WORLD TRADE ORGANIZATION
ORGANISATION MONDIALE DU COMMERCE
ORGANIZACIÓN MUNDIAL DEL COMERCIOWT/TPR/M/95/Add.1
11April 2002
(02-1956)
Trade Policy Review Body
23 and 25 January 2002Original: English/
               anglais/
               inglés
TRADE POLICY REVIEW
PAKISTAN
Minutes of Meeting
Addendum
Chairperson:  H.E. Mr. Pekka Huhtaniemi (Finland)
This document contains the advance written questions, and replies provided by the delegation
of Pakistan.1
__________________________________________________________________________________
Organe d'examen des politiques commerciales
23 et 25 janvier 2002
EXAMEN DES POLITIQUES COMMERCIALES
PAKISTAN
Compte rendu de la réunion
Addendum
Président:  S.E.  M. Pekka Huhtaniemi (Finlande)
Le présent document contient les questions écrites communiquées à l'avance et les réponses
fournies par la délégation pakistanaise.1
__________________________________________________________________________________
Órgano de Examen de las Políticas Comerciales
23 y 25 de enero de 2002
EXAMEN DE LAS POLÍTICAS COMERCIALES
PAKISTÁN
Acta de la reunión
Addendum
Presidente:  Excmo. Sr. Pekka Huhtaniemi (Finlandia)
En el presente documento figuran las preguntas presentadas anticipadamente por escrito,
junto con las respuestas facilitadas por la delegación de Pakistán.1
                                                     
1 In English only./En anglais seulement./En inglés solamente.WT/TPR/M/95/Add.1
Page 3
ADVANCE WRITTEN QUESTIONS BY MEMBERS AND REPLIES PROVIDED BY THE
DELEGATION OF PAKISTAN
CANADA
WTO Secretariat Report WT/TPR/S/95
IV. Trade Policy by Sector, (5) Services; (ii) Overall Commitments for the General Agreement
on Trade in Services, paragraph 71:
According to para. 71, for a number of activities (e.g. certain business, construction, health, and
tourism services), Pakistan has been unable to make binding commitments due to lack of technical
feasibility.  Please elaborate on this lack of technical feasibility.
The entire position is under the review of Government of Pakistan and where possible
Pakistan will make commitments at the appropriate time.
IV. Trade Policy by Sector, (5) Services; (iii) Financial Services; (a) Banking and Finance;
paragraph 76:
Paragraph 76 states that further amendments of recovery-related laws to make procedures more
effective are being considered.  Please comment on whether this sort of amendment is still under
consideration.  If yes, what modifications to the current law may be introduced and when?
The Government of Pakistan has promulgated the Financial Institutions (Recovery of
Finances) Ordinance, 2001 for speeding up recovery loans.  The Ordinance provides for establishment
of special banking courts.  A Financial  institution can, within a period of 3 years from the date of
issue of the above ordinance, file a suit for the recovery of any amount written off, released or
adjusted under any agreement, contract, or consent etc., if it can establish that the amount was writtenoff for considerations other than bonafide business  reasons.  In case the banking Court passes a
judgment against the loan defaulter, the defaulter can, within thirty days of such judgment, file an
appeal before the High Court.
IV. Trade Policy by Sector, (5) Services; (iii) Financial Services; (b) Insurance; paragraph 82:
Para. 82 notes that two public-sector-owned insurance companies are to be privatized by June 2002.
Please provide an update on the progress of this privatization process.
The privatization of State Life Insurance Corporation (SLIC) will commence as soon as its
corporatization process, which is under way, is completed.  To facilitate this process the regulatory
capacity for the insurance sector is also being st rengthened and mechanisms are being developed to
combat monopoly power, through the regulatory mechanism and through a reengineering and
unbundling exercise to address the massive market concentration of over 90% in the Life Insurance
Industry that SLIC enjoys.
The privatization process of Pakistan Reinsurance Corporation (PRCL) was initiated in 2001
by soft marketing for potential strategic investors.  This process was interrupted by the events of
11 September 2001 that particularly affected the reinsurance sector around the world.  The
privatization process for PRCL has now been rein itiated and currently a detailed study is being
undertaken of options that include various combinations like a strategic sale as well as capital markettransactions.WT/TPR/M/95/Add.1
Page 4
IV. Trade Policy by Sector, (5) Services; (iii) Financial Services; (b) Insurance; paragraph 86:
Para. 86 states that Pakistan’s cross-border commitments in Insurance under the GATS are
considered very limited.  Please comment on whether there is any plan to expand cross-border
commitments in insurance, and, if yes, please describe that plan.
Pakistan has recently replaced its insurance law.  The new law provides for wide ranging
reforms in the sector.  A regulatory body has also been set up.  As Pakistan acquires greater
confidence with the experience of administering the new law and procedures, it will consider, at the
appropriate time, expanding cross-border commitments in the insurance sector.
IV. Trade Policy by Sector, (5) Services; (iv) Communications; (b) Broadcasting and
audiovisual; paragraph 95:
According to para. 95, Pakistan is in the final st ages of establishing the Pakistan Electronic Media
Regulatory Authority (PEMRA) as a step towards opening broadcasting frontiers to private-sectorand international broadcasters.  In addition, the Ten-year Long Term Plan, announced in
September 2001, provides for the deregulation and privatization of the broadcasting sector.  Please
elaborate on the expected outcomes from the wo rk of PEMRA and the Ten-year Long Term Plan.
In order to pave the way for greater private sector participation in electronic media in Pakistan
a regulatory mechanism is being put in place in th e form of the Pakistan Electronic Media Regulatory
Authority (PEMRA).  The presence of such an authority will provide a transparent and predictable
regime for operation of privately owned radio and television broadcasting facilities.  It will encourage
healthy competition in this area and at the same time provide adequate legal protection to investors as
well as members of the public who may find themselves adversely affected by the operations of such
private sector entities.  It is expected that the existence of this Authority will encourage induction ofprivately owned radio and television stations in the country.
IV. Trade Policy by Sector, (5) Services; (vi)  Information technology and software development,
paragraph 102:
Para. 102 states that, since August 2000, Pakist an has pursued an information technology  policy
implemented through several tax, financial, and regulatory incentives.  The paragraph also states thatseveral procedural barriers (e.g. processing of licence applications) have been lifted.  Please clarify
what types of licensing requirements remain, to which would-be investors are currently subject.
There are no licensing requirements.  Prospective firms have to apply and register themselves
with the Security Exchange Commission of Pakistan.
Supplementary Questions from the Government of Canada
WTO Secretariat Report WT/TPR/S/95
III. Trade Policies and Practices by Measure; (2) Measures Affecting Imports; (viii)
Government Procurement; paragraph 53:
In paragraph 53, reference is made to a new amendm ent to the domestic procurement legislation of
Pakistan.  Please describe the provisions of the new amendment, and how it changes current
legislation.  Please also confirm the current status of the new amendment.
Under the new amendment the provision of price preference for public sector agencies has
been done away with.WT/TPR/M/95/Add.1
Page 5
III. Trade Policies and Practices by Measure; (2) Measures Affecting Imports; (viii)
Government Procurement; paragraph 56:
Paragraph 56 notes that a large number of government bodies make their suppliers’ registration and
procurement operations independently.  Please indicate whether there are any mechanisms in place
through which the Government can ensure that  procurement procedures carried out independently bythese bodies is in accordance with domestic legislation.
A large number of Government bodies make their procurements independently, but they have
to abide by the provisions of the purchase manual and General Financial Rules.  In addition, in foreign
aided projects procurement has to be carried out as per laid down Loan Agreement guidelines.
Further, all Ministries have their purchase committees consisting of representatives from various
departments for ensuring transparency through prop er tender documentation and evaluation of bids.
III. Trade Policies and Practices by Measure; (2) Measures Affecting Imports; (viii)
Government Procurement; paragraph 56:
Paragraph 56 states that the National Regulat ory Authority (“Authority”) was established to
eradicate corruption in the procurement process.  Please describe what progress if any the Authority
has made in eradicating corruption in the procurement process.
To be answered later.
HONG KONG, CHINA
Tariffs
(WT/TPR/S/95, p. 31, para. 28)
We would like to know the actions being taken by the Pakistani authorities to rectify the anomaly of
the applied tariff rates exceeding their bindings levels for 91 items, mostly textiles and clothing.
Regarding the anomaly of the applied tariff ra tes exceeding their binding levels for 91 items,
a notification covering about 80 items has already been issued to the WTO which will make the
necessary correction w.e.f. 1 July 2002, thus advancing the effectiveness of our existing bindings.
The remaining items will be addressed in the context of next year’s budget (1 July 2002).
