Features
Preparing for ‘beyond GSP Plus’
By Neville Ladduwahetty
In the midst of all the challenges that Sri Lanka is currently facing, the prospect of having to prepare itself for a possible temporary withdrawal by the European Union (EU) of its tariff preference in favour of developing countries known as GSP+ at this particular juncture, when the whole world is desperately trying to cope with the effects of a pandemic, runs counter to the EU’s own mission of helping developing countries through GSP+. This preferential treatment is extended to Low and Middle Income countries as classified by the Word Bank. According to this classification the Gross National Income (GNI) of Low Middle Income Countries varies between $1036 and $4045, while GNI of Upper Income Countries varies between $ 4046 and 12535.
The GNI per capita in Sri Lanka has hovered around $4000 depending on the method of calculation. Therefore, reaching a GNI per capita greater than $4046 is not much of a stretch. However, the issue is that a GNI in excess of $4046 needs to be sustained for three consecutive years for Sri Lanka not to qualify for tariff preference; a benchmark that is applicable for normal global conditions. Sri Lanka reached the Upper Income Status in 2019 prior to COVID-19. If not for COVID-19 Sri Lanka could have maintained the growth momentum for three years and beyond, in which event Sri Lanka would have lost the benefits of tariff preference. The fact that no allowance is made for a shortfall in GNI per capita due to a global pandemic, the consequences of which are experienced by every country, is not only deeply regretted but also lacks acknowledgement of reality. If such an allowance is made for 2020 and 2021 there is a strong possibility that Sri Lanka could reach the Upper Income status in 2021 and the requirement for three consecutive years would have been met. In such an event Sri Lanka would have lost tariff preference for GSP+ anyway. Therefore, the EU should seriously consider adjusting the threshold for Upper Income category for countries such as Sri Lanka that hover around the lower limit of Upper Income, instead of waiving temporarily or otherwise, GSP+ based on standards that do not apply for unprecedented global catastrophes.
As stated by former Director General, Dhammika Senasinghe, for Europe, Central Asia, the EU and Commonwealth, of the Foreign Ministry of Sri Lanka at a business forum, “As Sri Lanka progress to graduate to upper middle income states in the future we will be not qualify for the GSP+ benefits, which means we would need to work out on a special trading arrangement with the EU whilst highlighting our climate change related vulnerability also under the sustainable development criteria.” (ECONOMYNEXT, June 23, 2021).
Therefore, Sri Lanka has to prepare for the day when it is not eligible to GSP+. Since this is a real prospect, the Government should set up a group that is knowledgeable and experienced in trade related issues, preferably with international experience to prepare a proposal that could serve as a blue print for negotiations with the EU. The mandate for such a team should be to provide the same tariff preferences as the current scheme, or better for substantially all trade.
GSP+ to HELP DEVELOPING
COUNTRIES
According to the European Commission, GSP+ is a “Special Incentive Arrangement for Sustainable Development and Good Governance”. Furthermore, the Commission states: “The GSP+ scheme is designed to help developing countries assume the special burdens and responsibilities resulting from the ratification of 27 core International Conventions on human and labour rights, environmental protection and good governance as well as from the effective implementation thereof. It does so by granting full removal of tariffs on over 66% of tariff lines covering a very wide array of products including, for example, textiles and fisheries”.
Despite these inducements nearly 75% of the 193 countries remain in the Low or Upper Income category, as per the World Bank. Furthermore, only eight (8) countries are beneficiaries of the GSP+ scheme. They are, Armenia, Bolivia, Cape Verde, Kyrgyzstan, Mongolia, Pakistan and Sri Lanka. Therefore, there has to be an explanation why more Low Income Countries are not attempting to take advantage of the tariff preference and work towards becoming an Upper Middle Income country. For instance, India, Nepal, Bhutan and Bangladesh are not beneficiaries. Perhaps each of these countries have negotiated and initiated arrangements outside the constraints of GSP+ Therefore, there is a need to study the policies and strategies adopted by these countries including Vietnam, in order to stay competitive without the benefits of tariff preference of GSP+.
