25 August, 2019

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GSP + May Be Restored But Sri Lanka Has To Act Fast To Harness Its Full Benefits

By W.A Wijewardena

Dr. W.A Wijewardena

Dr. W.A Wijewardena

A positive report by EU on Sri Lanka

A report published by the European Union or EU on 11 January 2017 has concluded that Sri Lanka has completed all the requirements needed for it to be granted GSP + status, known in full as EU’s Generalised Scheme of Preferences Plus.

This positive report on Sri Lanka has been filed by EU six years after the suspension of the facility to the country by that powerful economic bloc in 2010. Accordingly, European Commission or EC, the governing body of EU, has proposed that Sri Lanka should be upgraded from its current state of enjoying just GSP to GSP +. However, it will take some more time to restore GSP +, at least another six months, since European Parliament or EP and its Council have up to four months to raise any objection to granting GSP + to Sri Lanka.

As it is, unless there is a major political change in the country during this period reversing its present progressive steps relating to human rights and good governance, restoration of GSP + to Sri Lanka from around the middle of 2017 appears to be a sure thing.

Euphoria of the ruling party members countered by Opposition

The ruling party has been euphoric of the prospects as pronounced by the leading figures in the Government. It has been termed by them as a major diplomatic victory by the new Good Governance Government.

At the same time, the lead figures in the Opposition have downplayed the victory as irrelevant and unnecessary. However, the private sector, specifically those representing the apparel industry, would be buoyant about the new opportunities which they might get if and once GSP+ is restored to the country.

Sri Lanka’s past performance is not satisfactory

Sri Lanka is one among the 30 developing countries which at present enjoys EU’s Standard GSP under which they get partial or entire removal of tariff on about two-thirds of the products which come under the GSP concession.

However, Sri Lanka’s track record in utilising this facility in the past has not been very encouraging. According to the data published by EU, in 2013, out of the total GSP eligible imports of ¤ 1.8 billion, Sri Lanka had utilised only ¤ 1 billion or 59%. In 2014, the country had been able to maintain the same utilisation ratio with comparable figures of ¤ 2 billion and ¤ 1.1 billion, respectively.

However, this has fallen to 54% in the first six months of 2015, indicating a marked decline in the utilisation rate. In comparison, India, which also enjoys GSP facility from EU, had been able to maintain an utilisation rate between 83% and 89% during this period. Hence, Sri Lanka’s exporters have to go a long way to fully harness even the facility which they presently enjoy with EU before they think of harnessing the benefits of GSP +.

What is GSP Plus?

GSP is a special trade concession offered by EU to world’s poor countries with no obligation on the part of the poor countries to offer similar concessions to EU. So, the concessions are one way from EU to the poor countries and not from the poor to EU.

It is being implemented by EU at three levels: the ordinary or standard GSP, GSP Plus and Everything But Arms or EBA facility.

The first one is a trade arrangement which EU provides to 30 developing countries and territories to sell their products in the EU market at reduced tariff rates.

GSP Plus is an enhancement of this facility to vulnerable developing countries, numbering 13 qt present, offering additional tariff reductions to enable them to attain sustainable development and maintain good governance in their affairs. For this purpose, they are required to ratify and implement a number of international conventions which the global community has prescribed for all its members. There are 27 such conventions which EU has stipulated for the eligibility for GSP Plus concessions and they cover a wide range of aspects applicable to human freedom.

EBA is a facility with full duty free, quota free access for all products except arms and ammunition for countries classified as least developed countries or LDCs by the United Nations. There are 49 such LDCs enjoying EBA facility from EU at present.

The Concerns of Human Freedom: Now a Global Concept

Human freedom is now recognised by economists and policymakers as the ultimate goal of development. This is because the development means the development of a perfect individual and without freedom, whatever the material well being attained by individuals in a society will become meaningless. The concept of freedom encompasses from political to economic to social to spiritual. Since the state, through the use of force, can arrogate to itself the power to deprive people of freedom, in olden times it was the merciful monarch and today the ruling executive who was expected to guarantee all kinds of freedoms to the people.

