25 July, 2021

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GSP Plus Threat Puts GR Regime On Notice

By Ameer Ali

Dr. Ameer Ali

After UNHCR’s hard hitting resolution in Geneva last year, a foreign policy disaster for GR regime, the looming threat of GSP+ withdrawal by European Union has put the regime on notice, and given a choice either to comply genuinely with Geneva stipulations or face economic constraints.

The situation is more serious than what Nivard Cabraal, State Minister for Economic Reforms for instance, was trying to convey by citing past experience. Comparing what happened in 2010 when the previous withdrawal happened, and when exports, instead of falling, as feared by many, actually increased from $2.9 billion to $ 3.6 billion or by 20% the following year, the minister tried to inject some false confidence by ignoring the fact that there was no pandemic driven global economic downturn at that time.  Since EU is the largest market for Sri Lankan exports, produced mostly by small and medium size enterprises (SMEs), it would be very difficult to find an equivalent size market or a collection of markets to compensate for the loss. Even within EU, SMEs would find it hard to market their goods in open competition. A few enterprises may survive but many would face bankruptcy.

Not only that, if EU withdraws its concessions what would US, another huge market for Sri Lankan products, do in support of EU’s action, is difficult to predict. International politics could complicate matters and add to Sri Lanka’s woes. Perhaps, it was this realization, in addition to US Congress’ resolution to recognize the island’s North and East, Tamil Homeland, that must have prompted Foreign Minister, Dinesh Gunawardena to assure US government that Sri Lanka would be prepared to work with US.  He should however, match his words with action.           

Reality is that the Sri Lankan economy is rapidly descending towards prolonged stagnation. Negative reaction by currency markets and international rating agencies, although dismissed as unwarranted speculation by the Chief of Central Bank, is driving down the purchasing power of local rupee. At the same time, erratic fiscal and import policies together with domestic market rigidities have combined to escalate the cost of living and thrown millions of families into clutches of poverty and misery. Mismanagement of the pandemic only compounded this adversity. Optimistic growth forecasts and confidence building speeches by the Central Bank and state ministers respectively are no substitute for the sad reality experienced by millions of households. Instead of dismissing the critics as doomsayers and their views as politically motivated, it is time that President GR and policy makers address seriously issues that may not be directly related to the economy but have impact on it.

UNHCR resolution captures in a nutshell some of those issues which call for immediate attention, and with which EU’s GSP+ threat is arguably connected. Reforming the draconian Prevention of Terrorism Act (PTA), under which many have been arrested and detained arbitrarily, including politicians, community activists, journalists, writers and professionals, needs be given priority and amended substantially or removed completely in order to stop human rights being trampled under the feet of a militarized regime. Although the foreign minister has informed the UN body that his government is addressing the issue nothing in substance has happened so far. But PTA is only one of the issues. There are others of which three i.e., increasing militarization of civil administration, erosion of independence of the judiciary and marginalization of minorities, which ultimately impact economic productivity and performance. Those economists and technocrats who refuse to see this connection are misleading their masters. No society or government that ignores or undervalues the role of human factor can enjoy economic prosperity and splendour. History is witness to this eternal truth.      

Presently, not only the minority communities but also a significant proportion of the majority in the country are disgruntled and dissatisfied with the way the regime is managing the country’s economy and polity. Psychologically, such a dissatisfied population will not be willing to contribute its maximum effort and energy to national development. They would prefer to grab the maximum they could with minimum contribution to national effort. If this attitude spreads and become universal the size of the national cake will shrink and so will be the size of its communal shares. It is no use blaming the pandemic for this difficulty, as President GR did in his latest address to the nation. It is the failure of his regime to harness the energy of the total population towards a united effort for growth and development. That failure is the result of his sectarian, militarized and authoritarian rule, and it is against that rule UNHCR, EU, US, UK and some other nations have rallied together and put the regime on notice. True, GSP+ is a politically initiated economic instrument to make the rulers act and not just talk. It is not a threat to national sovereignty as Cabraal tries to mislead. Even if so, where is the sovereignty in Hambantota, Colombo Port City, Norochcholai, and the three small islands close to Jaffna?   