Standards and Technical Regulations
(WT/TPR/S/95, p. 57, para. 68)
We note that Pakistani mandatory standards are incorporated in technical regulations of the
regulatory authorities for public health and safety.  We are interested in knowing the extent these
mandatory standards follow/adopt international norms,  particularly noting that some importers have
experienced difficulty owing to domestic quality standards.
The health and safety standards are of a non-discriminatory nature.  These standards generally
follow the international norms.  [Only one case (cer tain raw materials for soap industry) is known to
have been reported where the domestic quality standards, though compatible with international
standards, were at variance with the standards of the exporting country.  This had caused difficulty for
the exporters but was resolved satisfactorily by the Customs authorities.]WT/TPR/M/95/Add.1
Page 6
Regional Agreements
(WT/TPR/S/95, p. 21, para. 21)
We note that at the tenth South Asian Association for Regional Cooperation (SAARC) Summit, a
decision was taken to move towards the creation of a South Asian Free Trade Area and to draft a
treaty.  We are interested in knowing the latest state of play of this free trade initiative.
A draft of the South Asian Free Trade Area (SAFTA) treaty is under consideration of the
Committee of Experts of the SAARC member countries.  However, the process is at a preliminary
stage.  The target date for actualisation of SAFTA has been shifted to 2008.
Intellectual Property Rights
(WT/TPR/G/95, p. 11, para. 49)
It is mentioned that the Pakistan Intellectual Property Rights Organization (PIPRO) is in the final
stages of establishment and that it will be run along private sector lines with strong stakeholderparticipation on its Board of Governors.  We are interested to have further information on the
structure and the operation of the PIPRO, in particular how it would enhance the protection of
intellectual property rights in Pakistan.
By putting various agencies dealing with Intellectual Property Rights under one Organization,
we expect to ensure a more effective compliance of our TRIPS obligations.  The new organizationwill have the flexibility to engage experts and consultants from the private sector.  This will enable
PIPRO to have the necessary expertise to ensure greater enforcement.
Government Procurement
(WT/TPR/S/95, p. 53, para. 53)
It is noted that the Pakistani legislation on government procurement dated back to 1972 and the
legislation was amended most recently in March 1998.  It is also mentioned that a new amendment to
the legislation was under consideration.  We are inte rested in knowing the gi st of the new amendment.
Under the new amendment, price preference to public sector agencies is no longer available.
Safeguards
(WT/TPR/S/95, p. 56, para. 64)
It is mentioned that legislation on safeguard measures has been prepared and would enter into force
soon.  In this regard, we would like to know more information on the legislation including the timing
of its adoption and the rationale of formulating the legislation.
The Safeguards law is currently under the examination of the Ministry of Law.  The proposed
legislation provides a framework for investigation and determination of serious injury or threat of
serious injury to the domestic industry emanating from surge of imports.WT/TPR/M/95/Add.1
Page 7
Competition policy
(WT/TPR/S/95, p. 72, para. 121)
We note that a new competition policy law was under consideration to address anti-competitive,
restrictive business and unfair trade practices;  and to eliminate exemptions for state-owned firms
and registration requirements for private companies.  We would like to have more information on this
new law including the timing of its adoption.
We are still working on the new law.  We would be in a position to give information on its
coverage and timing of adoption once the law has been drafted.
Services Commitments
(WT/TPR/S/95, pp. 101-102, para. 71)
It is noted that Pakistan maintains MFN exemptions  for financial services with a view to, among
others, preserving reciprocity requirements, as well as for telecommunication services in favour ofcountries/operators signatories of bilateral agreements on accounting rates with the Pakistan
Telecommunication Company Limited (PTCL).  We would like to know whether Pakistan has any
plans to withdraw the exemptions and to bind its commitments on an MFN basis.  We would like to
know whether Pakistan has any plans to withdraw  the exemptions and to bind its commitments on an
MFN basis, especially in view that PTCL's monopoly  rights will only remain until end 2002 and that
full competition will come into place after.
To be answered later.
Banking
(WT/TPR/S/95, p. 102, para. 75)
It is mentioned that three national commercial banks (Habib Bank, National Bank and United Bank)
have been slated for privatization.  We would be inte rested to know the latest state of play of this
privatization process.
Latest position with regard to the three Nationalized Commercial Banks (United Bank
Limited, National Bank Limited and Habib Bank Limited) is as follows:
(i) We have received several Expressions of Interest (EoIs) for the privatization of the United
Bank Limited.  This was to be privatized by the end of December 2001, but the events of
September 11 have delayed the process.
(ii) As regards the privatization of National Bank Limited, the Government has recently floated
10% of its share in the stock market.
(iii) As a preparatory process for the privatization of Habib Bank Limited, the management of the
Bank is taking steps to improve the financial health of the Bank with a view to making it
attractive for privatization.
(WT/TPR/S/95, p. 103, para. 77)
We note that in addition to the reciprocity requirements for establishment and operation of foreign
banks, there is also the cap ceiling for the number of  branches set at twenty-five.  We would like to
know whether Pakistan has any plans to relax this restriction.WT/TPR/M/95/Add.1
Page 8
We have unilaterally increased the number of branches for each foreign bank from 8 to 25.
This limit could be increased if any bank so requests.
Insurance
(WT/TPR/S/95, p. 105, para. 82)
It is noted that new foreign entrants, both in life and non-life insurance, must incorporate or register
themselves as companies in Pakistan and meet various  requirements.  We would like to know whether
Pakistan has other regulations and requirements which are not spelt out in its schedule of specific
commitments, apart from the ownership restrictions.
The foreign entrants, along with the domestic firms, also have to meet requirements of the
Insurance Law.
Telecommunications
(WT/TPR/S/95, pp. 106-107, para. 88)
It is noted that in accordance with the relevant legislation, the PTCL monopoly rights will remain in
place until end 2002 and there will be full competition afterwards.  We would like Pakistan to
elaborate the ways foreign investors could participate in the progressive privatization of the PTCL, as
well as how to obtain additional new licences.
To be answered later.
MALAYSIA
In para. 3, p. 1 and Box 1.1 of the Secretariat’s Report, there is reference to the launch of a
comprehensive Economic Revival Programme in October 1999.  Could Pakistan provide further
information on the duration of this Plan, whether this is a short or medium-term Plan and its
assessment of the success of the Plan towards economic recovery?
To address the major structural bottlenecks and to restore macroeconomic stability, the
Government launched a Comprehensive Economic Revival Programme in October 1999.  The key
elements of the programme have been stabilization and structural reform measures.  A combination of
these two measures were undertaken during the last two years.  Sharp reduction in fiscal and current
account deficits, an impressive recovery in industrial production, reasonable increase in tax collection,low inflation, a modest growth in exports and remittances, and impressive build up of foreign
exchange reserves have been the major successes of the Programme.  Having achieved a major
success on stabilization front and laying the foundation for sustained high growth the Government has
decided to further consolidate the gains and deepen the structural reform measures by extending the
economic revival programme in the medium-term (i.e. by 2003-04).
Para. 32 refers to the reinstatement of regulatory du ties on imports of edible oil and oil seeds.  When
does Pakistan envisage that these duties will be phased out so as to reduce the complexity of the tariffsystem on these items which already include specific duties and withholding taxes.
The Government is considering removal of regulatory duty on imports of edible oil and oil
seeds from the next fiscal year.WT/TPR/M/95/Add.1
Page 9
JAPAN
Questions on the Report by the Secretariat (WT/TPR/S/95)
III. TRADE POLICIES AND PRACTICES BY MEASURE
(2) M EASURES DIRECTLY AFFECTING IMPORTS
Tariffs
(p. 29, paragraphs 20 and 21)
In Pakistan, 36.8% of all tariff lines are bound.  In this regard, Japan requests Pakistan to expand the
coverage of items under the bound tariffs.  Furthe rmore, as the gap between bound and applied rates
is wide, Japan requests Pakistan to reduce the gap by lowering the bound rates in view of improving
predictability in tariffs.  Please provide Pakistan’s view on this point.
In fact, a little over 40% of Pakistan’s tariff line are bound.  Pakistan is actively considering
to expand the coverage of items under the bound tariffs.  Pakistan is also considering reducing the gapbetween the bound and applied rates.  (In this cont ext, answer to question No. 1 from Hong Kong,
China may also be seen).
(p. 30, paragraph 23)
Following changes introduced in the customs tariff, as from 2001/02, no tariff lines are duty free, as
the lowest tariff rate has been raised to 5%.  In view of reducing tariff barriers, Japan considers thatduty free items should be restored.  Is there any possibility of this happening?
