The Chairman of MAS Holdings, warned of “very challenging times” ahead, with the prospect of GSP Plus concessions being withdrawn by the European Union.
“This duty-free facility is extremely vital to Sri Lanka as the country benefits significantly from these concessions to remain competitive in markets in the EU” said Mahesh Amalean of MAS holdings, South Asia’s largest manufacturer of intimate apparel.
If the program is not renewed, Sri Lanka’s garment industry, which sells around $3.47 billion to the EU alone, would be severely hit. Sri Lanka could no longer compete with countries such as Cambodia and Bangladesh, which also suffers concessions under a separate program, said Mr Amalean.
Companies who regularly export goods into the EU, such as Marks & Spencer’s, Next & Tesco could relocate their factories into these countries, if the GSP+ facility is withdrawn.
`The cost of manufacturing in these countries is also far less than in Sri Lanka`, he noted. `If the GSP Plus is withdrawn, they will have a competitive edge in the EU marketplace`.
`All these factors put together will pose a very big challenge to Sri Lanka`, the MAS Holdings boss underlined. `We need to take cognizance of this`.
This was echoed by the head of the Sri Lanka Apparel Exporters Association, Kumar Mirchandani.
“Price pressure is so high... people move away over a difference of 10 cents,” he said. “We can’t take 10 per cent off our prices — we don’t have those margins.”
The Sri Lankan Government has promised to pump $150 million into the apparel industry, in order to try and increase exports to countries such as India and China. The European Union however, made up 52% of all Sri Lanka’s garment exports, and 36% of all goods exports, making it an extremely hard market to replace.
“GSP Plus is crucial... withdrawing it would mean a lot of hardship,” said Mr Mirchandani.
The situation has become so critical, that even UNP Deputy Leader Karu Jayasuriya pleaded with the both the Sri Lankan Government and EU to allow the concessions to continue.
“As a responsible opposition, the UNP does not wish to see all our people suffer the consequences of the sins of a few. It is in this spirit that we have appealed to the EU recently to reconsider before withdrawing the trade concessions to Sri Lanka since more than a million of our poorest people will be affected by such an action while the perpetrators of violence who are responsible for our predicament will be largely untouched,” he said.
He slammed the current government and said they “must realize how serious the consequences of its actions are going to be for the people of this country. Today more than a million, direct and indirect jobs are in jeopardy.”
“The people of Sri Lanka need to understand that this government has long since perfected the art of propaganda and spin doctoring... What the democratic world is asking of us is the restoration of democratic rights in Sri Lanka.”
Meanwhile, the team of four ministers appointed by President Rajapakse concluded that they had met all conditions laid down by the EU for the concessions to continue.
“I see no reason for the EU to prevent the GSP+ facility being extended to Sri Lanka for a further period,” commented Deputy Finance Minister Sarath Amunugama, who is part of the team.
Sri Lanka’s admission into the GSP Plus program has been under review since October 2008, after increasing pressure on the EU to investigate human rights abuses. Since then, investigators have been refused entry into the country and categorically rejected by the Sri Lankan Government.
The EU is set to vote on the termination of the GSP+ tariff on October 15th.
