The European Council granting the Generalized System of Preferences Plus (GSP+) tariff concession to Sri Lanka allowing Sri Lanka to export over 1,400 products tax-free to the European market is a major victory for Sri Lanka.
Speaking to Daily News Business the Secretary and former President of Free Trade Zone Manufactures Association, Dhammika Fernando said that this is a result of good foreign policy maintained by the government and credit should go for it.
He said granting the GSP+ facility would allow buyers from 17 countries in EU to purchase Sri Lanka products minus a duty component between 2 to 12.5%. “Firstly this would result in our buyers enjoying a bigger margin of profits which will entice them from buying more from Sri Lanka. Secondly it would also lure both local and foreign entrepreneurs to invest more in Sri Lanka and create more employment opportunists.”
The European Parliament last month voted to approve granting the GSP+ tariff concession to Sri Lanka again as they believed that Sri Lanka has improved on their human and labor rights and on good governance.The EU is Sri Lanka’s biggest export market accounting for nearly one-third of Sri Lanka’s global exports. In 2015, total bilateral trade amounted to Euro 4.7 billion. The facility was withdrawn in 2010 due to the poor human rights record of the country.
The suspension of the GSP Plus in 2010 resulted in several SME apparel sector companies (not in the KIPZ) shutting down and over 10,000 jobs being terminated.
He however said that the EU buyers during the time looked at other sourcing markets like, Bangladesh, Vietnam, Egypt, Ethiopia and African countries which has now resulted in Sri Lanka having to fight hard to get some of the business back. “This is a tall order since the chips have changed.”
He also said that even Sri Lanka companies extended their operations to Ethiopia and African countries since they found it cheaper to manufacture and send to Europe.
Fernando also said that the exporters to EU did not have an advantage with regard to a stronger dollar since the Euro was not very strong.
“However with the regaining of GSP Plus there would be additional revenue to Sri Lanka which would help to somewhat narrow the import export gap which is not at all impressive.”