SITUATION in SRI LANKA
The former DG cited above opined that “Sri Lanka utilization rate of facilities is around 55- 58 percent, while Pakistan is 96 percent and the Philippines is 73 percent. Confirming this situation during the 14th Trade Policy Review of the European Union held on 18th February 2020, at the WTO, Geneva, the Sri Lankan delegation stated: “judging from Sri Lanka’s two years’ experience, the utilization rate of the GSP+ facility by Sri Lankan exporters stand relatively low at 55 – 60%, due to several reasons, including difficulties of qualifying GSP preferential Rules of Origin Criteria. For instance, more than half of the apparel exports of Sri Lanka enter the EU market without availing the GSP+ facility, but paying relatively high import duties compared to other industrial goods”.
Continuing the Sri Lankan Delegation stated: “Sri Lanka is in the verge of losing the EU GSP/GSP+ benefits from 01st January 2023, if this Status continues for two consecutive years. Sri Lanka has already flagged this situation and wishes to negotiate an alternative bilateral preferential trade mechanism or alternatively, a special scheme of preferential market access for small and vulnerable countries in the upper middle-income category.
Whatever measures Sri Lanka adopts to improve the rate of utilization of facilities, the stark fact facing Sri Lanka is how to use the facilities offered by the EU when Sri Lanka is recognized as an Upper Income Country. How to prepare for such an eventuality should be the focus of the government. In such a context, the dire warnings by commentators about the prospect of losing the benefits of GSP+ on grounds of the status of Human Rights in Sri Lanka, highlighted by the UN Human Rights Commissioner and the ineffective measures adopted to address accountability and reconciliation by the Core Group, would be secondary to losing GSP+ on grounds that Sri Lanka is recognized as an Upper Income Country not only for its economic gains but also for its noteworthy achievement in the field of Human Development that in fact surpasses some of those within EU’s 27 Members.
If Sri Lanka is to undergo experiences similar to what it had to endure with the withdrawal of GSP+ in 2010 on grounds of the Human Rights situation in the country, the prediction is that many factories and commercial establishments would close down and thousands would lose employment at a time when the public is already facing unprecedented hardships due to COVID-19. Therefore, instead of waiting for the axe to fall, Sri Lanka should adopt a “proactive approach” as suggested by the Free Trade Zone Manufacturers Association (FTZMA). However, it would have been helpful if the FRZMA had specifically proposed such an approach.
GEOPOLITICAL DIMENSIONS of the EU RESOLUTION
The Resolution of the EU Parliament having given regard to related documents and a Preamble with paragraphs A to K, proceeds to adopt nineteen (19) Resolutions. Nearly all the issues Resolved either impact on issues within the domestic jurisdiction of Sri Lanka or relate to GSP+ except for paragraph 18 of the Resolution which states: “Expresses, concern about the growing role and interference of China in Sri Lanka”. The question that naturally arises is whether the real reason for Paragraphs 14 and 18 to co-exist in the same Resolution is because of genuine concern for Human Rights or because of concern for China’s “growing role and inference of China in Sri Lanka?
Paragraph 14 states: “Underlines that the GSP+ scheme offered to Sri Lanka has made a significant contribution to the country’s economy, from which exports to the EU have increased to EUR 2.3 billion, making the EU Sri Lanka’s second-largest export market; highlights the ongoing monitoring of Sri Lanka’s eligibility for GSP+ status and stresses that the continuance of GSP+ trade preferences is not automatic; calls on the Commission and the European External Action Service (EEAS) to take into due account current events when assessing Sri Lanka’s eligibility for GSP+ status; further calls on the Commission and the EEAS to use the GSP+ as a leverage to push for advancement on Sri Lanka’s human rights obligations and demand the repeal or replacement of the PTA, to carefully assess whether there is sufficient reason, as a last resort, to initiate a procedure for the temporary withdrawal of Sri Lanka’s GSP+ status and the benefits that come with it, and to report to Parliament on this matter as soon as possible”.
If the EU hopes to use a temporary withdrawal of GSP+ to make matters difficult for Sri Lanka because of China’s growing role in Sri Lanka, the EU may be acting against its own interests of staying engaged with Sri Lanka because China is bound to grab the opportunity and entrench itself even further. Therefore, it is in the interest of the EU to stay engaged with Sri Lanka and negotiate an arrangement special to Sri Lanka, conscious of the fact that Sri Lanka would not be eligible for GSP+ anyway, in the very near term.
