Possible GSP+ loss: Sri Lanka could lose its apparel markets: JAAF

July 2, 2021
  • Local industry may lose $ 500 m per annum
  • India, Bangladesh could be beneficiaries
  • Cabraal says Government prepared for GSP loss
    By Imsha Iqbal

Amidst possibilities of Sri Lanka getting suspended from the Generalised Scheme of Preferences (GSP) Plus provided by the European Union, Sri Lankan apparel exporters are concerned over losing international apparel markets to regional apparel players such as India and Bangladesh whose cost of production is far more lower than that of Sri Lanka, The Morning Business learnt.

Speaking to us, Tuli Cooray, the Secretary General of Joint Apparel Association Forum Sri Lanka (JAAFSL) said that the loss of GSP Plus would considerably affect the apparel sector amidst the prevailing pandemic.

He explained: “The cost of operation in Sri Lanka is far higher than the one in Bangladesh, India, Indonesia, Cambodia.” Thus, countries such as Bangladesh, India (while being the largest fabric supplier in the global market) and Indonesia, in fact, would be benefitted unlike Sri Lanka due to the fact that the cost of operation is lower than the one in Sri Lanka as well as the countries who receive GSP facility among the mentioned, would apparently be benefitted.

As a result of the market shift that is taking place with the unstable presence of apparel of Sri Lanka, there is a possibility of losing $ 500 million of trade per annum which is clearly not a bearable burden for the sector, the Secretary General added.

“It is a 500 to 600 million US Dollar worth of trade that will be exported on zero duty basis when the UK is excluded, on apparel alone,” he said implying the magnanimity of the loss that might erupt if the GSP Plus is discontinued.

State Minister of Finance, Capital Markets and State Enterprise Reforms Ajith Nivard Cabraal said: “We have to be prepared to face the situation if the GSP Plus facility is withdrawn. We have started a risk assessment to see how we can face any outcome. While steps are underway to deal with this on the diplomatic front, we also have to be prepared to deal with it on the economic front,” during the parliament session that took place on Wednesday (23).

Further elaborating on the impact due to the disconnection of the said financial facility that is provided by the EU, Cooray said “an established company may share the burden, but most of the companies (apparel) will not be able to bear the burden.”

“A single quantity of goods which costs approximately 500 mn USD is being exported by a large number of people to the EU and among those exported goods, almost 90% of them are exported on the GSP Plus basis,” Cooray emphasised. Therefore, this diversion agenda could result in a total disaster in terms of export income.

Certain giant industries might be able to cope up with the drastic change, however, he questions the status of the rest of the companies who engage in this sector of the industry.

Former Prime Minister and the leader of the United National Party (UNP) Ranil Wickremesinghe on 13 June, pointed out that generate foreign currency to the country are at risk and said, “this facility (GSP Plus) provides Sri Lanka with permission to export goods to Europe without taxation, which led to a boom in the garment and fishing industries,” explaining the necessity of the aforesaid EU provided facility.