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GSP+ withdrawal: How would it impact Sri Lanka’s economy?

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By Asanka Wijesinghe and Eleesha Munasinghe

Sri Lanka’s preferential access to the vital European Union (EU) market faces fresh challenges after the European Parliament’s special resolution adopted in June 2021. The resolution calls for an assessment on “whether there is sufficient reason, as a last resort, to initiate a procedure for the temporary withdrawal of Sri Lanka’s GSP+ status.”.

The GSP+ is a non-reciprocal trading arrangement whereby Sri Lanka does not have to lower tariffs in return but is required to implement certain non-trade related conventions to benefit from preferential access. The GSP+ arrangement slashes import duties to zero for vulnerable low and lower-middle-income countries that implement 27 international conventions related to human rights, labour rights, environment protection, and good governance. This article assesses the impact of a hypothetical withdrawal of GSP+ on Sri Lanka’s exports to the EU: the largest single trading bloc, with the United Kingdom (UK), accounting for 30% of Sri Lanka’s exports.

The Impact

A possible withdrawal of GSP+ will increase the tariffs for Sri Lankan products up to the Most Favoured Nation (MFN) tariffs. Consequently, products coming from Sri Lanka will be more expensive in the EU market, directly reducing the export demand from Sri Lanka. However, Sri Lanka’s competitors that continue to benefit from the EU’s GSP will face zero preferential tariffs. Thus, in addition to the trade destruction effect, with the relative price of goods from Sri Lanka being higher, the trade will be diverted to those competitors. Using a partial equilibrium analysis, one can ex-ante quantify these effects of GSP+ withdrawal. Assuming the UK will follow the EU lead, and Sri Lanka will face the lower bound of relevant MFN tariffs, partial equilibrium estimates show that Sri Lanka’s exports to the EU will fall by 627 USD million The simulations are done taking 2019 as the base year.

The worst-hit sectors are apparel (HS 61 and HS 62), tobacco (HS 24), seafood (HS 03), and rubber (HS 40) sectors. The combined loss for the apparel sector will be as much as 494 USD million, and it is 79% of the total estimated trade loss. In addition, the seafood sector is deemed to lose 20 USD million or 17% of the sector’s 2019 exports to the EU. Thus, losing preference to a vital market will be hard for the recovering seafood industry

There are two caveats of an ex-ante impact assessment of this kind. The first is that the analysis is based on assumed elasticities. However, the assumptions are not overly restrictive. The second is that all the eligible exports from Sri Lanka do not utilise the GSP+ facility. Thus, the actual impact will be contingent upon the utilisation ratio. However, after Sri Lanka regained GSP+ preference in 2017, the utilisation ratio increased, reaching 61.8% in 2019, improving from 55.1% in 2017. Therefore, the increasing utilisation ratio makes the potential impact still significant.

Notably, there is a variation of the utilisation rate within the HS chapters, .

The apparel sector will be relatively resilient to a loss of preference as its utilisation ratio was 52% in 2019. However, a loss of preference will halt any industry drive that aims to increase the utilisation rate and then expand the market share in the EU. Further, the 2010 loss of GSP+ inflicted high costs to the industry. As seafood, rubber products, and footwear sectors utilise more than 90% of GSP+ preference, those sectors will be more vulnerable to the shock. Indeed, the difference between GSP+ preferential tariff and MFN tariff for seafood is higher -zero versus 7.5% respectively aggravating the impact.

Future Steps

The losses from GSP+ preference will be significant and heterogeneous across sectors. The GSP+ also opens the door for EU investments as outsourcing production to preference receivers is beneficial to the EU. In addition, sectoral losses may spillover to the overall economy exacerbating poverty and income inequality. Thus, avoiding such losses should be a political priority for policymakers. Less dependence on the EU market is a widely suggested strategy. Diversification is indeed beneficial when it is done for economic reasons. However, ad-hoc moves to diversify to escape from unresolved political issues will not do much good. The EU market is a high-end export destination for Sri Lanka. The quality improvements, product standards, and consumer preferences positively challenge the Sri Lankan exporters to improve product quality and competitiveness.