Amartya Sen: Justice in society is a must

The Nobel Laureate, Amartya Sen, has been a vociferous advocate of human freedoms for development of mankind. He argued the importance of freedom in two previous books titled ‘Development as Freedom’ and ‘Rationality and Freedom’.

Further developing and codifying his ideas on freedom, he, in his latest book, ‘The Idea of Justice’, has emphasised two requirements that are essential for ensuring justice in a society: the freedom to choose and the freedom to think with reasoning as the guide. According to Sen: “…the freedom to choose our lives can make a significant contribution to our well being, but going beyond the perspective of well being, the freedom itself may be seen as important. Being able to reason and choose is a significant aspect of human life.”

Just society being imposed by donors

Since it is widely alleged that many poor countries lack both these requirements, the donor community has taken upon itself the responsibility for ensuring a just society in aid recipient countries by tying aid to a multitude of behaviour traits. These traits cover such subjects as democracy, law and order, rule of law, good governance, transparency and proper disclosure, human rights, environmental preservation and labour conditions.

In addition, EU has the right to introduce any other requirement to address other deficiencies which the donors would have observed as prevailing in the recipients of aid programs.

Enforced good behaviour through aid packages

It seems that the West has interested itself in seeing a show of enforced good behaviour by poor countries which are desirous of receiving foreign aid. However, this has been subject to much criticism and protest by aid recipients. Yet, there is an element of justification, from the point of donors, in their tying aid with good behaviour traits.

First, there has been mounting evidence of gross abuse of aid flows by the power groups in poor countries, namely, politicians and bureaucrats. The absence of anti-corruption laws, or when such laws prevail, their weak application, has been found to be the main cause of the proliferation of the alleged misuse of aid flows in poor countries.

Second, with faster and more advanced communication systems, information on abuse of power or money by poor country rulers is now readily available to the citizens of donor countries. Since donor countries use taxpayers’ money for granting aid to poor countries, they have to listen to the collective wish of their citizens: that the aid givers should ensure that the tax money they sacrifice is put to proper use by the recipients.

Tariff concessions are also a form of aid

One may wonder how GSP Plus which is a special tariff concession could become an aid flow. The aid flows to poor countries could be classified into two categories.

One is the direct aid in the form of grants, concessionary loans and assistance in physical form like technical support and food supplies. The other is the indirect aid given in the form of preferential tariff concessions extended to developing countries through bilateral trade agreements to have larger market access in developed countries. Both have added to poor country woes, because they are linked to political affiliations, loyalty shown in international fora and in recent times, the commitment to good behaviour by aid recipient countries. The last string encompasses a wide spectrum of national behaviour traits as explained above.

Sri Lanka has always upheld the principles underlying the conventions

The conventions under reference are those ensuring all types of rights of the citizens (civil, political, social, economic, cultural, children’s, women’s, collective bargaining, freedom of organisation and freedom of association), prevention of discrimination against race, gender, employment and occupation, protection of citizens against torture, cruel, inhuman or degrading treatment or punishment, ensuring the prevention and punishment of the crime of genocide, abolition of child labour and many conventions involving the protection of environment and preservation of biodiversity.

These are all prerequisites for creating a just society as pronounced by Sen in ‘The Idea of Justice’ and therefore, it behoves a country to do so voluntarily rather than under compulsion. A plus point for Sri Lanka in this context has been that it has always upheld the principles underlying these international conventions and has raised its voice in international fora many a time for proper adherence to them by all nations without exception. Hence, there should not be any reason for Sri Lanka to have objections to ratifying and implementing them as required under the GSP Plus rules.

Adoption of conventions is no interference in sovereignty

Sri Lanka had agreed to ratify these conventions at the time it sought the concessions under GSP Plus. But by mid 2009, it was found that no action had been taken by the country to fulfil its obligations.

Enforcing human rights by donors

Under EU rules, a beneficiary country is given a three-year period to satisfy the requirement of ratifying and implementing all the 27 conventions involved. Since all these conventions are already designed by the global community and readily available for quick ratification and implementation, a period of three years cannot be claimed to be a too short a period for a country to do so.