CONCLUSION
After wading through paragraph after paragraph of the EU Resolution, the only two paragraphs that matter are paragraphs 14 and 18. While the former intends to explore the prospect of a “temporary withdrawal” of GSP+ as leverage to advance Human Rights in Sri Lanka, the latter is concerned with the “growing role and interference of China in Sri Lanka”. While a temporary withdrawal is bound to hurt Sri Lanka at a moment of unprecedented hardship due to COVID-19, there is a strong possibility that China would take advantage and step into the breach. Such an outcome would not be in the interests of the EU and the recently stated resolve of the G7 to Build Bigger and Better (B3B), in order to counter the growing global imbalance created by China’s Belt and Road initiative.
Instead, it would be far more prudent for the EU to stay engaged with Sri Lanka because doing so is in its own interest and that of the West, and recognize that Sri Lanka is on the threshold of becoming an Upper Income Country, and in keeping with such a prospect work out arrangements as stated in Article 4 of EU’s GUIDE to SRI LANKAN EXPORTERS. Article 4 states: “Sri Lanka would become ineligible for the GSP+ scheme should the EU conclude a Preferential Trade Agreement with Sri Lanka, which provided the same tariff preferences as the scheme, or better, for substantially all trade. The EU is currently not negotiating any further trade agreements with Sri Lanka”.
by Dr Gotabhya Ranasinghe
Senior Consultant Cardiologist
National Hospital Sri Lanka
When we sought a meeting with Hon Dr. Ramesh Pathirana, Minister of Health, he graciously cleared his busy schedule to accommodate us. Renowned for his attentive listening and deep understanding, Minister Pathirana is dedicated to advancing the health sector. His openness and transparency exemplify the qualities of an exemplary politician and minister.
Dr. Palitha Mahipala, the current Health Secretary, demonstrates both commendable enthusiasm and unwavering support. This combination of attributes makes him a highly compatible colleague for the esteemed Minister of Health.
Our discussion centered on a project that has been in the works for the past 30 years, one that no other minister had managed to advance.
Minister Pathirana, however, recognized the project’s significance and its potential to revolutionize care for heart patients.
The project involves the construction of a state-of-the-art facility at the premises of the National Hospital Colombo. The project’s location within the premises of the National Hospital underscores its importance and relevance to the healthcare infrastructure of the nation.
This facility will include a cardiology building and a tertiary care center, equipped with the latest technology to handle and treat all types of heart-related conditions and surgeries.
Securing funding was a major milestone for this initiative. Minister Pathirana successfully obtained approval for a $40 billion loan from the Asian Development Bank. With the funding in place, the foundation stone is scheduled to be laid in September this year, and construction will begin in January 2025.
This project guarantees a consistent and uninterrupted supply of stents and related medications for heart patients. As a result, patients will have timely access to essential medical supplies during their treatment and recovery. By securing these critical resources, the project aims to enhance patient outcomes, minimize treatment delays, and maintain the highest standards of cardiac care.
Upon its fruition, this monumental building will serve as a beacon of hope and healing, symbolizing the unwavering dedication to improving patient outcomes and fostering a healthier society.We anticipate a future marked by significant progress and positive outcomes in Sri Lanka’s cardiovascular treatment landscape within the foreseeable timeframe.
by Fr. Emmanuel Fernando, OMI
Jesuit Fr. Aloysius Pieris (affectionately called Fr. Aloy) celebrated his 90th birthday on April 9, 2024 and I, as the editor of our Oblate Journal, THE MISSIONARY OBLATE had gone to press by that time. Immediately I decided to publish an article, appreciating the untiring selfless services he continues to offer for inter-Faith dialogue, the renewal of the Catholic Church, his concern for the poor and the suffering Sri Lankan masses and to me, the present writer.
It was in 1988, when I was appointed Director of the Oblate Scholastics at Ampitiya by the then Oblate Provincial Fr. Anselm Silva, that I came to know Fr. Aloy more closely. Knowing well his expertise in matters spiritual, theological, Indological and pastoral, and with the collaborative spirit of my companion-formators, our Oblate Scholastics were sent to Tulana, the Research and Encounter Centre, Kelaniya, of which he is the Founder-Director, for ‘exposure-programmes’ on matters spiritual, biblical, theological and pastoral. Some of these dimensions according to my view and that of my companion-formators, were not available at the National Seminary, Ampitiya.