Additionally, a non-reciprocal preference for various products incentivises product diversification away from traditional exports into more complex products like electronic equipment, including semiconductors (HS chapter 85). Therefore, while Sri Lanka should work to secure the GSP+ resolving the current political issues and focus on fully utilising GSP+ preference in the short run. In the long run, as GSP+ is contingent upon income level, Sri Lanka will lose it someday, and as such should enter into reciprocal trade agreements with the EU and other high-end markets, including the US.

Link to blog: https://www.ips.lk/talkingeconomics/2021/09/28/gsp-withdrawal-how-would-it-impact-sri-lankas-economy/

Asanka Wijesinghe is a Research Economist at the Institute of Policy Studies of Sri Lanka (IPS) with research interests in macroeconomic policy, international trade, labour and health economics. He is also interested in the impact of adjustment costs of trade, gravity modelling in trade, econometrics and the trade origins of populist politics. He has undertaken efficiency analyses, particularly public spending efficiency, using parametric and non-parametric efficiency analysis approaches.

Asanka holds a BSc in Agricultural Technology and Management from the University of Peradeniya, an MS in Agribusiness and Applied Economics from North Dakota State University, and an MS and PhD in Agricultural, Environmental and Development Economics from The Ohio State University. His latest research focused on the effect of global trade-induced labour market changes on voting behaviour in recent US elections, including the 2016 presidential election.

Eleesha Munasinghe was a research intern at IPS. She is currently an undergraduate (Economics and Finance) at New Castle University in UK.



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Malaysia courts more Sri Lankan travelers as ‘Visit Malaysia 2026’ gathers steam

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Malaysian H.C. Badli Hisham Adam: ‘Fresh biz opportunities

Malaysia is intensifying efforts to attract more Sri Lankan travelers by promoting its diverse tourism offerings, strong air connectivity, Muslim-friendly facilities and expanding business partnerships ahead of the ‘Visit Malaysia 2026’ (VMY2026) campaign.

Addressing the Tourism Malaysia product presentation yesterday in Colombo, Malaysian High Commissioner to Sri Lanka Badli Hisham Adam said tourism remains one of the strongest pillars of the long-standing bilateral relationship between Malaysia and Sri Lanka, helping strengthen cultural understanding, business links and people-to-people ties.

The event, organised by Tourism Malaysia Chennai in collaboration with the High Commission of Malaysia in Colombo, brought together Malaysian tourism stakeholders, airline representatives, Sri Lankan travel industry professionals and members of the media to explore new business opportunities.

The High Commissioner said Sri Lanka continues to be an important source market for Malaysia, with growing numbers of Sri Lankan travelers seeking destinations that combine diversity, affordability, quality experiences and convenient connectivity.

“As part of ‘Visit Malaysia 2026’, we warmly invite Sri Lankan travelers to discover the richness of Malaysia, he said.

Highlighting Malaysia’s tourism strengths, the envoy said the country offers a wide range of attractions, including multicultural cities, UNESCO World Heritage Sites, pristine beaches, tropical rainforests, cool highlands and unique wildlife.

These are complemented by world-class shopping, family-friendly attractions, educational opportunities, wellness and medical tourism, business events and internationally renowned hospitality.

He also stressed Malaysia’s position as the world’s leading Muslim-friendly destination, supported by an extensive halal ecosystem with internationally recognised certification, halal-certified restaurants, easily accessible prayer facilities and family-oriented amenities across the country.

Despite ongoing geopolitical uncertainties around the world, the High Commissioner said Malaysia remains a stable, peaceful and welcoming destination for international travelers.

He urged Sri Lankan travel agents to strengthen collaboration with Malaysian tourism providers by developing innovative travel packages targeting leisure travelers, business visitors and event participants.

The presentation featured leading Malaysian tourism partners, including Wyndham Ion Majestic, Lotus Desaru, Key Term Holidays representing the Sabah Tourism Board and Asian Overland representing The PULSE Group, showcasing Malaysia’s diverse tourism experiences and investment in the Sri Lankan market.

The envoy also acknowledged the contribution of airline partners and the media in enhancing Malaysia’s visibility and improving travel connectivity between the two countries.

Looking ahead to ‘Visit Malaysia 2026’, he said the future growth of tourism would depend on stronger collaboration, innovation and meaningful partnerships between industry stakeholders.

He expressed confidence that closer cooperation between Malaysia and Sri Lanka would generate fresh business opportunities while encouraging more Sri Lankan visitors to experience Malaysia’s culture, diversity and hospitality.

