Loss of GSP Plus to cost 2% of Sri Lanka's GDP - Economist

[TamilNet, Friday, 15 August 2008, 10:07 GMT]
Referring to the conclusion of a research study by economists at the University of Sussex that "losing GSP Plus would lead to a 4% cut in Sri Lanka’s garment exports," and "[o]verall, it would cost 2% of GDP," the Economist in an article published in the 15th August edition, predicted dire economic future, and pointed out, "[a]nnual inflation is close to 30%. The rupee has appreciated against the dollar, further hurting exporters. By one estimate, economic growth—which was 7.6% in 2006—will be 4.3% this year. As elsewhere, inflation is being driven by high food and energy prices."

Under a concession known as “GSP Plus," awarded in 2005 to help Sri Lanka rebuild after the 2004 tsunami, Sri Lankan exporters enjoy preferential tariff treatment from the EU, according to the report.

The Economist emphasized the importance of the garment industry to Sri Lanka's economic health, saying, "garments, bound for British high streets, represent one of Sri Lanka’s strengths: an innovative garment industry, which accounts for 67% of total industrial output and the equivalent of 10% of GDP," and added that the 25-year Sri Lanka's war against Tamils "is waged mostly in the north and east, leaving the populous, well-off west largely unscathed." The report cautioned that this situation could change.

The report said that to earn the benefits of GSP+ , "beneficiaries must comply with 27 international conventions, on environmental, labor and human rights standards," and added that Sri Lanka is struggling to meet the HR standards, concluding that the agreement which expires at the end of 2008, is unlikely to be renewed based on "recent signs."

The report said: "[s]ince launching a fresh campaign against the LTTE in 2006, the government has been accused of complicity in the abduction or murder of hundreds of Tamil and Muslim men. It is at war with human-rights groups. It has refused to let the UN High Commissioner for Human Rights set up an office in Sri Lanka," adding, "[a] much weaker alternative, a group of “eminent persons” from India, France, America and other countries, was sent to observe Sri Lanka’s own investigations into six high-profile abuses. But the group disbanded itself in April, citing a “lack of political will” to uncover the truth."

External Links:

Economist:		Not many pluses
EU:		GSP - Generalized System of Preferences