In its bid to reduce the dispersion of tariffs, Pakistan currently applies only four rates (slabs)
i.e. 5, 10, 20 and 30%.  Effective 1
st July, the maximum tariff is to be reduced to 25%.  Therefore,
there will be a corresponding adjustment in the rates of the four slabs.  We have taken good note of
the suggestion from Japan and will take this into account when we fix the revised rates for the fourslabs in the forthcoming budget.
(p. 31, paragraph 28)
The Report states that applied tariff rates on 91 eight-digit HS items exceed their binding levels by up
to 17 percentage points, even after the changes in customs tariffs in 2001/02.  Japan hopes that
Pakistan will make further efforts to observe the level of its bound rates.  Please explain the measuresunder consideration by Pakistan for the purpose of improving the situation.
Corrective measures will be taken in the forthcoming budget. (Please also see answer to
question No. 1 from Hong, China)
State-trading
(pp. 45-53, paragraphs 50-52, Ta ble III. 4, p. 82, paragraph 18)
The Report states that as of January 2001, the Rice Export Corporation (REC) and the Cotton Export
Corporation (CEC) have been merged into the Tr ading Corporation of Pa kistan (TCP).  Please
indicate the function and competence of the TCP concerning the exports of rice and cotton.WT/TPR/M/95/Add.1
Page 10
Export of rice as well as cotton is in the private sector.  TCP has a very limited role to play.  It
only exports these commodities in exceptional circumstances, like when the buyers insist upon
dealing with a public sector agency.
TRIMs
(p. 55, paragraph 60)
Last year, Pakistan was granted an extension of the transition period until the end of December 2003
for eliminating its TRIMs programme.  Without clear plans as to how and when TRIMs would be
abolished, business would not have the full incentive to invest in Pakistan.  We would therefore ask
Pakistan to explain its plan for elimination in a detailed manner.  Please also explain the current
situation for considering “a new policy approach”, which is mentioned in the last sentence of the
above-referenced paragraph.
Pakistan will comply with the decision of the CTG of November 2001.
(3) M EASURES DIRECTLY AFFECTING EXPORTS
Export restriction to agricultural products
(pp. 59-60, paragraphs 78-86, p.78, paragraph 2)
According to the Report, some export restriction measures were or are being taken on some
agricultural products: e.g. the export prohibition on wheat and its milling products (until 2000/01),on edible oils and on wood and timber;  the temporary quantitative restrictions on potatoes;  the
preshipment registration on rice and cotton;  and the regulatory duties on exports of bones and
raw/wet blue hides and skins.  Please provide detailed information (i.e. the purpose, the period of
application, the amount and value of the product subject to restriction) for each of the products
mentioned above.
There is no export prohibition on wheat and its milling products, on edible oils or potatoes.
Restriction on wood and timber is for environmental reasons because Pakistan is faced with serious
desertification problems.  Pre-shipment restriction on rice is on account of certain international
commitments;  and on cotton because of the highly volatile nature of cotton trade.  Regarding export
duty on bones and raw/wet blue hides and skins, it will be recalled that Pakistan had banned theirexport.  This ban has been lifted and replaced with export duty.  Further review is under consideration
of the Government of Pakistan.
Japan also considers that the export restriction concerning potatoes shall be notified to the WTO, in
accordance with Article 12 of the Agreement on Agriculture, because Pakistan is a net exporting
country of potatoes.  Japan, therefore, requests Pakistan to make a notification to the WTO as soon as
possible.  Please comment on this.
Export restriction on potatoes was of a temporary nature occasioned by short domestic
production.  In our view provisions of Article 12 of Agreement on Agriculture are not applicable in
this case as Pakistan is not a net exporter of potatoes on a consistent basis.
Export subsidies
(pp. 64-66, paragraph 96-101)
As mentioned in paragraph 101 of the Report, Japan is also of the view that certain tax exemptions
relating to exportation are to be classified as prohibited export subsidies.  Although Pakistan isWT/TPR/M/95/Add.1
Page 11
exempted from the prohibition to grand export subsidies, such subsidies have to be notified to the
Committee on Subsidies and Countervailing measures.  Please make a comment on this point.
As mentioned in the Government report, Pakist an no longer provides any prohibited subsidy
for exports.
According to the Report, in 1997/98, an export subsidy for sugar amounting to PRs 4,500 (about
US$90) per tonne was applied, even though this was not prescribed in Pakistan’s Schedule.  Please
explain the consistency of this subsidy with Article 9 of the Agreement of Agriculture.
Export subsidy for sugar in 1997-98 falls within the meanings of Article 9, paragraph 1 (d)
read with Article 9, paragraph (4) of the Agreement on Agriculture.  According to our understanding,
Article 9 paragraph 4 – a Special and Differential Provision – exempts the developing countries from
undertaking reduction commitments and therefore notification requirement in respect of subsidies
listed in sub-paragraph (d) and (e) of paragraph 1 for items not included in the country schedule.
(4) M EASURES AFFECTING PRODUCTION AND TRADE
Intellectual property rights
(p. 73, paragraph 126)
Japan appreciates that Pakistan has decided to join the Paris Convention for the Protection of
Industrial Property.  In this regard, we would like to receive information on the current situation, aswell as on Pakistan’s estimation of the time of its accession to the Convention.
The draft for the Cabinet is being scrutinized by the Ministry of Law.  We expect the Cabinet
decision over the next three months.
(p. 75, paragraph 137)
According to the Report, the Pakistani authorities have been working to supplement existing software
protection with a new Ordinance for Protection of Software.  Japan commends such efforts by
Pakistan, and would appreciate knowing the planned schedule for its establishment process.
The legislation is under preparation.
Services
(p. 106, paragraph 85)
According to the Report, a set of draft insurance rules has been under preparation to make the
insurance and reinsurance market more competitive and free.  After these rules enter into force, will
the limitation on foreign capital for insurance com panies be deregulated?  Furthermore, Japan would
like to know whether it will be possible to establish a subsidiary in Pakistan.
The new insurance law will certainly contribute to making the sector more competitive and
free.  As of now, foreign investment in this sector is restricted to 50% equity holding.  As we gain
greater experience and confidence, we will review the limitations on foreign investment in this sector.
(p. 109, paragraphs 93 and 95)
According to paragraph 93 of the Report, no privatization plans are under consideration for the
Pakistan Broadcasting Corporation (PBC) and the Shalimar  Television Network (STN).  On the otherWT/TPR/M/95/Add.1
Page 12
hand, according to paragraph 95 of the Report, the Ten-year Long Term Plan was announced on
6 September 2001 for the deregulation and privatization of the broadcasting sector.  Is consideration
of the privatization of PBC and STN included under this Ten-year Plan?
There is no immediate plan to privatize the Pakistan Broadcasting Corporation or the
Shalimar Television network.  However, private sector is allowed to participate in thebroadcasting/telecasting sectors.  A regulatory agency (PEMRA) is being set up.
Questions on the Report by the Government (WT/TPR/G/95)
Intellectual property rights
(p. 11, paragraph 48)
According to the Report, the Legislation on Plant Breeders Rights is being finalized.  Japan
commends such efforts by Pakistan and would appreciate knowing the planned schedule for its
establishment process.
Under the constitution of Pakistan this legislation requires the approval/consent of the
provinces as well.  The legislative process is at an advanced stage and we expect enactment in the
near future.
(p. 11, paragraph 49)
According to the Report, the Pakistan Intellectual Property Rights Organization (PIPRO) is in the
final stage of being set up.  Japan commends such efforts by Pakistan and would appreciate knowing
when it is expected to be established.
The plan to set up PIPRO are being accorded due priority and it is hoped that it will be set up
during this calendar year.
EUROPEAN UNION
Report by the Government (WT/TPR/G/95)
I. MACROECONOMIC REVIEW
(1) Structural reforms
In paragraph 1 it states that the economy is already beginning to show unmistakable signs of
stabilization.  Please could you elaborate further and indicate over what time period you anticipatethis is likely to have positive trade benefits.
Macroeconomic imbalances have been the main factors responsible for the deceleration of
economic growth in the 1990s.  In order to restore balance in macroeconomy and at the same time
revive economic growth, the Government has pursued a combination of stabilization and structural
reform programmes over the last two years.  As a result of the policies pursued, we have already
witnessed sharp reduction in fiscal and current account deficits and simultaneously contained inflation
at low levels.  Having achieved initial success on stabilization front, the Government has prepared amedium-term plan where we envisage that through stabilization policy we will be able to reduce
budget deficit to 3.2% and current account deficit to 1.3% of GDP, in addition to keeping inflation at
around 5%.  We believe that by the end of the me dium-term plan (FY 2003-04)  Pakistan will regain
its lost growth momentum and macroeconomic stability on a sustained basis.WT/TPR/M/95/Add.1
Page 13
II. EXTERNAL SECTOR
(2) Exports
In paragraphs 16-18 You noted that the performance of the export sector has been erratic and that, of
late, terms of trade have deteriorated.  What precisely do you mean by "terms of trade".  If by this you
mean Pakistani exports face stiff competition from other sources, what steps do you envisage willneed to be taken to enhance their competitiveness.  You also mention that you need to diversify your
export base.  What steps have you taken so far in order to achieve this ?
