Sri Lankan exporters are looking for clarity on the state of the GSP+, to be able to adjust business strategies.
The GSP+ scheme allows duty free export of about 6,000 items to the EU from Sri Lanka. However, the continuation of the GSP+ is now uncertain, as a preliminary report points to an adverse outcome of an EU investigation. At this point, it is the uncertainty that is worrying local exporters.
“Exporters are concerned mostly because of the lack of clarity about the GSP+ situation. We need to know what the real situation is, to be able to prepare for it,” said the Vice President of the Exporters Association of Sri Lanka, Lasantha Wickremasekara.
Businesses point out that the loss of the GSP+ will mostly hurt Sri Lanka’s working population and dependents. “The EU might think it is punishing the government by taking away the GSP+ but they are actually punishing poor workers in Sri Lanka and poor people whose incomes depend on this,” said the Chairman of Dankotuwa Porcelain, Sunil Wijesinha. Dankotuwa is a leading Sri Lankan tableware exporter. The EU is the largest buyer of Sri Lankan tableware but the sector has been hit by the global economic downturn as well.
When contacted by the Sunday Times FT, the local office of the European Commission (EC) said a final outcome on the GSP+ scheme will only be arrived at after an EU Parliament decision sometime in October.
“The EU Parliament decision, which will be most likely in October, will give directions on the final outcome, and it is from that the various time frames will be set,” said an official at the local EC office.
Meanwhile, exporters are trying to take stock of the situation. Garment factories, the biggest users of the GSP+, say that some export categories of garments may become uncompetitive without the trade scheme. But larger companies are confident of retaining buyers.
“I don’t think customers will just drop us because the GSP+ is gone. But of course they will push us to reduce our prices. Some categories may also become less competitive. But overall, Sri Lanka is such a strong supply base and we have a strong reputation for quality and reliability, I think the situation will not be unbearable,” said the CEO of MAS Investments, Chandana De Silva. MAS Holdings is one of Sri Lanka’s biggest apparel exporters. About 30% of the group’s exports go into the EU.
The Joint Apparel Association Forum (JAAF) the representative body of the garment sector, is hoping for the best. “We are confident the government will work something out,” said the Secretary General of the JAAF, Rohan Masakorala.
By now, four years since the GSP+ was introduced to Sri Lanka, many different sectors, such as agricultural products, fisheries, rubber products, tableware, activated carbon and many more, have started using the GSP+. But export orders to the EU may not grow so fast without the GSP+.
“When we use the GSP+ the importer does not have to pay duties. So it is an incentive for them to import from Sri Lanka. But if the GSP+ is not there, they can look around and import from anywhere else,” said Mr Wickremasekera from the Exporters Association.
Some sectors, like tableware, are directly affected by regional competition. “Our main competitor is Bangladesh. They have lower energy costs and lower labour costs than Sri Lanka. In addition, because they are a Least Developed Country, they also get duty free access into the EU. One of the reasons we are able to compete against them is the GSP+. If the GSP+ is not available, we are going to find it very difficult,” said Mr Wijesinha from Dankotuwa.
Given the potential impacts on many different export sectors, exporters are hoping for some clarifications on the state of the GSP+ this week. |
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