GSP Plus benefits hang in balance as SL reaches upper middle income status

The government expressed uncertainty as to how long the country would be able to enjoy the concessions under the GSP Plus had the facility was re-granted by the European Union (EU) – a process which the government thinks will take at least 9 months. The Deputy Foreign Affairs Minister Dr.Harsha de Silva speaking on regaining the lost duty free access to the 28-member economic bloc at a recent forum in Colombo said he did not know how long Sri Lankan exporters would be able to enjoy the facility before the country migrates into an upper middle income country.

When asked if the process with full of pain and hassle was worth undertaking, considering the extremely shorter span the country is likely to enjoy it, he responded, “Once we pass those GDP per capita levels, we won’t have it anymore. I can’t change it and I don’t know how long we will be able to use the facility.

So, that’s the answer I can give you”. According to media reports, there are 58 strenuous conditions to be met in order to be re-qualified for the facility, a claim the Dr. de Silva flatly rejected. According to EU rules, only low and middle income countries are eligible for the GSP Plus facility.

The duty free access to the world’s largest trading bloc ceases once a country reaches an upper middle income status. Sri Lanka is set to reach upper middle income status by 2020 – just 3.5 years from now. Currently, Sri Lanka’s per capita income is barely touching US $ 4, 000 but the country attains the upper middle income status when it touches US $ 4, 125 mark. The Deputy Minister is hopeful the facility could be re-granted within 8 to 9 months but he noted the process could even be longer. Given the prolonged process of regaining the lost preferential access, Sri Lanka could well enjoy the facility not more than 1.5 to 2.0 years if at all the country is granted with the facility. The Sirisena- Wickremesinghe coalition government came into power using regaining the GSP Plus facility as one of the strong election slogans and vowed to re-apply for it within 2015. However, it took 18 months even to lodge the application which was completed only in June 2016. Sri Lanka’s policy makers and those who clamour for the GSP Plus at any cost have little realised the country’s apparel exports – the largest category sent to EU – have grown year-afteryear even during the times of absence of the preferential access and more importantly have moved up on their value chains and created distinctive competitive advantages to withstand shocks. However, Sri Lanka’s Finance Minister Ravi Karunanayake estimates a windfall of US $ 1.9 billion from regaining the lost duty free access.