Pakistan and Sri Lanka have yet to operationalize a bilateral dispute resolution body, nearly two decades after signing a treaty, leaving trade disputes unresolved and potentially harming Pakistan’s exports to Sri Lanka.
On Monday, Pakistan’s Ministry of Commerce informed the Senate Standing Committee on Commerce that Sri Lankan authorities have been uncooperative, suggesting that the issue now requires political intervention.
Senator Anusha Rahman of the Pakistan Muslim League-Nawaz (PML-N), who chaired the meeting, initially heard ministry officials claim the dispute resolution forum was functioning. However, they later admitted to Sri Lanka’s lack of cooperation.
“We maintain friendly relations with Sri Lanka and aim to resolve these trade disputes amicably,” said Pakistan’s Minister for Commerce, Jam Kamal.
Dr. Adnan, Joint Secretary at the Ministry of Commerce, explained that the Pakistan-Sri Lanka Free Trade Agreement (FTA) is the only treaty covering both government-to-government and business-to-business disputes. He added that since 2013, Pakistan has raised concerns about the dispute resolution mechanism, leading to an agreement to form a joint working group to address the issue.
The FTA, signed in 2005, includes a dispute resolution mechanism for commercial entities, but Sri Lanka has yet to designate a nodal chamber or establish an arbitration mechanism. The committee chairperson urged the Ministry of Commerce to expedite efforts to resolve the issue.
Dr. Adnan also mentioned that Sri Lanka recently suggested utilizing existing mechanisms like commercial arbitration and the judicial process, as trade disputes typically involve defining the rights and obligations of sellers and buyers.
In December 2022, Pakistan proposed an arbitration forum, with each side nominating two representatives. Although Sri Lanka initially agreed, it later claimed to have lost the meeting minutes, stalling progress, Dr. Adnan noted.
Due to the inactive dispute resolution mechanism, Pakistani exporters have been unable to claim disputed export proceeds. The committee was informed that Pakistan’s Trade and Investment attaché raised the issue with Sri Lanka, which advised using letters of credit (LCs) instead of bills of engagement for trade transactions.
The commerce minister stressed the need to involve Pakistan’s Ministry of Foreign Affairs to resolve the matter at a political level.
In addition to trade issues, Senator Anusha Rahman raised concerns about the Ministry of Commerce’s reluctance to accept parliamentarians’ nominations to the board of the Trade Development Authority of Pakistan (TDAP), despite it being a legal requirement.
The committee scrutinized Senator Faisal Saleem Rehman’s nomination to the TDAP board for the 2021-24 term and demanded an explanation for why he wasn’t appointed or notified of his removal. Senator Saleem pointed out that although the Senate nominated him in 2021, the Ministry of Commerce and TDAP failed to acknowledge his membership.
The additional secretary of the Ministry of Commerce explained that the State-Owned Enterprises (SOE) Act prohibits parliamentarians from serving on SOE boards. However, Senator Rahman countered that TDAP is not classified as an SOE by the Ministry of Finance, accusing the commerce ministry of manipulating its status to avoid parliamentary oversight.
She emphasized the importance of upholding TDAP regulations and questioned the ministry’s reluctance to appoint parliamentarians to the board.
Commerce Minister Jam Kamal assured the committee that the issue would be resolved promptly, and the chairperson called for a detailed report, including records of notifications, details of the TDAP chief executive during the 2021-24 period, and the names of officials responsible for the legal misinterpretation.
