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Experts wary of giving fresh GSP+ hopes

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While the Government has pledged to reclaim the GSP+ facility for the benefit of the country’s apparel industry, independent analysts opine that Sri Lanka did not need such a facility at the current juncture as the sector had managed to grow over the past five years despite the removal of the facility.

Professor, Department of Economics, University of Colombo, Dr. Ranjith Bandara speaking to The Nation Gain stated that while the facility proved beneficial to local exporters, the reasons also included several aspects which were political.

Dr. Bandara alleged that the EU could have continued with the facility, if the intention was to assist Sri Lanka. “The reason for pulling out GSP+ was that Sri Lanka did not listen to them,” he said.

“However, if they do give us, we would benefit. But Sri Lanka should not depend on such facilities, as it has already survived in the global market without it,” he added.

However, apparel exporters have warned that Sri Lanka would lose out on a competitive edge over other countries in the region if the GSP+ facility is not reclaimed.

In addition, the proposed Trans Pacific Partnership (TPP) which looks to include India and Bangladesh would also prove to be a challenge for Sri Lanka’s survival in the global market. The TPP agreement already includes 14 countries throughout the Asia Pacific region.

“India and Bangladesh would benefit from this agreement. Sri Lanka would fall behind as far as the South Asian region is concerned. Therefore, gaining the GSP+ is all the more important,” Chairman, Free Trade Zone Manufacturers’ Association (FTZMA), Dhammika Fernando told The Nation Gain.
Further, the previous government’s 2020 vision for the apparel industry was to reach 10 billion target.

The GSP+ gives a 9.4 percent tax concession to the European importer thereby reducing the cost the buyer has to pay for goods from Sri Lanka.
The apparel industry is the second largest revenue earner for Sri Lanka, bringing around US$5 billion to the country in export revenue year on year and is only second to worker’s remittances which had fetched over US$7 billion last year.

“We cannot reach the US$ 10 billion target if we do not have the necessary impetus. We need the GSP+ for that,” he added.  He stated that the facility, which provided tax concessions for exports to the EU, proved to be a backbone to the industry while it lasted.

The GSP+ facility was given to Sri Lanka after the 2004 tsunami. However, it was removed by the EU in August 2010 as Sri Lanka did not meet the required standards of the EU pertaining to human rights.

The decision to withdraw the facility was based on the findings following investigations launched on the country’s human rights record during the war.
According a report by Verite research on the issue, the probe relied mainly on reports by UN Special Rapporteurs and Representatives, other humanitarian agencies.

“These reports identified shortcomings in respect of Sri Lanka’s implementation of three UN human rights conventions – the International Covenant on Civil and Political Rights (ICCPR), the Convention against Torture (CAT) and the Convention on the Rights of the Child (CRC),” the research report by Verite stated.
Fernando meanwhile stated that Sri Lanka’s apparel industry had managed to cope with the situation by focusing on lingerie. “Lingerie items have a different type of tax system which does not come into the GSP+ facility,” he added.

Chairman, Apparel Exporters Association (AEA), Anis Sattar stated that Sri Lanka had managed to create new markets in countries such as the US, Russia and some East Asian countries during the past five years where the GSP+ was not effective.

Further, speculations that the facility would mean that Sri Lanka would be under constant watch by the respective associations and therefore, it would be detrimental for the country’s future progress have been in the rounds. Fernando, however, stated that such issues did not arise out of the blue since the country was aware of the conditions and requirements when obtaining such facilities.

Last modified on Saturday, 07 March 2015 17:48
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