Kuala Lumpur, Nov 8: Malaysia and Pakistan are scheduled to sign a free-trade agreement before Monday, a source familiar with the negotiations said today, in a deal that is expected to boost Malaysian palm-oil exports.
Malaysia is the world's largest producer of palm oil, used for cooking, cosmetics and biofuel, and counted Pakistan as its second-largest customer in the first eight months of this year.
Malaysia reported a trade surplus of 2.9 billion ringgit ($871 million) with Pakistan in 2006.
The source declined to give details of the agreement, which follows almost three years of negotiations and, finally, the approval of Pakistan's cabinet this week.
A Pakistani newspaper quoted sources today as saying Pakistan would start cutting tariffs on Malaysian palm oil from January 2008 under the agreement.
The Pakistan High Commission said it could not comment at this stage, while a spokeswoman for Malaysian Trade Minister Rafidah Aziz said a statement would be made on Monday.
The source said the free-trade pact would be signed in Kuala Lumpur by Rafidah and the Pakistan high commissioner to Malaysia, who was accompanied by a trade delegation from Islamabad.
''It could be signed today or tomorrow,'' the source added.
Both sides have already signed a so-called early-harvest pact, which began lowering tariffs on some goods such as textiles and electrical goods from January 2006.
Pakistani import tariffs on palm oil have been the main hurdle toward a full free-trade agreement. Pakistan, the world's fourth-largest buyer of edible oils, had originally asked for palm oil to be excluded from the full agreement.
Pakistan charges a fixed 9,500 rupees (156 dollars) a tonne as regulatory and customs duty on palm oil imports, besides a 15 per cent sales tax. Islamabad also charges 9,550 rupees per tonne on crude palm oil imports along with the 15 per cent sales tax.
Pakistan imports mostly Malaysian RBD palm oil and olein, which currently trade at 950 dollars and 955 dollars a tonne respectively.
In return for a lower tariff on palm oil exports to Pakistan, Malaysia is allowing greater access to Pakistan exports of a range of textiles, jewellery, fruit, some engineering goods, leather products and minerals, the Business Recorder said.