July 17, Colombo: Dismissing the speculations that Sri Lankan government is preparing to re-apply for the European Union's trade concession Generalized System of Preferences (GSP), a senior government official said Sri Lanka has no plans to reapply for trade concessions from the European Union.
Addressing a Forum on 'Government Strategy for Industrial Development of Sri Lanka' on Tuesday (July 16) at the Ministry of Industry and Commerce, Sri Lanka's Secretary of Ministry of Finance and Planning Dr, P.B. Jayasundara said Sri Lanka's macro challenges have changed and asking for export concessions only leaves the country as a subsistence economy.
"We will not ask for GSP. We should not grow markets on the basis of subsidies. Then the country will become vulnerable," he told 95 leading exporters, businessmen and industrialists, attending the forum.
"The biggest block we had for our development, the war, is over. In post conflict era, the biggest beneficiary is the private sector. And today's challenges are different. New challenges are wage rate hikes, worker unrest and even lack of workers," Dr. Jayasundara explained.
Earlier this year media reports said the Sri Lankan government is considering to reapply for the European Union's trade concession Generalized System of Preference plus (GSP+).
According to reports, the Commerce Department was preparing the necessary documents to reapply for the GSP+ facility and the government is planning to submit them to the EU Commission in June 2014.
The European Union, citing Sri Lanka's failure to meet human rights conventions relevant for benefits under the scheme, in August 2010, suspended the GSP+ tariff concession for Sri Lanka that provided tax free access to European markets for the country's products, especially for garment exports which was Sri Lanka's second largest foreign exchange earner next to worker remittances.
The withdrawal of the facility has not affected Sri Lanka's garment industry which the experts believed would be affected the most. However, the economic downturn in Europe and the United States, Sri Lanka's two biggest markets, has affected Sri Lanka's export earnings, especially in the apparel sector.
The critics of the government say the withdrawal of the GSP+ facility has resulted in closing of several garment factories and some industries have been moved to Bangladesh where they can enjoy the GSP+ concessions.
Anton Marcus, convener and the General Secretary of the Free Trade Zones and General Services Employees' Union (FTZ&GSEU) says that the loss of GSP + concessions has led to the recent closure of 186 garment factories.
The government, however says the industry has changed the strategy and now focus on specialized high-end more expensive designer garments rather than the simple finished garments it exported earlier.
The Governor of Sri Lanka's Central Bank says due to the concerns over the euro-zone crisis, which threatens the global economy, and since Europe is one of Sri Lanka's largest export markets, Sri Lankan firms are now looking for alternative export markets and the Sri Lankan authorities are trying to negotiate a free trade agreement with China.