By terms of trade we meant the ratio of the unit value of export to imports (Price of
Exports/Price of Imports).  Of late, Pakistan has witnessed deterioration in its terms of trade i.e. the
unit value index of imports grew at a faster rate than its unit value of exports.
As regards the diversification of export base, Pakistan is making intense efforts to diversify
exports geographically and commodity wise, but it will take time before these efforts bear fruit.
(3) Imports
In paragraph 20 it shows how the level of imports are beginning to recover, however in paragraph 21
you also note that the share of capital goods has continued to decline due the declining levels of
investment within the country.  What steps do you envisage to correct this decline?
Elsewhere in the report you draw attention to the favourable investment climate for foreign
investment.  Do you see the two as linked, given by  your own admission, the flow of FDI at present is
low?  What further steps do you envisage taking to improve the overall investment in Pakistan from
both domestic and foreign investors?
It is a fact that investment as percentage of GDP has declined in the 1990s.  Pakistan has
taken various measures to increase investment which include:  restoring macroeconomic stability,transparency and predictability of policy environment, strengthening the tax administration,
continuous dialogue with business community, st ability in exchange market, and building up of
foreign exchange reserves.
The share of capital goods in total imports has declined because import bills of petrol and
petroleum products have increased substantially as a result of sharp increase in international price ofoil.  The share of oil in total imports was around 15-16% but jumped to around 33-34% during
1999-2000 and 2000-01.  Consequently, the share of other categories of imports (including capital
goods) declined.
As regards the question of favourable investment climate for foreign investment and the low
inflow of FDI in Pakistan, our comments are as follows:
The inflow of foreign direct investment (FDI) has declined since 1996-97 for the following
reasons:  (i) the East Asian financial crises of 1997;  (ii) economic sanctions of May 1998;  (iii) theIPP issues and particularly the HUBCO issues;  (iv) low levels of foreign exchange reserves and
threat of default on external payments obligations;  and (v) lack of ‘confidence boosting’ support from
International Financial Institutions (IFI), in particular with the IMF.
Over the last two years, we have largely succeeded in removing these constraints.  For
example, all the IPP issues, including the HUBCO one, have been resolved;  foreign exchangereserves have reached a comfortable position;  and there has been a strong support from IFIs,
including the IMF.  Moreover, all economic sanction on Pakistan have been lifted.WT/TPR/M/95/Add.1
Page 14
III. TRADE POLICY DEVELOPMENTS
(1) Policy Objectives
In paragraph 26 you state that government interventi on was limited to ensuring a level playing field.
Please could you elaborate giving concrete exampl es.  Again it is mentioned that Pakistan needs to
diversify its export base.  Apart from your own measures to achieve this, what role has SAARC playedin this respect, especially where it has sought cumulation of origin, thus presumably enabling greater
opportunities for Pakistan's exports.
Role of SAARC in enabling Pakistan to diversify its exports has been very limited because of
limited trade flow among the SAARC countries.
(2) Import Regime
In paragraph 30 you mention that apart from the 57 items at HS 8-digit level, there are a further
192 items on the "restricted list" that can be impor ted upon meeting health and safety requirements.
Can you please confirm that due account has been taken by your authorities of existing International
Standards in the formulation of your own and that they  have also been crafted so as to cause the least
distortion to trade as possible.  It would be useful if you could cite some examples where this has been
the case.
It is confirmed that due account has been taken of existing international standards in the
formulation of Pakistan standards.  Almost half th e standards are identical to international standards
while the remaining are similar and have been crafted in a way so as to cause the least distortion to
trade.
(3) Tariff Policy
In paragraph 32 you cite that high tariffs has in the past been the source of government revenue, but
efforts have been made to reduce and simplify them.  Do you agree that in the case of automobiles the
level is so high so as to impede trade with the consequent result that no revenue at all is being
collected.  Do you not therefore feel that this needs to be addressed, particularly when the domestic
industry is unlikely to be adversely affected by the makes and models of foreign imported vehicles.
Would it not also offer predictability to potential investors in Pakistan if tariffs such as these were
bound ?
The point regarding duty on automobiles is well-taken.  We intend to review the position in
the forthcoming budget, while ensuring reasonable protection to local industry.
IV. TRADE REMEDY LAWS
In paragraph 46 you note the introduction of Anti-Dumping and Countervailing Duty Laws.  What
has been your experience to date and do you still consider them to be fulfilling their desired intent?
With the creation of the National Tariff Commission you consider that it will be better placed torespond to genuine complaints of unfair practice.  Please elaborate on why this was not possible
beforehand, and in what way the Commission will be able to distinguish between genuine and
fallacious complaints.
Pakistan has not initiated any action under anti-dumping or countervailing legislation as these
laws were recently introduced.  Anti-dumping ordinance was implemented on 22 December 2000 and
countervailing legislation on 3 January 2001.  Both these laws have been notified to the WTO.WT/TPR/M/95/Add.1
Page 15
National Tariff Commission (NTC) is being re-structured and legal experts from the private
sector are being engaged for this purpose.  Moreover, NTC is being given an independent status to
focus essentially on such remedial issues.
VI. SECTORAL POLICIES
(1) Agriculture
In paragraph 50 you refer to "implicit" subsidies.  Please explain what you mean by this term and cite
examples of what you have considered to be/have been "implicit" subsidies.
"Implicit" subsidies would mean, for example, the gap between maintenance costs and
recovery charges on the irrigation system, lower electricity charges for tube wells etc.  Pakistan has
recently undertaken Agriculture Sector Restructuring Programme through which we seek to eliminate
such implicit subsidies.
(2) Industry
In paragraph 52 you state that SMEDA has undertaken a study on the problems facing SMEs.  Is this
report available?  If so, please could you provide details of how it can be obtained?
SMEDA has undertaken a study entitled "Creating a Policy Environment Conducive to
Employment Growth within SMEs in Pakistan".  This Report is available with the SMEDA from its
Headquarters in Lahore, whose address is given below.
Small and Medium Enterprise Development Authority
Government of Pakistan
43-T, Gulberg II, Lahore (Pakistan)
Telephone: 111-111-456
Fax: (92-41) 575 3545 and 575 3587
Website  : www.smeda.org
(5) Banking, Capital Markets, And Insurance
In paragraph 58 you mention that currently 78 branches of foreign banks are operating in the
country.  How has the recent introduction of Islamic banking been accepted by them, and in what way
do you think this will affect their future operations in Pakistan ?
The Supreme Court of Pakistan in its Judgement of December 1999 had asked the
Government to examine ways and means to in troduce Islamic Banking.  Complying with the
Judgement the Government has set up a Task Force to examine the issue.  The Task Force will submit
its report in due course.
REPORT BY THE SECRETARIAT (WT/TPR/S/95)
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES(6) T
RADE AGREEMENTS AND ARRANGEMENTS
(ii) Preferential, regional, and bilateral agreements
(para 20) We would request the Secretariat that  the last sentence of this paragraph referring to the
trade concessions package proposed by the EU to Pakistan is deleted from here and inserted underWT/TPR/M/95/Add.1
Page 16
item (c) relating to bilateral arrangements.  It should also be noted that on 16 October 2001, the EU
and Pakistan concluded an agreement, therefore it is no longer just a Proposal.
III. TRADE POLICIES AND PRACTICES BY MEASURE
(1) O VERVIEW
The Secretariat's report refers to tariff bindings that have been breached and which the Governments
is remedying.  The EC would be grateful for further details of the Governments' intended remedy and
timeframe?
(para 3) and (page 31, para 28) The report states that there is a large and increasing gap between
bound and applied tariff rates.  We would be grateful to receive more detailed information on the
timeframe for solving the problem related to that fact.
Government has largely rectified the position and the rest is expected to be done in the next
budget w.e.f. July 2002.
(2) M EASURES DIRECTLY AFFECTING IMPORTS
(iii) Customs Valuation
As from January 2000, Pakistan has to fully im plement the WTO Agreement on Customs Valuation.
