Malaysia signs FTA with Pakistan.

KUALA LUMPUR, Nov. 12 Kyodo

Malaysia said Monday it has signed a free trade agreement with Pakistan, which will see the abolishment of import tariffs in many agricultural and manufacturing products by 2012 and special incentives for Malaysian companies in Pakistan.

The two countries sealed what is officially known as the Malaysia-Pakistan Closer Economic Partnership Agreement last Thursday.

The FTA, which will come into force Jan. 1 next year, is Malaysia's first with an Islamic country, according to a statement from Malaysia's International Trade and Industry Ministry.

Under the deal, Malaysia will eliminate import duties by 2012 on 77.3 percent of imports from Pakistan, valued at 152.7 million ringgit ($43.6 million) in 2006.

Pakistan will abolish duties on agricultural and industrial imports from Malaysia worth 633.7 million ringgit in 2006.

Bilateral trade amounted to 3.3 billion ringgit last year, mainly in Malaysia's favor.

Malaysia's exports to Pakistan were worth 3.1 billion ringgit and were mostly palm oil, chemical products and electrical and electronic goods. Imports from Pakistan totaled 217 million ringgit and were mainly textile, seafood and cereals.

In the first nine months of this year, bilateral trade amounted to 3.2 billion ringgit with exports from Malaysia totaling 3.0 billion ringgit.

In the services sector, Pakistan offered Malaysia maximum foreign equity participation of 60 percent in all sectors and no limitation to the number of Malaysians employed per organization.

Malaysia offered new licenses on Islamic banking and insurance to qualified Pakistani financial institutions that do business in international currencies in Malaysia.

''The agreement provides an excellent opportunity to the business community of both countries to further expand their bilateral trade and investment linkages,'' the statement said.

Both sides agreed to review the FTA every five years.