SL urged to use GSP+ to the fullest to promote export development

Sri Lanka needs to take full stock of its current economic situation and use to the maximum the potential in its GSP+ facility for export sector growth. In the process, it should ensure that it cooperates fully with the European Union. The urgency of undertaking these responsibilities is underscored by the issues growing out of the recent US decision to sweepingly hike tariffs on its imports, though differentially.

These were principal ‘takes’ for participants in the Pathfinder Foundation’s Ambassadors’ Roundtable forum held on April 8th at the Colombo Club of the Taj Samudra. The main presenter at the event was Ms. Carmen Moreno Raymundo, Ambassador of the European Union to Sri Lanka and the Maldives. The forum was chaired by Ambassador Bernard Goonetilleke, Chairman, Pathfinder Foundation. The event brought together a cross-section of the local public, including the media.

Ms. Moreno drew attention to the fact Sri Lanka is at present severely under utilizing its GSP+ facility, which is the main means for Sri Lanka to enter the very vast EU market of 450 million people. In fact the EU has been Sri Lanka’s biggest trading partner. In 2023, for instance, total trade between the partners stood at Euros 3.84 billion. There is no greater market but the EU region for Sri Lanka.

‘However, only Sri Lanka’s apparel sector has seen considerable growth over the years. It is the only export sector in Sri Lanka which could be said to be fully developed. However, wider ranging export growth is possible provided Sri Lanka exploits to the fullest the opportunities presented by GSP+.’

Moreno added, among other things: ‘Sri Lanka is one among only eight countries that have been granted the EU’s GSP+ facility. The wide-ranging export possibilities opened by the facility are waiting to be utilized. In the process, the country needs to participate in world trade in a dynamic way. It cannot opt for a closed economy. As long as economic vibrancy remains unachieved, Sri Lanka cannot enter into world trading arrangements from a strong position. Among other things, Sri Lanka must access the tools that will enable it to spot and make full use of export opportunities.

‘Sri Lanka must facilitate the private sector in a major way and make it possible for foreign investors to enter the local economy with no hassle and compete for local business opportunities unfettered. At present, Lanka lacks the relevant legal framework to make all this happen satisfactorily.

‘Sri Lanka cannot opt for what could be seen as opaque arrangements with bilateral economic partners. Transparency must be made to prevail in its dealings with investors and other relevant quarters. It’s the public good that must be ensured. The EU would like to see the local economy further opening up for foreign investment.

‘However, it is important that Sri Lanka cooperates with the EU in the latter’s efforts to bring about beneficial outcomes for Sri Lankans. Cooperation could be ensured by Sri Lanka fully abiding by the EU conditions that are attendant on the granting of GSP+. There are, for example, a number of commitments and international conventions that Sri Lanka signed up to and had promised to implement on its receipt of GSP+ which have hitherto not been complied with. Some of these relate to human rights and labour regulations.

‘Successive governments have pledged to implement these conventions but thus far nothing has happened by way of compliance. GSP+ must be seen as an opportunity and not a threat and by complying with EU conditions the best fruits could be reaped from GSP+. It is relevant to remember that GSP+ was granted to Sri Lanka in 2005. It was suspended five years later and restored in 2017.

‘The importance of compliance with EU conditions is greatly enhanced at present in view of the fact that Sri Lanka is currently being monitored by the EU with regard to compliance ahead of extending GSP+ next year. A report on Sri Lanka is due next year wherein the country’s performance with regard to cooperating with the EU would be assessed. The continuation of the facility depends on the degree of cooperation.

‘A few statistics would bear out the importance of Sri Lanka’s partnership with the EU. For example, under the facility Sri Lanka benefits from duty free access in over 66% of EU tariff lines. The highest number of tourist arrivals in Sri Lanka in 2023 was from the EU’s 27 member states. Likewise, the EU’s 27 member states rank second in the origin of inflows of foreign exchange to Sri Lanka; with Italy, France and Germany figuring as the main countries of origin. Eighty five percent of Sri Lanka’s exports to the EU market benefits from GSP+. Thus, the stakes for the country are high.’

Meanwhile, President, In-house Counsel & Legal Advisor, The European Chamber of Commerce of Sri Lanka, John Wilson said: ‘GSP+ should be seen as not only an opportunity but also as a necessity by Sri Lanka in the current international economic climate. ‘Implementation of local laws is what is needed. Considering the pressures growing out of the US imposed new tariff regime, a good dialogue with the EU is needed.

‘Sri Lanka’s level of business readiness must be upped. Among the imperatives are: An electronic procurement process, Customs reforms, a ‘National Single Window’, stepped-up access to land by investors, for example, a clear policy framework on PPPs and reform of the work permits system.’

It ought to be plain to see from the foregoing that Sri Lanka cannot afford to lose the GSP+ facility if it is stepped-up economic growth that is aimed at. It would be in Sri Lanka’s best interests to remain linked with the EU, considering the aggravated material hardships that could come in the wake of the imposition of the US’ new tariff regime. Sri Lanka would need to remain in a dialogue process with the EU, voice its reservations on matters growing out of GSP+, if any, iron out differences and ensure that its national interest is secured.