RESTRICTEDWORLD TRADE
ORGANIZATIONG/C/W/294
31 August 2001
(01-4214)
Council for Trade in Goods Original:  English
PAKISTAN - REQUEST FOR EXTENSION OF THE TRANSITION
PERIOD UNDER THE AGREEMENT ON TRADE-RELATED
INVESTMENT MEASURES
The following communication, dated 31 August 2001, has been received from the Permanent
Mission of Pakistan.
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With reference to Pakistan’s notification No. Econ. 1/19/94, dated 30 March 1995 in
connection with Article 5.1 of the Agreement on Trade-Related Investment Measures (TRIMs),
Pakistan would like to request an extension for the maintenance of the programme of
Indigenization/Deletion Policy in pursuance of the CTG’s Decision as contained in document
G/L/466, dated 7 August 2001.
1. Pakistan’s programme of Indigenization/Dele tion Policy, which may appear to fall under
paragraph 1(a) of the Illustrative List annexed to the TRIMs Agreement, has been designed to provide
incentives to promote the establishment and development of domestic industries. The policy serves
to:
- optimally exploit domestic resources;
- promote transfer of technology;
- enhance linkages between large, medium and small-scale industries;
- safeguard the external financial position of the economy;
- increase employment opportunities; and
- contribute to a steady growth in per capita income in real terms thus raising the living
standards of the people.
2. The programme applies to industrial enterprises which elect to opt for this programme. These
enterprises are entitled to import prescribed raw materials, and components and parts for the assembly
and manufacture of specific items at concessionary rates of import tariff. The programme includes
such sectors as general engineering, electrical goods, agricultural equipment and the automobileindustry, etc. The Ministry of Industries and Produc tion, Government of Pakistan, is responsible for
monitoring the implementation of the programme.
3. The industries which opted for the programme have significantly benefited in economic
terms. Not only large industrial enterprises, but also vending industries which are small and medium-
sized enterprises, have benefited tangibly from the programme. There have also been accompanyingsocial benefits, including job creation and development of economically depressed areas.
4. Pakistan faces considerable difficulties, both internal and external, in phasing out the
programme. A summary of these difficulties is attached in Annex 1.G/C/W/294
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5. The industries which have opted for the programme are at various stages of implementation
of the programme. Premature elimination of the programme circumstances not only would be
detrimental to these industries but also would adve rsely affect the several enterprises with forward
and backward linkages with these industries. It  would further have a negative impact on the
investment environment in Pakistan and further aggravate its already precarious balance-of-payments
situation, apart from impeding the process of technology transfer which is presently under way. In
addition, there would inevitably be an adverse effect on the social situation due to displacement of
labour and consequently higher unemployment. These effects would undermine the development
plans.
6. It needs to be mentioned here that the most sensitive sector benefiting from this programme
remains the automotive industry, which will face the most difficulties. This programme is vital forsustaining the industry and is also the largest sector providing employment in Pakistan.
7. A Report on the progress in phasing out the remaining TRIMs will be submitted periodically.
8. Pakistan hopes that this request for extension in the maintenance of its Indigenisation and
Deletion Policy will receive positive consideration by Members and that an extension will be agreed
until 31 December 2003, as indicated in the CTG’s decision of 7 August 2001.G/C/W/294
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ANNEX 1
Statement of particular difficulties, internal or external, Pakistan continues to
encounter in implementing the TRIMs Agreement
(i) Continued international sanctions against Pakistan in the post nuclear period
since May 1998;
(ii) Drying up of direct foreign investment and portfolio investment in Pakistan;
(iii) General economic slowdown, heavy debt burden and unsatisfactory GDP tax
ratios;
(iv) Phenomenon of deindustrialisation and exceptional problems of large-scale
industries;
(v) Rapidly increasing costs of utilities;
(vi) General reduction of protective duties from the level of 120% in the 1980s,
65% in the 1990s to 30% at present, with a prospect of its further reduction to25% in the next year;
(vii) Continued withdrawal of the traditional exemptions and concessions aimed at
exposing the local industry to a degree of competition;
(viii) Comprehensive dismantling of import bans and non-tariff barriers in
compliance with WTO principles and agreements;
(ix) Low investor confidence due to industrial slow down and flight of capital
(which is now beginning to improve gradually).G/C/W/294
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ANNEX 2
A description of steps taken to date and/or to be taken to eliminate remaining TRIMs
• High tariffs on industrial raw material and lo w tariffs on finished products hampered growth
of industries in Pakistan. Governments in the past did not rectify the anomaly for
considerations of revenue. This distortion in the tariff regime not only stunted the growth of
industry but also sapped the Government’s ability to correct this structural imbalance.
• The present Government has initiated a process of tariff reform to correct these imbalances.
• As a result the first phase of tariff rationalization was successfully completed by June 2001.
• Customs duties on a large number of raw materials/components have been brought down to
the concessional levels to reduce the need for a separate concessionary regime;
• The highest rate of customs duties has been brought down from 120% in the 1980s to 30%
now, with a further prospect of reduction to a final level of 25%;
• The main duty slabs have been gradually reduced from 42 in the 1980s to 16 in the early
1990s to 7 in late 1990s and just four now i.e. 5%, 10%, 20% and 30%;
• The number of concessional  SROs  has been  reduced  from 120 to  57 in the budget for
2001-2002;
• Major electronic goods like televisions and microwave ovens, etc. have been exempted from
the deletion programme in the budget for 2001-2002;
• A committee has been constituted to help eliminate the deletion programme;
• The following laws have been put in place for protection of the local industry:
(i) Anti-Dumping Ordinance 2000;
(ii) Countervailing Duties Ordinance January 2001;
(iii) Safeguard Duties Ordinance 2001 (proposed);
• The difference between statutory rates of customs duty and concessional rates for industry
included in the deletion programme has been substantially reduced to expose the localindustry to foreign competition; and
• Import policy has been gradually liberalized over the years to lift non-tariff barriers;G/C/W/294
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• Local assembly/manufacture of the following commodities has been made deletion free with
effect from July 2001:
(i) Electronic Calculator;
(ii) Microwave Oven;
(iii) Caller Line Identification Apparatus (CLI);
(iv) Car Cassette/Stereo Player;
(v) Cassette Player;
(vi) Pocket Size Cassette Player;
(vii) Compact Disc Player;
(viii) Hi-Fi Systems;
(ix) VCR/VCP;
(x) Laser Video Disc (VCD Player);
(xi) Digital Video Disc Player (DVD);
(xii) Cellular Mobile Telephone;
(xiii) Radio & Cassette Player;
(xiv) Television set;
(xv) Reception apparatus for receiving satellite signals of a kind used with TV
(Satellite Dish Receiver);
(xvi) Camera.G/C/W/294
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ANNEX 3
SUMMARY
Phase-Out Plan
Deletion Programmes
Sector Total 1st Phase 2nd Phase 3rd Phase
A. Plant, Machinery & Vapour
Generating Equipment27 16 5 6
B. Metal Working Machinery 24 12 4 8
C. Earth Moving Equipment,
Agricultural Machinery and
Material Handling
Equipment9225
D. Electrical Industry 8 3 4 1
E. Domestic Appliances 18 8 7 3
Total = 86 41 22 23
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