India and Malaysia Sign Trade Pact

February 19th, 2011
in econ_news

palm oil Econintersect:  India and Malaysia have signed a new trade pact that will phase in a number of tariff reductions over the next seven years.  The objective is to reduce tariffs on a number of items to 5% maximum by 2016 and to maxima between 5% and 20% before then.  One of the major tariffs addressed will be reduced as well, but to a level much above even 20%:  refined palm oil tariffs will be reduced by India to a maximum of 45% by the end of 2018.

Follow up:

Refined palm oil is a widely used cooking oil in the Far East and is subject to periodic shortages due to both production shortfalls and distribution inefficiencies.  For example, there appear to be distribution and hoarding problems for palm oil in Thailand, according to the Bangkok Post.  The Post describes various possible contributions to the Thailand crisis, including price controls, price manipulation and under the table payments to corrupt officials, in addition to a shortfall in production of domestic crude palm oil.  

A summary of the new trade agreement from The Times of India:

India on Wednesday signed a comprehensive economic cooperation agreement (CECA) with Malaysia which gives its doctors, accountants , two-wheelers , cotton garments and basmati rice greater access to the Malaysian market. This is in return for faster duty cuts for refined palm oil and binding tariffs on three other palm products. Besides, India has committed to freer entry norms for Malaysian engineers, accountants and IT specialists coming to the country on temporary contractual assignments.

There is an agreement on both sides to foster investment with India allowing Malaysian companies to hold 49-100 % equity in 84 service sectors while Malaysia provided a similar dispensation for Indian companies in 91 sectors including construction (51%), computer & related services and management & consultancy (100% each).

Source:  Bangkok Post and The Times of India

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