Sri Lanka, currently on a positive growth trend, is likely to enjoy the GSP Plus facility until 2020 if the application is submitted immediately, the European Union’s (EU) top official in the country said last week. A c c o r d i n g to EU Regulation 978/2012, countries that fall under the uppermiddle income classification of the World Bank will be ineligible for the special preferential tariff scheme, as they would have higher competitive power than poorer countries.“We realise that statistics go up and down sometimes, so GSP Plus will end only if a country has remained in the upper-middle income bracket for 3 consecutive years,” EU Ambassador David Daly told Mirror Business.
The World Bank defines an upper-middle income country as having a gross national income (GNI) per capita exceeding US$ 4,125. Sri Lanka in 2015 recorded a GNI per capita of US$ 3,853, and the Central Bank is expecting the economy to grow by around 5.8 percent in 2016, while the International Monetary Fund projects the Sri Lankan economy to grow between 5-5.4 percent between 2016 to 2020. Given such projections, Sri Lanka is likely to reach the upper-middle income status by 2017 and is likely to remain in the bracket for the next 3 years. With the country losing such preferential trade terms, and not being able to access developmental funding once it reaches the upper-middle income status, the risk of falling into a middle-income trap increases. The Central Bank had said that it would appeal to the EU to let Sri Lanka remain in the GSP Plus programme for longer than regulations allowed, as the country’s different regions have wide differences in income levels.
However, the EU is likely to stick to its regulations. “GSP Plus is meant for lower-middle income countries,” Daly said. Further, while many ministers and Prime Minister Ranil Wickremesinghe have said over the past week that Sri Lanka will regain the GSP Plus facility by the end of this year, Daly said that the proper procedure will be followed, which will take 8-10 months. “When the application is received, the European Commission and the External Action Services of the EU will have 6 months to do our assessment report.
Then if it is positive, we make a proposal to member states in the council and the EU Parliament, so it will take 6 months, plus 2, plus 2 months,” he said. Daly said that Sri Lanka has yet to submit its application to the European Commission. Sri Lanka lost the GSP Plus facility and reverted to the GSP tariff bracket in 2009 over allegations of human rights violations during the latter part of the civil war. Local industries lost significant ground in the EU markets as prices of Sri Lankan goods rose, and experts note that if Sri Lanka does not gain GSP Plus soon, markets would shift completely to other buyers. Finance Minister Ravi Karunanayake recently said that Sri Lanka would save US$ 1.9 billion in tariffs if the country regains the GSP Plus facility. (CW)