In view of Sri Lanka’s long commitment to these principles, the failure of the country to do so as revealed in mid 2009 would have been due to a breakdown of its management systems which should have advised the Government to do the needful at the appropriate time. Hence, it is most unfortunate that a set of international conventions meant for ensuring justice, freedom and the wellbeing of its citizens is portrayed as unnecessary interference in the sovereignty of the country by outside forces.

Satisfaction of right requirements has been made during previous two-year period

According to the EU Report published on 11 January 2017, Sri Lanka has been able to comply with the requirements for GSP + only after the new good governance government was voted to power in January 2015.

There are four requirements that have to be satisfied by a country that seeks GSP + facility. First, the country’s economy should be vulnerable to external shocks due to a heavy concentration of export products in a few product types and that concentration should be more than 75%. In the case of Sri Lanka, according to the report, this concentration is at 92%.

Second, the applicant country should ratify all the 27 conventions specified by EU for that purpose and Sri Lanka has ratified all of them. Third, there should not be any reservation of the ratified conventions and Sri Lanka has met that requirement too.

Fourth, there should not be evidence of serious failure of human, women’s and children’s rights as guaranteed by the prevailing legal, constitutional and administrative systems. In this respect, there are certain weaknesses in Sri Lanka’s case. However, the report has noted that Sri Lanka has already started important legislative processes to correct them effectively. Thus, the report concludes that “the shortcomings do not amount to a serious failure to effectively implement the Convention that would prevent Sri Lanka from joining the GSP+”.

Accordingly, in terms of the undertaking which Sri Lanka has given, the report has concluded that Sri Lanka has satisfied all the requirements for getting GSP + from EU.

Sri Lanka may have to naturally exit GSP + by 2020

However, GSP + is available only to low income and lower middle income countries as defined by the World Bank. A country should be in either of the two categories for the last three year period to become eligible for the facility. In terms of this requirement, when a country gains the upper middle income country status, there is a natural exit from GSP +.

According to the World Bank classification, done in 2016, countries with a per capita income of $ 1,025 or less are categorised as low income, those between $ 1,026 and $ 4,035 as lower middle income, countries between $ 4,036 and $ 12,475 as upper middle income countries. Sri Lanka with a GNI per capita of $ 3,836 in 2015 is pretty much close to this threshold of natural exit from the facility. With the current projected growth rates, it will pass the threshold easily by 2018. Since it should be observed for a three-year period, Sri Lanka will have to exit GSP + by 2020. As such, there is only a very brief period of time available for Sri Lanka to enjoy the benefits of GSP +.

Sri Lanka has spent six long years in its unsuccessful negotiation with EU for GSP + since it was suspended in 2010. That loss cannot be recovered now. But, it can now plan to harness the benefits in full during the remaining four-year period.

In this context, Sri Lanka cannot rely on its apparel industry to provide continued benefits to the country for two reasons. One is that apparel industry has already reached its saturated point and its further development, except in niche products, is unlikely. The other is that Bangladesh, its biggest competitor, is enjoying more favourable concessions under EBA facility.

It has, therefore, to transform its economy into high tech products so that even after it exits GSP + naturally by about 2020, it can continue to harness the benefits by getting integrated to the larger world economy.

*W.A. Wijewardena, a former Deputy Governor of the Central Bank of Sri Lanka, can be reached at waw1949@gmail.com

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Latest comments

  • 2
    1

    Dr. W.A Wijewardena

    RE: GSP + May Be Restored But Sri Lanka Has To Act Fast To Harness Its Full Benefits

    1. “A report published by the European Union or EU on 11 January 2017 has concluded that Sri Lanka has completed all the requirements needed for it to be granted GSP + status, known in full as EU’s Generalised Scheme of Preferences Plus.”

    “This positive report on Sri Lanka has been filed by EU six years after the suspension of the facility to the country by that powerful economic bloc in 2010.”

    This is indeed very good news. Given the current economic situation Sri Lanka is in, courtesy of Medamulana Rajapaksa and his cronies, needs all he help it can get.

    2. “As it is, unless there is a major political change in the country during this period reversing its present progressive steps relating to human rights and good governance, restoration of GSP + to Sri Lanka from around the middle of 2017 appears to be a sure thing.”

    So it makes it critical that Medamulana Rajapaksa and his cronies will nor come back to power.