The High Commissioner concluded by expressing hope that the networking session would lead to stronger commercial partnerships and contribute to the success of ‘Visit Malaysia 2026’, further deepening tourism and economic ties between the two friendly nations.

By Ifham Nizam

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Women Empowered Global launches ‘Leadership Lab’

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Senela Jayasuriya, Founder and CEO of Women Empowered Global.

Women Empowered Global (WEG), a network of award‑winning female leaders, corporate CXOs and entrepreneurs, experts and thought leaders dedicated to empowering women from six continents, unveiled the ‘WEG Leadership Lab’, a 24‑week virtual intensive programme, commencing 26 September. The programme is designed exclusively for women leaders who are ready to accelerate their careers, amplify leadership visibility, and drive transformational growth.

The women‑only leadership experience breaks the mould of conventional training, offering a powerful blend of masterclasses, mentorship, and practical leadership tools tailored for rising leaders, managers, and senior professionals. Participants will gain international exposure, sharpen essential skills, and the opportunity to join a vibrant knowledge‑sharing community which fosters confidence, resilience, and impact.

“The WEG Leadership Lab is not for casual growth. It is for women who are serious about transforming their leadership journey,” said Senela Jayasuriya, Founder/CEO, Women Empowered Global. “By combining global expertise with local delivery, we are creating pathways for women across manufacturing, trading, finance, marketing, technology, and management, as entrepreneurs, business owners, fractional executives, or corporate leaders, to thrive and build a more inclusive leadership landscape.”

WEG’s platform facilitates international exposure and career development for professionals and connects more than 4,000 members worldwide. The Leadership Lab builds on WEG’s flagship initiatives, including the 1 Million Women in Power campaign, the African Women Leadership Forum, the Business Hub, and the Global Online Academy. The programme aims to deliver a transformative journey equipping women to step boldly into leadership roles locally and internationally.

Led by Senela Jayasuriya (MBA, UK), an internationally recognized and awarded leadership & empowerment coach and innovation partner, keynote speaker, and certified expert, WEG collaborates with DEI specialists, corporate boards, Business and HR leaders, to design programmes which advance women’s careers, leadership visibility, equity, and inclusion. To date, she has successfully delivered leadership development programmes to more than 20,000 professionals.

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JKCG Auto and Green EV join forces to build Sri Lanka’s most expansive EV charging network

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John Keells CG Auto (JKCG Auto), the authorised distributor of BYD and Denza in Sri Lanka, has launched a strategic partnership with Green EV on 26th June 2026 to significantly expand the charging infrastructure available to its customers across the island. The collaboration, formalised through a Memorandum of Understanding (MOU), marks a pivotal step in JKCG Auto’s ongoing commitment to building a comprehensive and reliable New Energy Vehicle (NEV) ecosystem in Sri Lanka.

Through this partnership, BYD and Denza owners will gain seamless access to Green EV’s public charging network of 100+ DC fast chargers and 70 AC chargers, spanning 20 districts and all nine provinces of Sri Lanka, from Jaffna in the north to Hambantota in the south, and from Puttalam on the northwest coast to Trincomalee and Ampara on the eastern seaboard, encompassing a mix of 40kW, 60kW, and 120kW fast-charging infrastructure. The network has been designed to ensure that customers can charge conveniently and confidently, whether in the heart of Colombo or in suburban and outstation communities, removing one of the most commonly cited barriers to EV adoption in Sri Lanka. Further strengthening customer confidence, Green EV has partnered with SLIC to provide a comprehensive insurance cover of LKR 100 million for every Green EV charging station, offering protection against potential damages and ensuring complete peace of mind for every user.

The initiative reflects JKCG Auto’s broader strategy to invest in the foundations of sustainable mobility, ensuring that the transition to electric vehicles is supported not only by world-class vehicles, but by a dependable ecosystem that addresses the practical needs of everyday ownership.

“If the future of mobility in Sri Lanka is going to be electric, success will hinge on how accessible we are able to make the actual vehicles, as well as the enabling infrastructure around them. JKCG Auto is proud to partner with other visionaries like Green EV to ensure that we eliminate range anxiety, so that every customer – whether in Colombo or anywhere in Sri Lanka will have the confidence to go electric,” JKCG Auto Chief Executive Officer, Charith Panditharatne.

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