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GSP Plus: Enabling Sri Lanka compete with region’s apparel industry

"Sri Lanka faced export revenue losses of around Rs 250 billion after being blackballed and losing its GSP+ concession in August 2010 on allegations of human rights. The country, which according to the International Trade Centre, was much ahead of Vietnam, Pakistan and Cambodia in apparel exports in 2009, trailed them by 2015. Apparel exports in 2015 were $ 3.9 billion for Vietnam, $ 2.9 billion for Pakistan and $ 3.7 billion for Cambodia while Sri Lanka trailed at $ 2.4 billion. The European Union (EU) reinstated the EU GSP Plus facility to Sri Lanka on May 19, 2017. This facility provides Sri Lankan exports level playing field with its neighbours such as Bangladesh and Pakistan, and also several other countries from African and South American continents."

 

GSP Plus Enabling Sri Lanka compete with regions apparel industry 002Sri Lanka faced export revenue losses of around Rs 250 billion after being blackballed and losing its GSP+ concession in August 2010 on allegations of human rights. The country, which according to the International Trade Centre, was much ahead of Vietnam, Pakistan and Cambodia in apparel exports in 2009, trailed them by 2015. Apparel exports in 2015 were $ 3.9 billion for Vietnam, $ 2.9 billion for Pakistan and $ 3.7 billion for Cambodia while Sri Lanka trailed at $ 2.4 billion.

The European Union (EU) reinstated the EU GSP Plus facility to Sri Lanka on May 19, 2017. This facility provides Sri Lankan exports level playing field with its neighbours such as Bangladesh and Pakistan, and also several other countries from African and South American continents.

A positive impact on the industry

A year after regaining GSP+ facility, apparel volume growth in Sri outstripped its revenue by 1-2 per cent,GSP Plus Enabling Sri Lanka compete with regions apparel industry 001 suggesting modest sharing of price benefit with customers. Exports in the last two months have been particularly strong. The sector further estimates an increase of around 7,500 in jobs. Exports have already increased by $150million, 1/3rd of its stated target of $500 million increment for the apparel sector.

The GSP+ scheme encourages increased value addition within Sri Lanka, thereby promoting backward integration, resulting in the setting up of new industries, and creating new employment opportunities in the country.

Rise in export earnings

In 2017, Sri Lanka reported the highest ever export earnings of $15.1 billion, which may further rise to $17.4 billion this year. FDI inflows in 2017 were recorded at $1.9 billion and may rise to around $2.5 billion this year. Compared to other Asian countries however, Sri Lanka still lags behind. Annual exports of Singapore are estimated at $480 billion, Taiwan’s is $340 billion, Thailand’s $254 billion, in Vietnam’s $250 billion, and Malaysia’s $230 billion.

Benefits of FTAs

All these countries focused on FTAs, trade liberalisation, and foreign direct investment, to reach this level. Sri Lanka still has a long way to go in this regard. Right now, it’s only choice is to integrate with world markets. The country executed the Singapore FTA earlier this year and is in the advance stages of negotiating a FTA with China besides expanding its current FTA with India through Economic and Technology Cooperation Agreement (ETCA). ETCA can increase Sri Lanka’s competitiveness in industrial exports and also increase its supply capacity, to better utilise the market access to India.

ETCA negotiations address outstanding non-tariff barriers in the Indian market as well as many existing procedural barriers and delays in Indian ports of entry, particularly through Mutual Recognised Agreements. Together, the Chinese FTA and Indian ETCA give Sri Lanka preferential access to a market of two billion people and an emerging middle class larger than the whole of the EU.

The Sri Lankan government further plans to provide a trade adjustment package for local industrialists to upgrade machinery and introduce new technology so that these industries can be more competitive and serve the local market as well as export to the regional and global markets.

 

 
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