    The biggest question is will the Modayas, Mootals and Fools understand this? They all need to be informed, and expose the Medamulana Rajapaksa and his cronies, more.

    • 3
      1

      GDP Plus is a Political victory and not and economic one.

      The corrupt politicians in Miracle of Modayas steal from the poor, and then run after UN, EU, IMF for help to pay off debt! Ranil Wickramasinghe is the worst begging bowl man – running after the West for hand outs.. a total DEPENDENCY mentality.

      GSP acctually just perpetuates Sri Lanka corrupt politicians’ Aid dependency mentality and BEGGING BOWL mentality which is anti-real people-centered development of the country.

      In fact, GSP and its Growth Fetishism policy mindset is part of the problem and not the solution to DE-DEVELOPMENT of Sri Lanka and over reliance on Harvard economic hit men by Ranil and his moronic economic team headed by Charitha Ratwatta who knows very little about HUMAN development.

  • 4
    0

    I think it is a great achievement to get GSP plus back to lankens: My Salute is to all that work hard to get this done. Human rights related imrpovements to the levels they expect lanken to reach should have ben achieved if not full to someextent, to allow them the concession.
    However, as a highly sensitive srilanken living on the west (sinhalese srilanken), I believe, had EU put some pressure on lanken govt questioning the people s dissatisfaction on the election pledges in terms of speedy investigations on all high profile abuses deliberately made by former VVIP family tot he nation, we the folks longing for justice being finally served in the country.
    Today from the point of view of some ruling ministers, there exist prima facie evidence in terms of grabs of billions of state funds and putting them in Dubai Saving Banks. This was publicly made by some ministers to public forums telecasted in the country last week. Poor folks have to bear the burden while those men are still given unnecessary luxurious life. Those men deliberately abused people s funds have no rights to even today abuse the state funds for their enjoyable life styles.
    This means not that I only focus on the frauds being made by Rajaakshes, I also want if Bond scam made that billions of losses tob e investigated int eh same pace not being biased to any parties.
    Since both grand parties are in the ruling coalition, they should both focus not only on their party power consolidations but priority should be given tot he pledges made tot he people – at least 6.2 Millons oft he voter eligible citizentry sacrificed rulers tob e elected as their representatives.

  • 3
    3

    What is the purpose of GSP ?

    Sri lanka has to fulfill 52 or more conditions.

    Europe considers Sri lanka as a backward culture. They don’t want to understand when they were living in trees like monkies sri lanka had a developed civilization.

    NOw, they want Sri lanka to increase the number of women in the parliament. Decrminalize homosexuality.

    What do they want ? homosexuals to have sex on the road side ?

    Why Europe is not an open market ? Why Sri lanka cannot produce products for competitive prices.

    Sri lanka imports canned fish. Yet, look for markets to sell fish.

    • 6
      1

      Prophet jim softy peace be upon you

      “NOw, they want Sri lanka to increase the number of women in the parliament.”

      Whats wrong with it? Do you prescribe a Medieval Middle East form of governance?

      “What do they want ? homosexuals to have sex on the road side ?”

      When you earned your living being a beach boy some 30 years ago at the age of 50, why cannot consenting adults have sex in their private domain?

      Are you

    • 2
      0

      What is the purpose of GSP ?

      if you dont want to see it – it is to create more jobs not permitting your wives, sisters, mothers, young sister not leaving the country – leaving young ones and their nurture away.
      Today s drug problem is solely connected with those families whose sons and daughters had no other option than continue their lives without a mother in their households.

      Please think it somewhat broadly, even if your brain is filled with Rajakashe extremneta.

      We are all human beings. More of our folks that are indeed in need are the poor majority folks. Their blood was sucked by Rajaakshes, but not giving hand them to see it beyond.

      No with GSP plus is about to be gotten back, at least for 5 -7 years, things can change for those who seek jobs.

      Ballige puthas of your kind will never sense it, since your extremist mind sets seek no reverse.

