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Sri Lankan govt initiates measures to regain GSP+ status

"The EU is a most important export destination with 40 per cent share, for the Sri Lankan players. Industry estimates suggest that exports to the EU rose from $1billion in 2005, when GSP+ was granted, to $1.7billion in 2010. And while exports have been on the rise since then, with $2billion reported last year, industry players are of the opinion that duties on exports are impediments to the export target of $8.5billion-per-annum."
 
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Setting a goal of reaching $8.5billion in clothing exports per annum by 2020, Sri Lanka’s apparel manufacturing segment is looking forward to regaining the GSP+ status from EU.

 

Efforts on to regain GSP + plus from EU

While Sri Lanka has emerged the international centre for apparel manufacturing with high-value segment particularly showing growth momentum, in 2010, the European Commission decided to temporarily revoke the low or non-existent tariffs awarded to the country under the Generalised System of Preferences Plus (GSP+) scheme after investigation alleged human rights abuses at the end of the country’s civil war. However, the country does enjoy the standard GSP scheme with fewer, preferential import tariffs.

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Experts believe with the newly elected reform-oriented administration having the GSP+ scheme back on its agenda, the manufacturing and export sectors will get a renewed boost. Speaking to the media recently, Harsha de Silva, Deputy Minister of Foreign Affairs said by the end of December 2015, the government will be formally reapply for the GSP+.

The EU is a most important export destination with 40 per cent share, for the Sri Lankan players. Industry estimates suggest that exports to the EU rose from $1billion in 2005, when GSP+ was granted, to $1.7billion in 2010. And while exports have been on the rise since then, with $2billion reported last year, industry players are of the opinion that duties on exports are impediments to the export target of $8.5billion-per-annum.

Green signal to GSP+ from the EU

While Sri Lankan government is doing its bit to regain the status, the EU has expressed its willingness to grant the GSP+ status to Sri Lanka. For instance, in its most recent statement on the issue, released in mid-November, the European Council said, “It takes positive note of the progress recently achieved” and called on “the High Representative and the European Commission to continue to engage with Sri Lanka to support its efforts to lay the groundwork for a renewed application for GSP+”.

Amid rising production costs, countries are exploring lower-cost locations such as Southeast Asian countries but many companies are also eyeing South Asia – mainly Sri Lanka as an alternative production base. The country is known as one of the world’s most renowned fashion sourcing locations, with a wide range of global brands - including Victoria’s Secret, Gap, Marks & Spencer and Nike - regularly buying from the island’s apparel manufacturers.

Sri Lanka set in the Indian Ocean has already attracted a number of Hong Kong manufacturers because of its geographical location and comparatively low labour costs. It is also capable of delivering value-added products that could appeal to buyers and importers in the more mature markets, including the EU and US. It is now one of the fastest-expanding economies in Asia, providing a highly conducive business environment for foreign manufacturers. Over the past six years, manufacturing has consistently accounted for around 18 percent of Sri Lanka’s GDP.

Its location, at the centre of a major trade route between Asia and Europe, places Sri Lanka in an advantageous position compared to many other South Asian nations when it comes to connectivity with many of the markets in Europe and the Middle East. This offers a significant edge to those manufacturers whose supply chains extend across the east, but whose major markets are in the west, allowing them substantial cost savings in terms of logistics as well as shorter delivery times.

 
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