Second Review of the Malaysia- Pakistan Closer Economic Partnership Agreement (MPCEPA)

This report titled “Second Review of the Malaysia-Pakistan Closer Economic Partnership Agreement (MPCEPA)” is part of the PBC’s Market Access Series 2020-21. MPCEPA was signed in November 2007, which came into effect in January 2008.

Major Findings

  • Under the terms of the FTA, Pakistan offered concessions to Malaysia on around 6,803 tariff lines, including palm-based products. In turn, Malaysia offered concessions on around 10,593 tariff lines.
  • Comparing Malaysia’s Concession List under the Pakistan FTA with that offered to other FTA partners, Pakistan has managed to negotiate the lowest number of lines for zero tariffs.
  • In 2019, Pakistan faced a trade deficit of $724.1 million with Malaysia with imports from Malaysia being nearly three times exports.
  • Palm Oil, which is Pakistan’s largest import from Malaysia, as well as the commodity with the largest indicative potential for exports from Malaysia to Pakistan is a part of Pakistan’s concession list for Malaysia.
  • Other important imports from Malaysia comprise of Machinery and Mineral Fuels.
  • Pakistan’s exports to Malaysia largely consist of Agricultural Products on some of these like rice, Malaysia applies high tariffs. In the case of rice, Pakistan’s competitors Myanmar, Thailand, Vietnam (ASEAN members) and India face a lower tariff as compared to Pakistan.
  • At HS-06 level, Pakistan has an indicative export potential for the top 25 items amounting to $2.0 billion, in 2019, Pakistan actually exported a mere $74.2 million of these high potential products to Malaysia.
  • Most of Pakistan’s high export potential commodities fall under Agricultural Goods and Foodstuff. High export items include Rice, Vegetables, Fruits and Meat.
  • Major non-tariff barriers to increasing Pakistani exports to Malaysia include labelling and certification requirements. In addition, due to the absence of direct flights to Malaysia exports of perishables from Pakistan is difficult and expensive. In such case, Pakistan can try to tap into the potential market of Textiles.

Major Recommendations

  • Since most textile goods under MPCEPA are allowed zero duty access, more trade fairs and marketing of textile goods, especially high value-added products in place of raw material (Cotton), will allow Pakistan to tap into this market.
  • Another potential market is for Surgical Equipment which are currently exported in low volumes to Malaysia.
  • Pakistan’s Pharma and Drug regulatory authorities are not registered with the International Pharmaceutical Inspection Convention which restricts the export of such goods to Malaysia. By gaining recognition of international authorities, exports can increase since the country already produces high quality pharmaceutical products.
  • At FTA review meetings Pakistani negotiators should target tariff parity with Malaysia’s other FTA partner countries. Parity should be especially targeted for high potential exports such as Rice, Portland Cement, Articles of Bedding etc.

Pakistan-Malaysia Bilateral Trade

The PBC is a private sector not-for-profit advocacy platform set-up in 2005 by 14 (now 83) of Pakistan’s largest businesses. PBC’s research-based advocacy supports measures which improve Pakistani industry’s regional and global competitiveness. More information about the PBC, its members, objectives and activities can be found on its website: