20% of its total tariff lines for Indonesian products, while Indonesia has granted the same to 10% of its total tariff lines for Pakistani products. This has created new opportunities for businesses and investors in both countries to explore each other`s markets and expand their presence in the region.

The PIFTA covers a wide range of products, including textiles, pharmaceuticals, chemicals, machinery, electronics, and automotive parts, among others. It also provides for the protection of intellectual property rights and the facilitation of customs procedures, making it easier and cost-effective for businesses to trade with each other. Furthermore, the agreement includes provisions for cooperation in areas such as trade promotion, technical assistance, and capacity building, which will help to enhance the competitiveness of both economies.

The PIFTA has already begun to yield positive results for both countries. According to the Pakistan Bureau of Statistics, bilateral trade between Pakistan and Indonesia increased by 69% from $1.91 billion in 2011-12 to $3.23 billion in 2019-20. Pakistan`s exports to Indonesia increased by 255% during this period, while imports from Indonesia increased by 38%. Major items of exports from Pakistan to Indonesia include rice, textiles, surgical instruments, sports goods, and leather products, while imports from Indonesia include palm oil, rubber, chemicals, and paper.

The PIFTA has also opened up new investment opportunities for businesses in both countries. Indonesia has already invested in Pakistan`s cement, banking, and mining sectors, among others, while Pakistan has invested in Indonesia`s textile, palm oil, energy, and infrastructure sectors. Both countries have expressed their willingness to further strengthen their economic ties by exploring new avenues of partnership, such as joint ventures, technology transfers, and knowledge-sharing.

In conclusion, the Pakistan Indonesia Free Trade Agreement is a significant step towards boosting economic cooperation between two friendly neighbors. The agreement has provided a platform for businesses in both countries to expand their markets, increase their competitiveness and create new jobs. As the two countries work towards realizing their shared vision of a more prosperous and interconnected region, the PIFTA is expected to play a crucial role in strengthening their economic ties and promoting regional integration.