Pakistan has, indeed, replaced its Import Trade Price ("ITP") valuation system with the declared
"transaction value" method, but has invoked a reservation in order to use minimum values on a list ofproducts.  The EU would be interested if Pakistan could clarify its position with regard to minimum
values.  At the same time, the EU would like to know the needs of Pakistan in terms of technical
assistance for the implementation of the WTO Agreement on Customs Valuation.
Pakistan does not have any list of minimum values.  The provision in the law has been
provided in case the WTO was to allow Pakistan to use minimum values for a few products for alimited period.
(viii) Government procurement
(para 53) Could Pakistan please provide the main provisions and text of the proposed amendment to
its legislation?
(para 54) What is meant by the term ‘advised’?  Are public entities legally bound to award price
preferences to local suppliers?  By which authority and according to which criteria is the decision
taken to award price preferences?
(para 55) What are the ‘principles of international competitive bidding’ generally followed?  How
does Pakistan ensure transparency of the system?  In particular:
− Which public procurement tenders are international?  Is this specified by law or decided on a
case by case basis?  How are international tenders published?
− How do prospective international bidders have access to information about Pakistan’s
procurement procedures and rules?
− Do tender notices include information about bidding procedures, award criteria and possible
price preference margins for local suppliers?WT/TPR/M/95/Add.1
Page 17
− Do unsuccessful bidders have access to information on why their bid was refused?
− What are the challenge procedures against any decision taken by the Purchasing and
Inspection Agency (or any other procuring entity)?
(para 56) Please inform if information about registration with the Department of Investment
Promotion and Supplies of the Ministry of Industries and Production is made available to foreign
entities?  What are the requirements for registration for foreign entities, are they different from those
for domestic entities?  Would Pakistan provide details of the composition, functioning and powers ofthe National Regulatory Authority established to eradicate corruption in the procurement process?
Does the Authority review all of Pakistan’s procurement activity systematically or only in the case of
complaints?  What national laws and regulations dealing with corruption in the procurement process
are currently in force?
Previously price preference was accorded to domestic producers in procurement being made
by government departments as well as government  controlled public sector agencies.  Now through
the amendment in question such price preference can only be given by government departments intheir procurement and not by public sector agencies since they do not fall within the definition of
government even though they are partly or wholly government owned or controlled.  Public entities
are, therefore, not legally bound to give price prefer ence.  Transparency in international competitive
bidding is maintained through advertising tenders through the press, cross checking of contracts
before award by the Ministry of Finance and, of course, by scrutiny through the staff of the AuditorGeneral of Pakistan.
(x) Contingency measures
Paragraph 63 states that Pakistan has made regular reports – have these been notified?
(para 62) The report states that domestic legislation on anti-dumping and countervailing action was
promulgated in 2000 and 2001, respectively.  Could Pakistan please indicate when this legislationwill be notified to the WTO Anti-dumping and Subsidy Committees.
(para 63, footnote 76) We would ask the Secretaria t to delete the reference to EC anti-dumping on
bed linen.  The EC is currently in the process of  implementing DSB rulings in this regard and the
measure referred to  will be repealed.
Pakistan has notified to WTO on Subsidies and Countervailing Measures that it has not
initiated any anti-dumping action and countervailing measures against any Member.
(xi) Standards and other technical requirements
(para 66) Please inform if the Pakistan Standa rd and Quality Control Authority (PSQCA) has
accepted the WTO TBT Code of Good Practice fo r the Preparation, Adoption and Application of
Standards.  In addition, the paragraph states that standards may also be developed by differentministries and departments.  We would like to know  whether or not these standards are voluntary.
(para 67) Has the Pakistan Environmental Protection Agency (PEPA) accepted the Code of Good
Practice?
We are also interested to know if the PSQVA acts as the TBT Enquiry Point?  Does it have a web-
address?
We would be grateful if Pakistan could inform about the possibility of suppliers declaration of
conformity in the Pakistani system.WT/TPR/M/95/Add.1
Page 18
Pakistan Standards Institute (PSI), the predecessor of Pakistan Standards and Quality Control
Authority (PSQCA), had accepted the WTO, TBT Code and Good Practice in February, 1998.  The
Standards even developed by the Ministry/Departments are referred to PSQCA for
endorsement/enforcement.
Pakistan Environmental Protection Agency (PEPA) has not accepted the code of goods
practice as yet.
Pakistan has notified following two enquiry points on TBT:
(a) Pakistan Standards Institute for Standardization and Certification.
(b) Ministry of Health for Technical Regulation relating to food and health safety.
(3) M EASURES DIRECTLY AFFECTING EXPORTS
(ii) Export duties and minimum prices
(para 80) We note that Pakistan applies a 20% export tax to exports of hides and skins and wet blue
leather.  Could Pakistan please indicate whether ther e is any time schedule for the elimination of this
tax?
Export duty has been levied on hides and skins and wet blue leather in order to remove export
restrictions.  Elimination of this tax will be reviewed at the time of next budget.
(v) Duty and tax concessions, (vi) Export-performance and value-added requirements, (vii)
Export-processing zones
(para 95, 97, 101) The report states in these paragraphs that various measures, which appear to
constitute specific subsidies, have not been notified to the Committee on Subsidies and Countervailing
Measures.  Could Pakistan please indicate when it will fulfil its obligations to make these
notifications which are required under Article 25 of the WTO Agreement on Subsidies andCountervailing Measures.
To be answered later.
(4) M
EASURES AFFECTING PRODUCTION AND TRADE
(iv) Intellectual property rights
Please explain how Pakistan implements the obligation contained in 39.3 TRIPS to protect
pharmaceutical and agro-chemical test data against unfair commercial use and from disclosure.
We would also like to receive a description how and under which provision, Pakistan’s legislation
grants the retroactive protection provided pursuant to Article 18 of the Berne Convention and
Article 14.6 of the TRIPS Agreement.
The Ministry of Health maintains a policy to protect the undisclosed test data information
provided to them in connection with market approval for pharmaceutical and agricultural chemical
products.  The Ministry does not display/reveal information about it being the custodians of theinterest of the right holders.WT/TPR/M/95/Add.1
Page 19
The rights of the performers, producers of the phonograms (sound recording) and the
broadcasting organizations have been protected in  Pakistan’s Copyright (Amendment Ordinance 2000
through insertion of a new section 24 A to Ordinance XXXIV of 1962 that reads as under:
"24A. Rights of performance and producers of phonograms (sound recording).  (1) The
performers shall have the right to do or prevent fixation of their unfixed performance andreproduction of such fixation and broadcasting by wireless means and communication to the
public of their live performance."
Trade Facilitation
We would welcome information on any measures taken recently by Pakistan to reduce and simplify its
import and export procedures, and to introduce mode rn customs and trade administration procedures
such as pre-arrival processing of consignments, risk assessment procedures, and submission of data
by electronic means.
What measures does Pakistan have in place to co nsult the trading community – including importers
and exporters, shippers, freight forwarders and agents, SMEs – on customs and trade facilitation
rules and procedures and ways of improving them?
What are the principal needs of Pakistan in respect of technical assistance in the field of trade
facilitation/simplification of customs, import and export procedures?
The Government of Pakistan has a high powered National Trade and Transport Facilitation
Committee headed by the Secretary Commerce.  The members, inter alia , include representatives of
importers, exporters, shippers, freight forwarders and agents etc.  This Committee is examining ways
and means of simplifying import and export procedures and its work being supported by an ongoing
World Bank/UNCTAD project titled "National Trade and Transport Facilitation Project".
In addition, the following steps have been taken to simplify customs import and export
procedures:
1. Simplification of Trade Laws
Customs tariff has been simplified by deleting 1,200 national tariff lines, which were not
required for duty or statistical purposes.  It was experienced that these national subheadings were inmany cases causing classification disputes.  Reserve duty slabs have been reduced and all similar
goods have been made chargeable to the same rate.
2. Reduction of exemptions
The number of Statutory Regulatory Orders (SROs), which allowed duty concessions for
certain industries have been reduced from 120 to 56.  A number of such exemptions have been made a
part of the tariff by creating chapter 99.
3. Electric Assessment System (EASY)
Based on risk profiling, almost one third of total imports are cleared on the basis of self
declaration and only post-audit is carried out.  Moreover, importers have a choice of pre-arrival
processing of consignments.WT/TPR/M/95/Add.1
Page 20
4. Submission of data by electric means
The framework has been provided.  All shipping manifest are received electronically.
Importers can also file import documents (Bills of Entry) electricity.
All customs data including daily clearances of imports/exports are available on-line on the
CBR’s website.
Consultation with the trading community is a regular feature.  All Chambers of Commerce
and Industries and specialized Trade Associations have committees (on custom matters), which meet
periodically to sort out any issues.