*Dr. Ameer Ali, School of Business & Governance, Murdoch University, Western Australia

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Latest comments

  • 11
    4

    Ameer Ali,

    I have a basic question to ask everybody: Why does Sri Lanka need GSP+? Less than 10 poor countries get this concession from the EU.

    Why can’t the Sri Lankan businesses produce goods and services that are competitive internationally? They can export fruits, vegetables, etc. and provide call centers like what India, Philippines and several other countries do. Tamil Nadu exports fresh murungaikkaai to Singapore via air freight! Sri Lankan society has become a pampered lazy lot

    Aren’t people productive enough to satisfy their needs and have a modest surplus? Do we need handout of concessions from EU and others to make a living?

    What is the use of education if the educated are not productive and competitive?

    Educated Sri Lankans who migrated to Western countries are thriving because they became productive and competitive following the host societies.

    Since independence the Sri Lankan state has been mismanaged and people have got used to entitlements. Even politicians form all sides want the energy price be reduced while the world market price is much higher, and it is imported.

    Appe Aanduwa has utterly failed – Sri Lanka is truly a failed state.

    • 6
      1

      Dont worry
      Former president percival just wrote an article here on CT assuring us that the islands future is in good hands (of china).

    • 4
      1

      Thiru,
      “Why can’t the Sri Lankan businesses produce goods and services that are competitive internationally? They can export fruits, vegetables, etc. and provide call centers like what India, Philippines and several other countries do. Tamil Nadu exports fresh murungaikkaai to “
      You have a point there. India and Philippines don’t claim 99% literacy or middle income status. The price of diesel in India is LKR 230. But bus and auto fares are the same as here, and a cup of milk tea is only LKR 20. How can this be? Who is ripping off the public?
      Tamil Nadu doesn’t have a 2500 year old irrigation system, but it produces enough food even for export, including rice. We can’t export our rice even if we want to, because of its poor quality.

      • 2
        0

        OC,
        You have nailed the point, absolutely correctly and I fully agree.
        That shows the absolute necessity to increase productivity and efficacy of the SL process and methods, which appears to be the need of the hour. What we need is improving the methodology, practiced over 2500 years, because we cannot achieve the desired results; to be competitive. Then we do not need external incentives, such as GSP plus and ignore their demands.

      • 3
        0

        old codger
        FYI

        Where does Sri Lanka import Rice. from?
        Top trading partners (import of “Rice.”) of Sri Lanka in 2020:

        Pakistan with a share of 64% (6.76 million US$)
        India with a share of 32% (3.39 million US$)
        Thailand – 98 thousand US$
        Vietnam – 74 thousand US$
        China – 50 thousand US$
        USA – 44 thousand US$
        Other Asia, nes – 5.7 thousand US$
        Venezuela – 3.32 thousand US$
        Italy – 2.2 thousand US$
        Japan – 1.79 thousand US$

        Where does Sri Lanka export Rice.?
        Top export destinations of “Rice.” from Sri Lanka in 2020:

        Germany with a share of 14.2% (1.23 million US$)
        United Kingdom with a share of 13.3% (1.15 million US$)
        Canada with a share of 12.9% (1.11 million US$)
        Australia with a share of 12.6% (1.1 million US$)
        Italy with a share of 7.24% (627 thousand US$)
        United Arab Emirates with a share of 7.01% (608 thousand US$)
        USA with a share of 5.73% (497 thousand US$)
        Switzerland with a share of 5.57% (482 thousand US$)
        Qatar with a share of 3.55% (307 thousand US$)
        Maldives with a share of 2.6% (225 thousand US$)
        https://trendeconomy.com/data/h2/SriLanka/1006

        Sri Lanka to import rice as trade controls strengthen domestic grain ‘mafia’
        Tuesday June 22, 2021 1:27 pm
        ECONOMYNEXT

        • 1
          0

          Native,
          So SL imports more rice than it exports? Are those exports for human consumption or cattle feed?

          • 1
            0

            “for human consumption or cattle feed?”

