GSP+: First round win but issues ahead

The Sri Lanka Government claimed victory on Friday after an unexpected resolution before the European Parliament objecting to the resumption of GSP+ concessions was defeated but issues loom ahead when eventually concessions are secured.

While welcoming the pro-Sri Lanka vote in the European Parliament, Felix Fernando, Chairman – Sri Lanka Apparel Exporters Association (SLAEA), said the garments industry has a much bigger issue – labour shortage.

With more than 40,000 vacancies in the sector, the industry is struggling to cope and attract newcomers. “This is a big problem we are facing because of the ‘Juki image’ for garment workers and thus young people prefer to take other jobs like going abroad or work in retail,” he said, adding that the industry is to undertake a study on ways of rectifying this situation.

Speaking to reporters on Friday, Deputy Foreign Minister Harsha de Silva who returned from Brussels overnight said that the government is now mulling a Free Trade Agreement (FTA) with the European Union (EU) on the back of the success of Thursday’s anti Sri Lanka GSP+ vote.

“This is the way to go. This is what we should be doing. We will start on this and I also told both the President and Prime Minister about this,” he said, adding that an FTA with the EU is the best way to exploit the GSP +.

The resolution presented by a group of EU parliamentarians against approving GSP+ to Sri Lanka was defeated in the Brussels-based European Parliament on Thursday with 436 members voting against the motion, 119 in favour and 22 abstentions.

“It was an election promise by us to reapply for the import duty concession. We said that we’ll get the GSP + and we did it,” Dr. De Silva told the media. He said that after this development, it’ll take nearly three weeks for the GSP + to be finalised. This is based on the EU guidelines for developing countries granting trade incentives to those implementing core international conventions on human and labour rights, sustainable development and good governance. He added that an EU fact finding delegation had earlier this month raised concerns over labour rights in Sri Lanka.

The mission, which included EU Parliamentarians Anne-Marie Mineur and Lola Sánchez Caldentey, visited Sri Lanka to assess the country’s progress on human and labour rights and they had wanted a percentage of the profits gained through GSP + to be granted to the workers, Dr. De Silva said. “But I explained to them (in Brussels) that we cannot do this and certainly not legally as it would require a law to get employers to give a portion of their gains to their staff.”

Palitha Athukorala, Secretary of Industriall Sri Lanka Council – which was associated with the visit of the two EU MPs, told the Business Times that the two MPs have said they would ask EU Commissioner Cecilia Malmström to ‘make some’ reference to the promise of workers getting half the benefits from the concessions.

“The next step in the process is for the GSP+ request to come before the European Council meeting which could be any time between May 7-10 and just a formality in the approval process. At that point the suggestion for worker benefits would be made,” he said.

When the delegation met Labour Minister John Seneviratne in Colombo, he had agreed to 50 per cent of the benefits of the GSP+ to be shared by the workers, a proposal that was also endorsed by Board of Investment Chairman Upul Jayasuriya who was present at the same meeting.

SLAEA chief Fernando said that securing the GSP+ would result in an immediate $400-500 million revenue benefit. While the extra work is unlikely to create more new factories, current factories are expected to expand production to take new orders.

He said some investors (including those in the garment sector) were waiting for the implementation of the 2017 budget proposal providing incentives moving into certain, underdeveloped regions in the country. “Investors are waiting for the tax laws that would formalise this proposal,” he said.

In the budget, tax holidays were offered for large-scale investments in underdeveloped parts of the country. Concessions have been offered to the private sector to construct mini-industrial parks which will be incubators in Moneragala, Puttalam, Jaffna/Vanni, and Ampara.

(Source: The Sunday Times – By Duruthu Edirimuni Chandrasekera)