As far technical assistance is concerned, Pakistan is in the process of implementing revised
Kyoto Convention on simplification of customs pr ocedures and Istanbul Conventions on temporary
import of goods.  Technical assistance in these areas will be appreciated.
(x) Contingency measures (para 62)
The legislation on anti-dumping and countervailing were notified to the WTO on
17 January 2002 and have been notified by the WTO on 23 January 2002.
KOREA
IV. TRADE POLICIES BY SECTOR
(5) S ERVICES
(iv) Communications
According to the footnote No. 143 in para 88 (page 106) of the Secretariat's Report, the state-owned
Pakistan Telecommunication Corporation (PTC) was converted into the commercially operated
Pakistan Telecommunication Company Ltd (PTCL) in 1996.  Please let us know whether the change
of the PTC's status is de jure or de facto.
It is de jure as well as de facto.
As para 90 (page 108) of the Secretariat's Report points out, the Pakistan Telecommunication
Authority (PTA) is an "autonomous" body.  Please explain to us what "autonomous" means and why
the term of "autonomous" is used in place of "independent" which is used at the reference paper.
Additionally, explain to us who has the competence to appoint the PTA's high ranking officialsincluding the president.
Autonomous is used in terms of PTA’s financial and administrative independence.  (It does
not, for instance, rely upon Government’s budgetary support.)
NORWAY
Norway would like to commend the Government of Pakistan for their efforts to expand the tax-base,
which among other positive effects will make public  revenues less dependent on import duties.  Could
the Representative of Pakistan elaborate on the results of these efforts to date?  What are the plansand time perspectives for establishing a less complicated and broader based tax system?
Already custom duties have come down to 16% of the tax revenue.  The General Sales Tax
regime has been widely implemented.  While many of the tax reforms have already been implementedWT/TPR/M/95/Add.1
Page 21
we are at an advanced stage of finalization of the remaining reforms.  (This question is dealt with in
greater detail in Pakistan delegations statements on 23 and 25 January 2002).
As a result of the tax and tariff reform introduced over the years, Pakistan’s reliance on
import duties for tax revenue has declined.  The share of import duties on total tax revenue was 38%
in 1990-91 but declined to 16% by 2000-01.  With further deepening of tariff reform, its share in totaltax revenue will further decline.  We have already simplified the tax laws and reduced the number of
taxes.  The process of broad-basing tax system is on going and in the next three years the tax system
will be broadened and the tax laws further simplified.
INDIA
Pakistan has consistently denied MFN status to India even though India has extended such status to
Pakistan.  Denial of MFN status to India is a violation of the basic principle of GATT/WTO by
Pakistan and is inconsistent with the WTO rules.
We would request the delegation of Pakistan to indi cate when the MFN status would be extended to
India.
The Indo-Pak trade relationship cannot but be viewed in the context of the difficult political
relations between the two countries over the course of the past 50 years.
The GATT/WTO in Article XXI, provides that a country can take measures to regulate trade
for the protection of its essential security interests.  Paragraph (b) (iii) of Article XXI stipulates that:
“Nothing in this Agreement shall be construed to prevent any member from taking any action
which it considers necessary for the protection of its essential securi ty interests .......... taken
in time of war or other emergency in international relations”.
Both India and Pakistan have acted in the spirit of this exception.  After the 1965 war, trade
and diplomatic relations were terminated by both sides.  The subsequent process of normalization was
slow and deliberate, with each side opening trade on an item by item basis with trade being channeled
through limited trade and shipping routes.  Thus, in practice, both India and Pakistan have acted
consistent with WTO Rules relating to national security in treating each other as exceptions to the
MFN principles.
The situation has become more complex and difficult over the years.  The trade regimes of the
two countries have evolved in different directions – with Pakistan’s regime reflecting a commercially
more liberal and open approach.
Pakistan has proposed a comprehensive dialogue to India, covering both political and security
issues i.e. Kashmir and military issues, as well as trade relations.  The political and practical
difficulties relating to the full application of MFN between Pakistan and India can be addressed and
resolved as part of this dialogue.
THAILAND
II. TRADE POLICY REGIME:  FRAMEWORK AND OBJECTIVES
WT/TPR/S/95 (Para. 20, p. 21)
In October 2001, the EU proposed to Pakistan a package of trade concessions to increase Pakistan's
exports of textiles and clothing to the EU.  In return, Pakistan was to reduce its import duties by 5%on textiles and clothing originating in the EU.  In this respect, we would be interested to knowWT/TPR/M/95/Add.1
Page 22
whether or not the products under such package of concessions had been integrated into the
Agreement on Textiles and Clothing and whether Pakistan's concessions will be made available to
other Members on an MFN basis.
Pakistan has integrated the total Textile and Clothing sector as required by the ATC ahead of
its obligations under the Agreement.  Pakistan has also notified the reduction in tariffs to the WTO,which will be available to all other members on MFN basis.
III. TRADE POLICIES AND PRACTICES BY MEASURE
WT/TPR/S/95 (Para. 5, p. 25)
Under Pakistan's tariff regime, a number of border taxes and charges, withholding taxes and a
capital-value tax are employed to provide further pr otection from imports.  We would like to know if
the capital-value tax is, apart from  imported motor vehicles, also levied on domestically produced
merchandise.
There is no capital value tax and withholding taxes are adjustable in tax returns.  We do not
know what border taxes and charges have been referred to.
WT/TPR/S/95 (Para. 12, p. 26)
According to the report, nearly all importers are required to register as importers with the Export
Promotion Bureau while exemption from registration requirements is extended to public sectordepartments.  However, in the year 2000, there were  plans to amend the regu latory framework with a
view to simplifying the registration procedures.  We would like to seek clarification if such regulatory
framework has been amended or continues to be in existence.  If amendments have been made, please
provide information how the registration procedures have been simplified, and if any private entities
have been granted exemption from registration requirements.
Registration as an importer is an automatic process.  It was being done for data and statistical
purposes.  With the establishment of Pakistan Revenue Automation Limited, which automatically
creates the database, proposal to do away with the registration requirement is under consideration.
WT/TPR/S/95 (Para. 18, p. 28)
Despite the attempt to simplify the tariff structur e, the tariff remains to be a complex instrument and
accords varied levels of protection to domestic industry.  Bound MFN tariff rates are also, by and
large, considerably higher than applied rates, resulting in a high degree of import regime uncertainty.
Given the large gap between the applied and bound rates, applied rates may be raised without
breaching bindings.  We would like to get informa tion as to by how much on average the raise from
applied rates had been made.
As part of our ongoing tariff reforms we have been reducing the applied tariff rates;
therefore, there is no question of applied rates having been raised.
WT/TPR/S/95 (Para. 28, p.31)
In 2001/02, applied tariff rates on 91 items, mostly textiles and clothing, exceed their binding levels
by up to 17 percentage points.  We would like to know the rationale of maintaining such big gap
between bound and applied rates, and of the Government's policy in rectifying the discrepancies to be
in line with WTO commitments.WT/TPR/M/95/Add.1
Page 23
Of the 91 items referred to, Pakistan has already made correction to about 80 tariff lines,
textiles and clothing.  These corrections will be effective from July 1, 2002 and will bring the bound
and the applied rates in line with our WTO commitments.
WT/TPR/S/95 (Para. 101, p. 65)
Under Pakistan's EPZ regime, certain tax exemptio ns available for industries are classified as
prohibited export subsidies.  And, as a developing country, Pakistan is required in the context of the
Agreement on Subsidies and Countervailing Measures, to notify in 2001 if she so wishes to continue
to utilize such subsidies under the regime.  Otherwise, the granting of tax exemptions shall have to be
abandoned within 2002.  As we understood Pakistan had not notified in 2001, it would therefore be
grateful if Pakistan could elaborate on the use of this measure, and whether she may deem to do away
with such measure so as to bring her legislation into line with WTO provisions by the end of 2002.
To be answered later.
IV. TRADE POLICIES BY SECTOR
WT/TPR/S/95 (Para. 15, p. 81)
As bound MFN rates are substantially higher than applied rates for agriculture allowing for great
flexibility in raising the latter.  It would be appreciated if Pakistan could provide information if she
had ever before raised applied tariff rates on any agricultural items.
A detailed examination will require time.  At the moment we can only think of one
agricultural product on which applied rate was raised.  This was in the case of wheat, where duty was
increased to 30%.
WT/TPR/S/95 (Para. 67, p. 100)
The highly protected motor-vehicle industry in Pakistan has entailed extensive state involvement, and
as such, the industry has been granted assistance with a view to boosting low cost production and
promoting the industry.  The schemes involve, among others, the provision of credit facilities
(agricultural tractors) and exemption from value-added tax (cars and jeeps).  We wish to know if such
measures have remained in place up to the present.