            Does it matter? What’s the difference?

            • 1
              0

              Nimal,
              That’s like exporting coconut oil and trying to join OPEC!

    • 1
      0

      And I got the second dose of the Sinopharm vaccine here in Bandrawela. I guess that that’s better than nothing.
      .
      I can’t report that I have seen anything untoward here, but the mood is not good. However, talk to them a little more, and one realises the problem in uniting the people.
      .
      Racism still flourishes in the minds of people. I keep urging them to THINK, THINK, THINK!

      • 0
        0

        Dear S_M,

        Sad state of affairs. Racism, still well and alive, must be why we are trapped in a vicious cycle!

        [I really do hope Sinopharm offers substantial protection from severe disease. Please keep donning a mask at the least]

  • 7
    0

    Cabral the Huna is turning into a total clown. Next time someone doesn’t want to do business with him, he’s “gonna bomb the shit out of ’em.” Threat to national security … my foot.

  • 2
    1

    Lankawe does not appear to be expecting to continue with the EU’s GSP+. In Chitanta time, EU, non-tactically all of a sudden cancelled GSP+. Then the EU was begging the Old Royals’ government to take it back. The Old King did not bend. So, as soon as Ranil came to power, the EU just forced Ranil to take it back, without any conditions. So Ranil didn’t fulfill even one of the 57 conditions the EU originally started to bargain with. Old King did a successful campaign of defeating Susan Rice and putting Sec. Kerry in that place. Later this helped Ranil to get American protection for the Royals. Until Ambassador Keshap was sent out of Ranil’ office in December 2017, America had put a halt on any action on Lankawe, this has enabled Ranil to sell Hangbangtota without any resistance. Like one time the Sinhala Intellectuals in Boston were strongly footed in the US government, now they are very well controlling Bonn, Frankfurt…… With massive reorganization and re-consolidation of the family’s grip over the Modaya mass they are on a big secret project. Aanduwa has taken in Ranil, Younger Brother Prince and other master schemers. They will soon reply to all international reactions. As Ranil is there. Sampanthan Ayya going back on Wheelchair. Secret Solution will be an elaborative path to thaw IC’s concern.

  • 2
    1

    Dr. Amir has extensively talked about the General condition of the country. My interest is knowing the stock on hand. Though there are many suspicions raised by the media, I did not see one international estimate on this. Finance is evaluated throughout the year by private agencies, but stock by very few like UN, CIA like that. America warned its citizens going to Lankawe, but the reason was a possible turmoil situation by Covid. They didn’t talk about food or Hotels. Media men asked their suspicion on food stock directly from Rowdy Rumbo. But you all know what the reply was. The current freaking out in Diyawanna Lake appears to be about patching the political fallout on the IC stage; they seem to not worry about people if something goes wrong. My opinion is, the least prepared country for any emergency in the world is the Wildlife Sanctuary, SinhaLE, Lankawe. Last few times, when flood or Meethotamulla garbage dump slide, Muslim philanthropist tried to help as much as possible. Like one time, SJV said about Tamils, only God can help the Lankaweyans.

  • 1
    1

    China + +

    • 0
      0

      China + + free for Paksaas for sure.

      Not for the Sinhala State, and that is the problem.

  • 2
    0

    OC,
    You have nailed the point, absolutely correctly and I fully agree.
    That shows the absolute necessity to increase productivity and efficacy of the SL process and methods, which appears to be the need of the hour. What we need is improving the methodology, practiced over 2500 years, because we cannot achieve the desired results; to be competitive. Then we do not need external incentives, such as GSP plus and ignore their demands.

    • 1
      1

      Mahila,
      Currently, the policy seems to be to go back to ” indigenous practices”, which means 2500 year old practices.

  • 1
    1

    Not really.

    GSP+ only profits owners of garment exporters. They have tax breaks so government does not benefit from GSP+. If GSP+ is withdrawn it reduces the profit of top garment exporters who are all from minorities.

    So no impact on government politically or economically. Nothing happened when the EU withdrew GSP+ in 2012 for this reason.

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