Ever since that time, our Oblate formators/ accompaniers at the Oblate Scholasticate, Ampitiya , have continued to send our Oblate Scholastics to Tulana Centre for deepening their insights and convictions regarding matters needed to serve the people in today’s context. Fr. Aloy also had tried very enthusiastically with the Oblate team headed by Frs. Oswald Firth and Clement Waidyasekara to begin a Theologate, directed by the Religious Congregations in Sri Lanka, for the contextual formation/ accompaniment of their members. It should very well be a desired goal of the Leaders / Provincials of the Religious Congregations.
Besides being a formator/accompanier at the Oblate Scholasticate, I was entrusted also with the task of editing and publishing our Oblate journal, ‘The Missionary Oblate’. To maintain the quality of the journal I continue to depend on Fr. Aloy for his thought-provoking and stimulating articles on Biblical Spirituality, Biblical Theology and Ecclesiology. I am very grateful to him for his generous assistance. Of late, his writings on renewal of the Church, initiated by Pope St. John XX111 and continued by Pope Francis through the Synodal path, published in our Oblate journal, enable our readers to focus their attention also on the needed renewal in the Catholic Church in Sri Lanka. Fr. Aloy appreciated very much the Synodal path adopted by the Jesuit Pope Francis for the renewal of the Church, rooted very much on prayerful discernment. In my Religious and presbyteral life, Fr.Aloy continues to be my spiritual animator / guide and ongoing formator / acccompanier.
Fr. Aloysius Pieris, BA Hons (Lond), LPh (SHC, India), STL (PFT, Naples), PhD (SLU/VC), ThD (Tilburg), D.Ltt (KU), has been one of the eminent Asian theologians well recognized internationally and one who has lectured and held visiting chairs in many universities both in the West and in the East. Many members of Religious Congregations from Asian countries have benefited from his lectures and guidance in the East Asian Pastoral Institute (EAPI) in Manila, Philippines. He had been a Theologian consulted by the Federation of Asian Bishops’ Conferences for many years. During his professorship at the Gregorian University in Rome, he was called to be a member of a special group of advisers on other religions consulted by Pope Paul VI.
Fr. Aloy is the author of more than 30 books and well over 500 Research Papers. Some of his books and articles have been translated and published in several countries. Among those books, one can find the following: 1) The Genesis of an Asian Theology of Liberation (An Autobiographical Excursus on the Art of Theologising in Asia, 2) An Asian Theology of Liberation, 3) Providential Timeliness of Vatican 11 (a long-overdue halt to a scandalous millennium, 4) Give Vatican 11 a chance, 5) Leadership in the Church, 6) Relishing our faith in working for justice (Themes for study and discussion), 7) A Message meant mainly, not exclusively for Jesuits (Background information necessary for helping Francis renew the Church), 8) Lent in Lanka (Reflections and Resolutions, 9) Love meets wisdom (A Christian Experience of Buddhism, 10) Fire and Water 11) God’s Reign for God’s poor, 12) Our Unhiddden Agenda (How we Jesuits work, pray and form our men). He is also the Editor of two journals, Vagdevi, Journal of Religious Reflection and Dialogue, New Series.
Fr. Aloy has a BA in Pali and Sanskrit from the University of London and a Ph.D in Buddhist Philosophy from the University of Sri Lankan, Vidyodaya Campus. On Nov. 23, 2019, he was awarded the prestigious honorary Doctorate of Literature (D.Litt) by the Chancellor of the University of Kelaniya, the Most Venerable Welamitiyawe Dharmakirthi Sri Kusala Dhamma Thera.
Fr. Aloy continues to be a promoter of Gospel values and virtues. Justice as a constitutive dimension of love and social concern for the downtrodden masses are very much noted in his life and work. He had very much appreciated the commitment of the late Fr. Joseph (Joe) Fernando, the National Director of the Social and Economic Centre (SEDEC) for the poor.
In Sri Lanka, a few religious Congregations – the Good Shepherd Sisters, the Christian Brothers, the Marist Brothers and the Oblates – have invited him to animate their members especially during their Provincial Congresses, Chapters and International Conferences. The mainline Christian Churches also have sought his advice and followed his seminars. I, for one, regret very much, that the Sri Lankan authorities of the Catholic Church –today’s Hierarchy—- have not sought Fr.