The measures referred to in the question are no longer in place.
WT/TPR/S/95 (Paras. 83-84, pp. 105-106)
We would like to know in greater detail about the requirements imposed on life insurance firms for
maintaining separate funds for each type of busine ss.  Furthermore, please inform us about the
organization structure and sources of fund of the SEPC, as well as the organization structure of the
Insurance Ombudsman and Insurance Tribunal if both have already been established.
Details are provided in the Insurance Ordinance 2000 (copy can be provided upon request).
SECP is guided in its working by its Policy Board in which the major stakeholders are represented.Its funds are generated from various fees and charges. Insurance Ombudsman and Tribunal are being
set up.WT/TPR/M/95/Add.1
Page 24
UNITED STATES
SUMMARY OBSERVATIONS
Economic Environment
Para. 5
The Secretariat report notes that the “State retain s a prominent direct role in the economy.”  This
statement is backed up by several pages of details on the enterprises controlled by the state.   What is
the GOP doing to lessen state involvement in the economy?  What enterprises have been privatized?
Why was information on state-controlled enterprises not notified to the WTO?
The wide-ranging structural reform measures introduced over the last two years have meant to
reduce the role of the state in the economy.  More than a hundred state-owned enterprises have
already been privatized.  The Government plans to deepen the reforms programme over the next
three years.  We believe that these structural reform measures would reduce the role of the state in theeconomy even further in the medium-term.
(3) Trade Policy Developments
Para. 1
The Secretariat's Report notes that the tariff remains a primary source of government revenue and a
potential restraint on domestic competition and obstacle to efficient allocation of resources withnegative consequences for the economy.  What is the Government of Pakistan doing to decrease
improve competition and to find alternate sources of revenue?
Tariff used to be the primary source of government revenue in the early 1990s.  For example,
tariff accounted for 38% of tax revenue in 1990-91.  Its share has declined to only 16% by 2000-01.
The reliance on tariff for revenue has been declining as a result of the tax and tariff reform measuresundertaken over the years.  The shares of income and consumption-based (sales tax) taxes have
increased considerably over the years.  They together account for 71% of tax revenue in 2000-01 as
against only 22% in 1990-91.  With further broadening of tax bases as envisaged in the medium-term,
the reliance on tariff as a source of revenue would further decline.  Government is trying to improve
competitiveness through tariff reform with a view  to reducing anti-export bias and using a market-
based exchange rate regime.
Para. 2
The Secretariat's report notes a significant spread between current applied rates and bound rates,
and a low share (about one third) of tariff lines bound.  What is the Government of Pakistan.  These
two features, combined with a large number of “concessions” in the tariff  can result in an
unpredictable tariff.   What is the Government of Pakistan doing to increase the predictability of its
tariffs and, given the importance of the tariff in Pakistan’s regime,  its trade policy?
As part of the ongoing tariff reform the government is committed to rationalize the tariff
structure as a result of which the gap between the applied and bound rates will also be narrowed.
Para. 2
The Secretariat report also notes that Pakistan has apparently breached its WTO bindings on 90 tariff
lines, primarily in the textile and clothing area.  Has Pakistan notified its 2001-02 applied rates to theWTO?  What does Pakistan plan to do to restore WTO-consistent rates to these items?WT/TPR/M/95/Add.1
Page 25
Pakistan has notified the bound rates for 2001-02 and 2002-03 to the WTO for textile and
clothing items.  Implementation of these bindings with effect from 1 July 2002 will become consistent
with WTO commitments.  In fact, Pakistan has ad vanced the tariff bindings for most textile and
clothing items from 2005 to 2002.
Para. 5The Secretariat report refers to the possibility that minimum imports values could be used.  This is
briefly discussed in part II. of the report. furthe r discussed.  Under what conditions are minimum
import values used in Pakistan?
Pakistan is not using minimum import values.  However, it has requested the WTO for
allowing Pakistan to use minimum import value for a few items for a limited period.
(4) Sectoral Issues
Para.1
The Secretariat's Report notes that insofar as barriers to commercial presence restrict competition in
the provision of services, they tend to impair efficiency in the sector, so that the prices paid for these
services, both by businesses and households, are higher than would be the case in a more competitive
market.  The resulting higher costs of doing business could hamper the competitiveness of all firms in
Malaysia that require essential services (such as energy, finance, telecommunications, andtransportation) as inputs in their production and delivery of goods and services.  What is the
Government of Malaysia doing to reduce these barriers to the provision of services?
The question was perhaps not intended for Pakistan.
I. ECONOMIC ENVIRONMENT
I.(3)(ii) para. 13 - WT/TPR/S/95 (S/95) states that  Pakistan has a n extremely weak tax base, with
taxes accounting for only 14% of GDP.  Is this a refe rence to income taxes?  If not, what taxes are
referred to here.  In paragraph 162 it is noted that indirect taxes account for 71% of total tax revenue.
What point is being made by pointing out that taxes account for 14% of GDP?
‘Taxes accounting for only 14% of GDP’ does not refer to income taxes but includes all taxes,
i.e. income taxes, sales tax, custom duty, central excise, and surcharges on gas and petroleum.
Indirect taxes consist of sales tax, custom duty, central excise, and surcharges and account for
71% of total taxes.  Total taxes (which include both indirect and direct taxes) account for 14% of
GDP, which represents the country’s fiscal effort.  This obviously needs to be improved.
II. TRADE POLICIES BY MEASURE
III.(1) para. 59 - S/95 states that roughly one third of tariff lines are currently bound.  Given the
uncertainties faced by business and industry because of unbound tariff rates, does Pakistan plan to
fully bind its schedule in the new round?
Matter is under consideration of the Government.WT/TPR/M/95/Add.1
Page 26
(2) Measures Directly Affecting Imports
(ii) Tariffs
(b) General Features
Para. 3
The Secretariat Report notes that several govern ment agencies have the power to exempt imports
from duty and impose regulatory of special cu stoms duties.  Under what conditions are imports
exempted from duty?  Are duty exemptions made on an MFN basis?
No agency has the power to exempt imports from the duty with the exception of the Central
Board of Revenue (CBR).  As regards imposing regulatory duty (RD), the National Tariff
Commission is empowered to recommend, not impose, the regulatory duty.  The decision to impose
RD or otherwise is taken by the Cabinet.
Imports are generally exempted from duty only where the items are received as donations.
Donations received from any country enjoy the same status.
(c) Duty free treatment
In the current budget (announced June 2001), the duty-free tariff category was eliminated.  The
Secretariat report indicated that duty free entry is allowed on an exceptional basis.  What are the
exceptions that would result in duty free treatment?
Duty free treatment is allowed only in the case  of previous international commitments (grand-
father clause).  Items such as computers and IT related equipment covered under the Singapore
Agreement are treated as duty free.
(g) Tariff escalation
The Secretariat report notes that tariff escalati on is an “important” feature of Pakistan’s economy.
What is the GOP doing to reduce tariff escalation?
As part of the tariff reform the Government has reduced the maximum tariff rate as also the
tariff escalation.  The reform process is continuing.
(h) Regulatory Duties
The Secretariat report refers to “regulatory” duties in several places in the report.  What is the
purpose of a regulatory duty, and what is the rate?  Does Pakistan consider this to be a customs duty?
The purpose of the regulatory duty (RD) is to achieve certain custom duty rate which is not
provided in the tariff.  Secondly, in the absence of adequate mechanism for anti-dumping it was used
as a mechanism to protect the local industry from injury by dumping.  Furthermore, it was sometimes
used to rectify certain tariff anomalies.  The rate is generally 5%.  This is treated as customs duty.
III.(4)(i) paras 161-171 - Pakistan’s stable of taxes applied to imported goods and services is very
extensive and complex.  In addition to the customs duties there is a Sales Tax at 15%, a CentralExcise Tax (up to 200%), a Corporate Income Tax, a “Once and for All” tax on corporate assets, a
Central Excise Tax, Workers Welfare Fund taxes and Capital Value taxes.  These taxes are all
complex, with frequent variations in the rate of tax and even more frequent exemptions from the taxes,WT/TPR/M/95/Add.1
Page 27
usually for protection of local industry.  Pakistan should simplify its tax structure, eliminating some, if
not all, taxes and reducing the total incidence of taxes on imported goods.
III(4)(i) Paras 161-171:  Imports are subject to  custom duty, sales taxes, and withholding
income tax.  Since sales tax is a value added tax, therefore, these are adjustable.  In the case of
withholding income tax, these are adjustable for indus trial importers against their income tax liability.