  • 3
    0

    Good analysis.What was lost as a result of losing the GSP Plus facility can never be recovered and we should curse the Rajapaksa gang of thugs for it.What remains to be harnessed from regaining the concession is likely to be lost by 2020.So SL will continue to wollow in the middle income trap for the forseeable future.The tiny segment of the rich will become richer and the majority segment of the poor will become poorer.Who said colonialism ended in the 1960s?The international economic system of the world has be been so cunningly contrived by the west to make it extremely difficult if not impossible for the majority of poor states to trancend their limitations and join the elite club of developed nations.

    Earlier it was colonialism by force but now it’s colonialism by statistics.A country crosses an arbitrary figure imposed by the World Bank and it slides back to where it came from.Perhaps writers like the eminent Dr Wijewardene should educate the hoipoloi like us on the perils that await the majority of our people, trapped as we are by this terrible international economic system by explaining a possible way out for countries like Sri Lanka so that when our politicians promise us prosperity we could tell them where to get out.

  • 1
    0

    When the export prices go up the factories will naturally expand. After four years when the prices go down a cut back will have to be applied. So it looks like the investment on expansion capital may not be recovered. This is very obvious when the GSP facility is used only at 54%. It looks like Lankawe is better off without GSP+.

    The way the government’s ministers’ advertising of this minor assurance appears to be they want the political victory celebrated than reaping any financial gain from GSP+. Probably they are aware the GSP+ benefits are marginal. China’s habit of handsomely rewarding with commission is the path they like to go. To keep the Modaya crowd silent while they travel on China’s path, this GSP+ victory is important. So far Swaminathan’s Iron cages, Volkswagen factory and Central bank bonds all indicating the next government will need CCCIFCID (Commission of Criminal Conduct Investigation of FCID).

    Government has a long way trip on the project of babysitting China. China so forcefully jumped from Nuraicholai to Colombo Pong Cing using a small rebel of Old Regime. They wanted to have the Nuraicholai repaired by India. China blocked by forcing the Defense department to surrender it. It birthed its submarines in Lankawe’s ports. Further it got the seabed to Pong Cing.

    For Ranil’s big mouth, China has already punished a lot. But it is with only 1.3 Billion out of 8 Billion. So a lot is yet to come. China may have idea where to take Lankawe from here. Ranil may know what is cooking on China’s menu. So Ranil may not mind to lose face once more like Volkswagen Factory. But the GSP+ Political part is more than a guardian angel while he loses grounds after grounds to China on its deals.

  • 0
    0

    Dr. Wije. Sri Lanka needs a proper NATIONAL DEVELOPMENT POLICY framework that puts LANKAN PEOPLE FIRST and at the CENTER of development planning and not the whims of corrupt politicians. For this Lanka needs:
    1. in-country TECHNICAL Expertise, a development brains trust to build a policy framework and review of so called development and FDI projects, particularly in social and environmental sectors to assess impacts of development on environment and people.

    2. DUE DILIGENCE and AUDIT REVIEW by technical experts that examines each proposed project and its cost-benefit- to reduce corrupt and ignorant Politicians steam rolling financially destructive projects.

    3. Stop expecting EU, US, and China which are all it the development game for their own benefit to draw up development policies for Sri Lanka and give hand outs.

    Today Sri Lanka with all its assets is a development debacle – in a massive development DEBT TRAP to Chinese and IMF because it expects foreigners to draw up it development plans and policies!
    The fisheries sector and failure of Lanka to capitalize on fisheries resources is a good example. Today Sri Lanka still imports canned fist, but given its massive ocean resources it should be canning and EXPORTING canned fish! Meanwhile EU is putting all sorts of restrictions now in the name of environment conservations while British ships fish in the Indian Ocean!

    Now EU is throwing peanuts in the form of GSP plus which the stupid Jarapalanay govt. is bragging about. Development is a discourse and joke that is used by big powers to brow beat and de-develop countries like Lanka that are ruled by CORRUPT POLITICIANS.

    Singapore realized this and built up its national BRAINS ANS EXPERTISE TRUST while balancing China, India and US, and that is why it is a first world country today!

  • 0
    0

    WAW,

    Thanks for the analysis.

