Financial Times

Loss of the EU’s GSP+ will hurt entire economy - exporters

Garment exporters say the loss of the EU’s GSP+ will be felt across the country’s economy and will be felt most in the rural sector. The new chairman of the Sri Lanka Apparel Exporters Association, Kumar Mirchandani, speaking at the association’s recent AGM, said the termination of the GSP+ will hurt an industry that is ‘compliant’ with international standards.

“Politics and policy aside, our industry has proved itself in the eyes of the world to be extremely good employers, to be compliant in every area above and beyond all international norms. If GSP+ were to go away, it is this excellent and compliant industry that will be hurt very badly,” said Mr Mirchandani
“The effects will be seen right throughout Sri Lanka, our rural economy will face hardship, women’s employment and empowerment will be greatly damaged,” said Mr Mirchandani.

The garment export industry also noted the need for exchange rate adjustments. “In our region, India and Indonesia have given the lead and adjusted their exchange rates,” said the outgoing chairman of the Apparel Exporters Association, Noel Priyatillake. Meanwhile, local garment factories were advised to “trim their sails”.

“Firstly, our members must take immediate measures to trim their sails. Towards this end I suggest that the pyramid type organisation structure should be changed and replaced with something like an upturned drawing pin, which would make our companies leaner,” said Mr Priyatillake.
The apparel exporters (in Mr Mirchandani’s speech) also presented an industry wish list:

1. Need to clean up the tax regime – all of us know the problems we have with VAT, exempt supplies, zero-rated supplies, suspended VAT, TQB letters, BOI and customs reconciliation, and so on.

2.Appointment of a port and shipping regulator – this has gone on for years. It is about time we got down to it and did it.

3.Wage increase – I believe we should stop across the board wage increases. I believe the government in consultation with the private sector has the right to set minimum wages as done everywhere else in the world but not to enforce annual ad hoc increases.

4.We need sound management of our economy. We need to keep inflation under control for us to be competitive.

5. We need to have a realistic exchange rate that keeps us competitive.

6.Another issue we have been discussing for nearly as long 30 – 40 years is the system of holidays in our country. It is a sensitive subject but we have to approach it and find out how we can rationalize it so that we don’t have holidays in the middle of the week.

7.I would also like a modernization of the government/citizen interface. We have to find a way in which our people could conduct their business with government in an efficient manner.

8.For the next two years, we would like financial support from the government to retain competitiveness in spite of high inflation, costs of utilities and unfavourable exchange rates.

9.Good investment incentives to encourage legitimate properly vetted investments are important for our country.

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