Korea, Pakistan to sign FTA to enhance investment and trade volume

Pakistan and Korea, having bilateral trade and diplomatic relations for over three decades, are very much ambitious to sign Free Trade Agreement (FTA) to enhance investment and trade volume.

However it will take years to attain the objective, as both the countries have to examine minutely the FTA proposal exchanged by them July this year. Pakistan’s Commerce Minister had visited Republic of Korea in July to discuss bilateral trade and possibilities of FTA.

Muhammad Waseem Vohra, CEO, Eastern Enterprises, and Vice President, Federation of Pakistan Chambers of Commerce & Industry (FPCCI), the apex trade body of country said that it will take at least four to five years, as the process is still at initial stage. The two countries would have to compare trade figures and scrutinize certain other implications before finalizing the matter.

Pakistan has to negotiate the FTA carefully in view of its experience with China. Benefitting from zero tariffs under FTA the China exports goods to Pakistan worth 12 to 13 billion dollars annually against Pakistan’s exports amounting hardly to 2.5 billion dollars causing closure of several local industries here.

This shouldn’t happen in case of FTA with Republic of Korea, he added saying that the current trade volume of Pakistan with Republic of Korea is around one billion dollars, which could be enhanced to a great level if the Korea allows access to its market. There are a number of items including textiles, readymade garments, handicrafts, minerals and rice that could find place in Korean market.

The Korean Ambassador Dr. Jong Song Hwan while addressing the Pakistani textile exporters in March last had expressed concern that Pakistani exports to Korea were declining. Similarly, exports from Korea to Pakistan had gone down by three percent in 2013 and six percent in 2014 while exports from Pakistan to Korea had decreased by 33 percent in 2013 and another cut by 23 percent in 2014.

Korea and Pakistan are not only good friends but also two leading trade partners but for the last two years this trade partnership after touching the two way trade volume $1.6 billion in 2012 has witnessed downward slide to $1.3 billion in 2013 and further to $1.17 billion in 2014.

The South Korean companies are already present in Pakistan. They export electronic items, machinery, spare parts, paper, chemical etc and have captured a wide market of 200 million people. The role of South Korean companies in Pakistan is commendable as they had been working on several mega projects in energy, roads and other sectors and the Korea Trade Centre KOTRA is playing vital role in enhancing the trade relations between two countries, but more Korean investment is needed here. The Republic of Korea invests 45 billion dollars annually in different countries of the world of which hardly 500 million dollars in Pakistan.

Establishing industries in Pakistan would benefit Republic of Korea, as it can export its goods to China with zero tariffs under FTA. The Korean companies could also avail the benefit of Pakistani labor, which is cheaper than rest of the world, Vohra suggested.

Talking about access to Pakistani labor to Korea, the FPCCI official said that the number of Pakistanis working in Korea in 2005 was hardly 7000 and now it might be around 20, 000. Pakistanis can contribute towards progress of Korea.

The FPCCI official referring to the Korean Prime Minister’s visit to Pakistan a couple of years back, said that the visits of leaders from two countries would help further cement their friendly relations.