Pakistan moved to Special 301 Priority Watch List


 Apr 11 - 17, 2005




Pakistan could face a mounting pressure on implementation of trade laws carved under the umbrella World Trade Organization.

An alarming note sounded last week when the House Democrats, citing the rising US trade deficit, urged US President George W. Bush to take action against China, Japan, the EU and six other countries including Pakistan accused of unfair trade practices.

A detailed report discussing multifaceted trade violations causing billions of dollars to the US made the basis of the democrats' resentment.

The report, prepared by the Bush administration said that Pakistan's failure to adequately protect intellectual property constitutes one of its most severe barriers to trade and investment. The US government had placed Pakistan on the Special 301 Watch List every year from 1989 to 2003 due to widespread piracy, especially of copyrighted materials. Continuing IPR violations have invited the US government in 2004 to move Pakistan from the Special 301 Watch List to the Special 301 Priority Watch List.

In 2004, Pakistan was among the world's leading exporters of pirated optical discs and apparel. Pakistan does not adequately enforce patents, copyrights, and trademarks due to lack of a functioning of the central IPR regulatory and enforcement body, an underdeveloped judicial system, and corruption, the report lamented.

In response to longstanding local and international criticism and the need to implement its WTO Trade-Related Aspects of Intellectual Property Rights (TRIPS) obligations, the Pakistani Cabinet in 2004 approved legislation creating the Pakistan Intellectual Property Rights Organization (PIPRO) to consolidate authority over trademarks, patents and copyrights in one government body.

However, the legislation has not yet been approved by the parliament, and was being mothballed for many months. In addition, the Ministry of Commerce established an IPR Advisory Committee (IPRAC) with the help of private sector and non-government organization. Unfortunately, IPRAC met once in January 2004 and has been dormant since that time. Although Pakistan has enacted five major new laws relating to patents, copyrights, trademarks, industrial designs and layout designs for integrated circuits in the past few years, the legislation and enforcement mechanisms remain lacking in several areas. The failure of its implementation described below.

Pakistan is a party to the Berne Convention for the Protection of Literary and Artistic Works, and is a member of the World Intellectual Property Organization (WIPO). On July 22, 2004, Pakistan acceded to the Paris Convention for the protection of industrial property. Pakistan has not yet ratified the WIPO Copyright Treaty nor the WIPO Performance and Phonograms Treaty.

A draft law concerning plant breeders' rights has not progressed because of a dispute over federal and provincial jurisdiction for the past two years.



According to the International Intellectual Property Association, calendar year 2003 copyright piracy rates in Pakistan stood at 95 percent for motion pictures, 100 percent for records and music, and 83 percent for business software (no figures were available) while losses on account of CD and DVD were estimated at $82 million. Pakistan has become a major exporter of pirated optical discs. Industry groups estimate that in 2004 there were ten firms, which produced roughly 230 million illegal discs in 2004, up nearly 30 percent from 2003 levels. Industry analysts estimate that almost 90 percent of this production is exported.

The level of piracy occurs despite the current ban on the import and export of pirated materials. Pakistani law includes a maximum punishment of three years imprisonment and a fine of 100,000 rupees ($1,750). Enforcement, however, remains weak, characterized by sporadic raids at the retail level, few prosecutions, and inadequate penalties. In addition, no separate IPR enforcement bodies or IPR courts exist in Pakistan. For example, authorities have not inspected optical disk factories operating in Pakistan.

Businesses operating in Pakistan have repeatedly called for strengthening law and order.

Corruption and a weak judicial system remain recurrent leaving substantial disincentives to investment. Pakistani laws targeting corruption include the 1947 Prevention of Corruption Act, the 1973 Efficiency and Discipline Rules and, most recently, the 1999 National Accountability (NAB) Ordinance. Previously, NAB, the Federal Investigation Agency (FIA), and Provincial Anti-Corruption Departments were responsibly shared combat corruption.

In October 2002, Pakistan's cabinet approved a National Anti-Corruption Strategy (NACS) that identified areas of pervasive corruption and recommended time-bound measures and reforms to combat corruption. The NACS also named the NAB as the sole anti-corruption agency at the federal level.

Contract enforcement is difficult in Pakistan. A longstanding investment disputes between a major US multinational company and a local partner also raised concerns about the sanctity of international arbitration awards under contracts between private parties.

Pakistan actively promotes the export of Pakistani goods with measures such as tariff concessions on imported inputs and income and sales tax concessions. Subsidies in 2004 were confined mostly to wheat and roughly totalled at $76 million, according to the government sources. The government also provides freight subsidies to some products and these subsidies totalled close to $17 million in 2004. On January 5, 2005, the government announced that its Export Development Fund would provide a 25 percent air and sea freight subsidy for leather garment exports for calendar year 2005. Pakistan established its first Export Processing Zone (EPZ) in Karachi in 1989, with special fiscal and institutional incentives available to encourage the establishment of exclusively export-oriented industries. The government subsequently established additional EPZs in Risalpur, Gujranwala, and Sialkot in Punjab province and Saindak and Duddar in Balochistan province.

Principal government incentives for EPZ investors include an exemption from all federal, provincial, and municipal taxes for production dedicated to exports, exemption from all taxes and duties on equipment, machinery, and materials (including components, spare parts and packing material), indefinite loss carry forward, and access to Export Processing Zone Authority 'One Window' services, including facilitated issuance of import permits and export authorizations.