Central excise duty is levied on limited number of imports where local products are subjected to
similar treatment.  As part of its tax reforms multiplicity of taxes is being reduced.
TBT COMMENTS
Paragraph 122 references the process of how the PSQA develops and adopts standards.  Can
Pakistan please elaborate on this process?  Are mandatory technical regulations, mandating specific
standards or testing subject to a public notification and comment period?
In reference to paragraph 127, the United States welcomes Pakistan’s notification of its TBT enquiry
point and acceptance of the code of good practice on voluntary standards.  These are two good steps
in full implementation by Pakistan of TBT obligations.
As part of the TBT Committee’s Second Triennial Review of the TBT Agreement, the TBT Committee
is actively developing a demand driven technical assistance programme in 2002.  The programme
requires LDCs to identify specific needs for implementing TBT obligations.  Based on the informationprovided in paragraph 127, areas that Pakistan may want to consider for technical assistance are
consultation and notification procedures for technical regulations.  We encourage Pakistan to identify
specific needs that would allow GOP to bring its laws into compliance with its WTO TBT obligations,
which are notified under Article 15.7, and send a proposal for technical assistance to the WTO TBT
Committee.
Para. 122:  To be answered later
Patents and Designs
Para. 3
The Secretariat report notes that there is no plan to provide criminal penalties for patent infringement
in Pakistan as required under TRIPS Article 61.  Why not?
Pakistan is in compliance with Article 61 of the TRIPS Agreement.
Textiles
Regarding Pakistan's import tariff bindings on textiles and apparel.  We note that via a letter dated
24 January 2000, to Mr. Heinz Opelz of the WTO Market Access Division, the United States entered a
reservation on Pakistan's notification circulated by the Secretariat as G/MA/TAR/RS/61, dated
26 October 1999.  The United States believes that the operative textile and clothing tariff
commitments of Pakistan are those circulated as G/MA/SP/2 dated 8 August 1995.  The United States
seeks assurance from Pakistan and the Secretariat that those commitments contained in G/MA/SP/2
have been formally certified.
Pakistan’s commitments made vide G/MA/SP/2, dated August 8, 1995 were formally notified
to the WTO and are being implemented.WT/TPR/M/95/Add.1
Page 28
Telecom Services
(Para. 286) The Secretariat Report indicates that the PTCL monopoly on international services will
end on 31 December 2002.  According to Pakistan's "Revised Schedule of Specific Commitments on
Basic Telecommunications," 18 December 1997,  WTO reference S/C/W/33, the international voice
market will not be liberalized until 1 January 2004.  If you now intend to liberalize on 1/1/2003, willyou modify your current WTO schedule accordingly?
(Para 288) There is reference to the Pakistan Telecommunication Authority (PTA) that functions as a
telecom regulatory body.  In the same WTO document referred to above (Pakistan's commitment in
basic telecom services), Pakistan attached a reference paper that significantly differed from the
consensus telecom reference paper more than 60 WTO Members accepted.  Pakistan's reference
paper left out entire provisions or changed the wording in important ways on interconnection, public
availability of licensing criteria, procedures for the allocation and use of scarce resources, andassurances that the telecom regulator is an independent body.  Does Pakistan now intend to adopt the
standard reference paper, an action that will make the country more attractive for foreign investment
and participation in the telecom sector?
(Para 286) The Report refers to the Government's intention to transfer 15 to 26% of PTCL to a
strategic investor.  Does the Government intend to fully privatize PTCL, and if so, has it set a roughtimetable to accomplish that?
(Para. 286)
Modification of the current WTO Schedule in so far as it concern the PTCL monopoly is in
our consideration.
As regards ‘full’ privatization of PTCL, this is an option that will be considered as the
privatization process gets actualized.
SWITZERLAND
Secretariat's Report page 12, paras 26-27, and Government Report page 8
As narrow export base and concentration on few markets have been identified as structural
weaknesses.  Which of the broad trade policy objectives identified seem most promising to addressthis weakness and improve Pakistan's competitive st rength?  What is the timeframe the Government
expects for the policies to become effective?
It will clearly not be possible to bring about a significant market and product diversification
over the short term.  Our major focus in this respect is onshore capacity building, improved physical
and social infrastructure, trade facilitation and a synergetic approach to the development of SMEs.
We expect to start seeing the results of these initiatives in 2-3 years time.
Regional Trade Agreements, page 21, paras 21-22
How does Pakistan judge the effects on trade flow s of participating in the SAARC?  How does
Pakistan view the value-added of being a member, where are the limits?
SAARC is still in early stages of evolution.  It  will be premature to make definitive comments
on the long term potential and its limitations.WT/TPR/M/95/Add.1
Page 29
Preferential Arrangement with EU, page 21, para. 20
In return to certain preferences obtained from the EU, Pakistan is "to reduce its import duties by 5%
on textiles and clothing originating in EU".  Coul d Pakistan elaborate on the implementation of this
commitment – is such reduction compatible with the of MFN-principle?
The tariff reduction is compatible with the MFN principle as Pakistan has notified the bound
rates to the WTO.
Page 25, para. 3
Applied rates on 91 tariff lines exceed the bound rates by as much as 17 percentage points.  What are
the intentions of Pakistan with regard to reduce the level of these applied rates to the bound rates?
This is being corrected in the forthcoming budget.  Details can be found in responses to
Questions from Thailand and other countries.
Page 25, para. 5 and page 41, para. 42
Are withholding taxes levied on imports and exports efficient to combat income tax evasion?  Please
elaborate further on the purpose of these taxes and the potential effect on trade flows.
Could you please elaborate on the way withholding-type taxes levied on imports (para. 42) are
applied and collected.  Could there be a systemic problem in the case of an importer in a non-
taxpaying position?  Does Pakistan foresee any measure to address this issue?
It is arguable if withholding taxes help combat tax evasion.  The real motivation for
introduction of these taxes was, on the one hand, a certain area of comfort to the tax payer, who
prefers a ‘rough and ready’ method, and on the other, ease of collection.
With the reforms of the Central Board of Revenue, and greater confidence with the new
Income Tax Ordinance, the concept of withholding taxes is most likely to be reviewed.
Page 27, para. 12
"In the year 2000, there were plans to amend the re gulatory framework with a view to simplifying
registration procedures and introducing an automatic database upgrade".  Has the regulatory
framework been amended in the me antime?  If so, what  amendments have been introduced?  If not,
what are the reasons?
The regulatory framework has not so far been amended.  It is going through an inter-
ministerial examination.  We expect the position to be finalized in about three months time.
Page 28, para. 18
Due to reduction of applied tariffs bound MFN tariff rates are significantly higher than applied MFN
rates.  Additionally, only a limited number of tariff lines are bound.  Both factors can be a source of
uncertainty for traders.  Is Pakistan ready to address these issues in the negotiations?
The matter is under our active consideration, however, details can be found in responses to
other countries.WT/TPR/M/95/Add.1
Page 30
Page 35, paras 34-35
Are duty concessions/exemptions applied to all activities or industries eligible irrespective of their
origin?  In the case of pharmaceuticals, have the concessions/exemptions been replaced or
eliminated?  If replaced, please elaborate on the new regime applicable.
Yes, concessions are applied irrespective of their origin.  No, concessions on pharmaceuticals
have not been replaced.
Page 39, Table III.2-B
"Exemption from customs duty is foreseen for raw materials and components as are not manufactured
locally".  What conditions need to be fulfilled in order to be eligible for this exemption?  What raw
materials and components can benefit from this exemption?
A limited number of products are eligible for exemptions if these are not manufactured
locally.  The only condition in such cases is whether or not these products are being locally produced.
Export Subsidies (page 63, para. 90 and Summary para. 19;  Government Report page 10)
According to the Secretariat's Report it seems that export subsidies constitute and important element
of economic policy of Pakistan.  Some might view export subsides as financial support of foreign
consumers and industries and may take the position that there are more sustainable ways of
strengthening the supply-side capacity – what is th e position of Pakistan on these issues?  On the
other hand, in its report (page 10) the Government states that "It is our endeavour to do away with all
export subsidies, explicit or otherwise".  What exactly are the intentions of the Government of
Pakistan as regards export subsidies?
Neither our policy, nor our fiscal space, permits subsidies.  We propose to discuss this aspect
of the report with the Secretariat.
Notification Subsidies (page 70, para. 116)
It seems that "questions have been raised in the Committee (on Subsidies) regarding several tax and
non-tax measures that have not been notified".  What is the stance of Pakistan towards these
allegations?
Again, we propose to discuss this aspect of the report with the Secretariat.
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