Aloy’s expertise for the renewal of the Catholic Church in Sri Lanka and thus have not benefited from the immense store of wisdom and insight that he can offer to our local Church while the Sri Lankan bishops who governed the Catholic church in the immediate aftermath of the Second Vatican Council (Edmund Fernando OMI, Anthony de Saram, Leo Nanayakkara OSB, Frank Marcus Fernando, Paul Perera,) visited him and consulted him on many matters. Among the Tamil Bishops, Bishop Rayappu Joseph was keeping close contact with him and Bishop J. Deogupillai hosted him and his team visiting him after the horrible Black July massacre of Tamils.
Sri Lanka-Singapore Free Trade Agreement
By Gomi Senadhira
senadhiragomi@gmail.com
“You might tell fairy tales, but the progress of a country cannot be achieved through such narratives. A country cannot be developed by making false promises. The country moved backward because of the electoral promises made by political parties throughout time. We have witnessed that the ultimate result of this is the country becoming bankrupt. Unfortunately, many segments of the population have not come to realize this yet.” – President Ranil Wickremesinghe, 2024 Budget speech
Any Sri Lankan would agree with the above words of President Wickremesinghe on the false promises our politicians and officials make and the fairy tales they narrate which bankrupted this country. So, to understand this, let’s look at one such fairy tale with lots of false promises; Ranil Wickremesinghe’s greatest achievement in the area of international trade and investment promotion during the Yahapalana period, Sri Lanka-Singapore Free Trade Agreement (SLSFTA).
It is appropriate and timely to do it now as Finance Minister Wickremesinghe has just presented to parliament a bill on the National Policy on Economic Transformation which includes the establishment of an Office for International Trade and the Sri Lanka Institute of Economics and International Trade.
Was SLSFTA a “Cleverly negotiated Free Trade Agreement” as stated by the (former) Minister of Development Strategies and International Trade Malik Samarawickrama during the Parliamentary Debate on the SLSFTA in July 2018, or a colossal blunder covered up with lies, false promises, and fairy tales? After SLSFTA was signed there were a number of fairy tales published on this agreement by the Ministry of Development Strategies and International, Institute of Policy Studies, and others.
However, for this article, I would like to limit my comments to the speech by Minister Samarawickrama during the Parliamentary Debate, and the two most important areas in the agreement which were covered up with lies, fairy tales, and false promises, namely: revenue loss for Sri Lanka and Investment from Singapore. On the other important area, “Waste products dumping” I do not want to comment here as I have written extensively on the issue.
1. The revenue loss
During the Parliamentary Debate in July 2018, Minister Samarawickrama stated “…. let me reiterate that this FTA with Singapore has been very cleverly negotiated by us…. The liberalisation programme under this FTA has been carefully designed to have the least impact on domestic industry and revenue collection. We have included all revenue sensitive items in the negative list of items which will not be subject to removal of tariff. Therefore, 97.8% revenue from Customs duty is protected. Our tariff liberalisation will take place over a period of 12-15 years! In fact, the revenue earned through tariffs on goods imported from Singapore last year was Rs. 35 billion.
The revenue loss for over the next 15 years due to the FTA is only Rs. 733 million– which when annualised, on average, is just Rs. 51 million. That is just 0.14% per year! So anyone who claims the Singapore FTA causes revenue loss to the Government cannot do basic arithmetic! Mr. Speaker, in conclusion, I call on my fellow members of this House – don’t mislead the public with baseless criticism that is not grounded in facts. Don’t look at petty politics and use these issues for your own political survival.”
I was surprised to read the minister’s speech because an article published in January 2018 in “The Straits Times“, based on information released by the Singaporean Negotiators stated, “…. With the FTA, tariff savings for Singapore exports are estimated to hit $10 million annually“.
As the annual tariff savings (that is the revenue loss for Sri Lanka) calculated by the Singaporean Negotiators, Singaporean $ 10 million (Sri Lankan rupees 1,200 million in 2018) was way above the rupees’ 733 million revenue loss for 15 years estimated by the Sri Lankan negotiators, it was clear to any observer that one of the parties to the agreement had not done the basic arithmetic!