    “Just society being imposed by donors

    Since it is widely alleged that many poor countries lack both these requirements, the donor community has taken upon itself the responsibility for ensuring a just society in aid recipient countries by tying aid to a multitude of behaviour traits. These traits cover such subjects as democracy, law and order, rule of law, good governance, transparency and proper disclosure, human rights, environmental preservation and labour conditions.

    In addition, EU has the right to introduce any other requirement to address other deficiencies which the donors would have observed as prevailing in the recipients of aid programs.”

    Unfortunately very few understand what kind of an opportunity has now arrived.

  • 1
    2

    Dr. W.A Wijewardena:

    I think you are making the readership fools or you are just checking the views of those who read it.

    You know what conditions they have asked Sri lanka to fulfill in order to ship things to Europe. Why Sri lanka can not find other countries other than EU. Why Sri lanka can not negotiate with the individuak countries instead of EU ?

    I think say Yes to GSP+ make the country prostituting to EU just to get some discount on exports that Sri lanka wish to send. Why when poor countries sell something to them, it becomes a big deal ?

    Are Sri lankans that cash strapped ?

    • 1
      0

      Swaziland King, Ethiopia, Somalia also have their own badu. So you flush through the toilet your exports.

      Even after selling the sovereign land and sea to an oppressor, your thick racism is not thawing. The paid writing to fools seems to be cannot be cured. What a hardened stupidity is that arrogantly showing ignorance.

      In future, if you protest against China, like you did in Hanbangtota, you are going to see the Tiananmen Square tanks. Chinese are not Tamils to take your toilet exports.

      • 0
        0

        Mallaiyuran:

        South should not take exports from North too.

        Why not ?

        Send those to Tamilnau

        • 0
          0

          Where are in the world are you!

          Get the rapist army out of North. We don’t want it.

          We don’t want to give ours to you. We will make a real miracle out of North and East than what we did out of Ceylon during the British time.

          You rob,loot, rape, corrupt, demolish, destroy ……

          It is you who are occupying the the North for steal free. Tell them to release all our lands, release our people and tell them to come to South!

  • 0
    1

    Real truth of the GSP+

    Sri Lanka will surpass the lower limit of the per capita income (US $ 4,035) of upper middle income countries soon (2018 /2019 ?).

    The Gross Domestic Product per capita in Sri Lanka was 3637.54 US dollars in 2015.
    Per Capita Gross National Income (GNI-Market Prices) was $ 3,836 in 2015. (People should note that GNI per capita was doubled during the 9 year period of President Mahinda Rajapaksha.)

    Though we get this benefit after another six months, we have to take time to come to agreements with European companies to export our products.

    Then it will take some more time for manufacturing those products.

    Thus we may have a very limited time to enjoy the benefits.

    Under such circumstances;

    do we have to bow down to the conditions enforced by EU to get GSP+ only for three years (effectively less than three years as described above)?

    do we have to sacrifice our freedom and independence to get these short term concession?

    do we have to give the Federal solution to appease the Tamil and Muslim extreme racists?

    People should not overjoy with proclamations of the government without context.
    The government should stop painting a glossy picture about the future of the country.

  • 0
    3

    Act fast. GG will use a jackboot policy to fullfil the conditions.

  • 1
    0

    GG?GGPonambalam? He passed away in the1970s,son GGJunior was killed by Tigers in 1990s.

  • 0
    0

    Native Vedda: You quoted someone’s comment as: “Now they want Sri Lanka to increase the number of women in Parliament” and you asked “What is wrong with it”?. Yes, I agree that there is nothing wrong with it. But what I am concerned is the “Way” that is going to be achieved. The suggestion/proposal is for the political parties to “Nominate” at least 25% of the total candidates from among women. I do not agree with this principle. Why adopt a policy of 25% women and that conveys to me a “Gender Highlight” and “Segregation” in nominations. My opinion is: There must not be any “Gender” considerations or a laid down rule of a “Proportionate” basis in nominating candidates for any elections. Let ALL (men & women) be EQUAL irrespective of any gender classification. The nominations must necessarily be based on “Qualitative” and “Competency” criteria, leaving aside this “Gender”. It is left to the person who seeks nomination to prove that he/she is more eligible than another by establishing claims on qualitative and competency bases; but not definitely on gender basis.

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