EU wake-up call for diversifying Sri Lankan exports
Sri Lanka has no time to waste in diversifying its exports to the European Union (EU) and grab the last chance of GSP + before the country graduates to an upper-middle income economy status (as classified by the World Bank) and remains in that category for three years.
This wake-up call was made by Head of EU delegation to Sri Lanka and the Maldives Tung –Lai Margue when he addressed a business leader’s forum in Colombo this week.
This session with the EU Ambassador was organised by the National Chamber of Commerce of Sri Lanka to create awareness on bilateral trade between EU and Sri Lanka among local businessmen.
He warned the country for considering a short-term reduction of imports as part of a strategy to manage the current currency issues.
Imports have a positive effect on an economy: consumers get cheaper products, and if production inputs are imported, restrictions could hurt established value chains, he added.
In addition, any discriminatory practice could also diminish the trust of current and future investors, he pointed out.
GSP + grants duty free access to the EU market for Sri Lankan products on 66 per cent of the EU tariff lines representing something like 6000 products.
Fisheries exports in particular exploded by 100 per cent. Other notable growth sectors included clothing, tea, tyres, gems as well as motor vehicle parts and footwear.
Subsequently, 2017 saw Sri Lanka’s export earnings reach over US$15.1 billion. This year, it is expected to rise even further, he disclosed.
One serious impediment to Sri Lanka’s exports to the EU is lack of diversification he said adding that the country has time till 2023 to fully exploit the potential of GSP +, by diversifying its export basis.
Sri Lanka’s GSP utilisation rate is still relatively low, at only 55 per cent in 2017. And it was even lower for clothing, at 43 per cent, he revealed.
He expressed the belief that “this rate will improve – after all, GSP+ was only awarded last year and exporters have to adopt new reflexes.”
In addition to diversifying its export products, it is also important for Sri Lanka to diversify the European countries it is exporting to, he added. At present the UK accounts for more or less 1/3 of Sri Lanka’s exports to the EU.
Even with the departure of UK with Brexit, there will still be 27 countries in the EU with the prospect of more joining later, he disclosed.