Six years later, according to a report published by “The Morning” newspaper, speaking at the Committee on Public Finance (COPF) on 7th May 2024, Mr Samarawickrama’s chief trade negotiator K.J. Weerasinghehad had admitted “…. that forecasted revenue loss for the Government of Sri Lanka through the Singapore FTA is Rs. 450 million in 2023 and Rs. 1.3 billion in 2024.”
If these numbers are correct, as tariff liberalisation under the SLSFTA has just started, we will pass Rs 2 billion very soon. Then, the question is how Sri Lanka’s trade negotiators made such a colossal blunder. Didn’t they do their basic arithmetic? If they didn’t know how to do basic arithmetic they should have at least done their basic readings. For example, the headline of the article published in The Straits Times in January 2018 was “Singapore, Sri Lanka sign FTA, annual savings of $10m expected”.
Anyway, as Sri Lanka’s chief negotiator reiterated at the COPF meeting that “…. since 99% of the tariffs in Singapore have zero rates of duty, Sri Lanka has agreed on 80% tariff liberalisation over a period of 15 years while expecting Singapore investments to address the imbalance in trade,” let’s turn towards investment.
Investment from Singapore
In July 2018, speaking during the Parliamentary Debate on the FTA this is what Minister Malik Samarawickrama stated on investment from Singapore, “Already, thanks to this FTA, in just the past two-and-a-half months since the agreement came into effect we have received a proposal from Singapore for investment amounting to $ 14.8 billion in an oil refinery for export of petroleum products. In addition, we have proposals for a steel manufacturing plant for exports ($ 1 billion investment), flour milling plant ($ 50 million), sugar refinery ($ 200 million). This adds up to more than $ 16.05 billion in the pipeline on these projects alone.
And all of these projects will create thousands of more jobs for our people. In principle approval has already been granted by the BOI and the investors are awaiting the release of land the environmental approvals to commence the project.
I request the Opposition and those with vested interests to change their narrow-minded thinking and join us to develop our country. We must always look at what is best for the whole community, not just the few who may oppose. We owe it to our people to courageously take decisions that will change their lives for the better.”
According to the media report I quoted earlier, speaking at the Committee on Public Finance (COPF) Chief Negotiator Weerasinghe has admitted that Sri Lanka was not happy with overall Singapore investments that have come in the past few years in return for the trade liberalisation under the Singapore-Sri Lanka Free Trade Agreement. He has added that between 2021 and 2023 the total investment from Singapore had been around $162 million!
What happened to those projects worth $16 billion negotiated, thanks to the SLSFTA, in just the two-and-a-half months after the agreement came into effect and approved by the BOI? I do not know about the steel manufacturing plant for exports ($ 1 billion investment), flour milling plant ($ 50 million) and sugar refinery ($ 200 million).
However, story of the multibillion-dollar investment in the Petroleum Refinery unfolded in a manner that would qualify it as the best fairy tale with false promises presented by our politicians and the officials, prior to 2019 elections.
Though many Sri Lankans got to know, through the media which repeatedly highlighted a plethora of issues surrounding the project and the questionable credentials of the Singaporean investor, the construction work on the Mirrijiwela Oil Refinery along with the cement factory began on the24th of March 2019 with a bang and Minister Ranil Wickremesinghe and his ministers along with the foreign and local dignitaries laid the foundation stones.
That was few months before the 2019 Presidential elections. Inaugurating the construction work Prime Minister Ranil Wickremesinghe said the projects will create thousands of job opportunities in the area and surrounding districts.
The oil refinery, which was to be built over 200 acres of land, with the capacity to refine 200,000 barrels of crude oil per day, was to generate US$7 billion of exports and create 1,500 direct and 3,000 indirect jobs. The construction of the refinery was to be completed in 44 months. Four years later, in August 2023 the Cabinet of Ministers approved the proposal presented by President Ranil Wickremesinghe to cancel the agreement with the investors of the refinery as the project has not been implemented! Can they explain to the country how much money was wasted to produce that fairy tale?
It is obvious that the President, ministers, and officials had made huge blunders and had deliberately misled the public and the parliament on the revenue loss and potential investment from SLSFTA with fairy tales and false promises.
As the president himself said, a country cannot be developed by making false promises or with fairy tales and these false promises and fairy tales had bankrupted the country. “Unfortunately, many segments of the population have not come to realize this yet”.
(The writer, a specialist and an activist on trade and development issues . )
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