Even if Sri Lanka can reach and maintain upper-middle-income country status in the next few years, the country’s economy will benefit from regaining the European Union’s Generalized Scheme of Preferences Plus (GSP+) for at least five years, the global publishing firm, Oxford Business Group (OBG) says.
The OBG says the recent decision by the EU to reinstate Sri Lanka to its tariff exemption scheme, designed to assist developing countries in achieving upper-middle-income status, should serve to boost exports and generate renewed private sector investment.
On May 19 the EU formally restored Sri Lanka to the ranks of countries that benefit from the enhanced Generalized System of Preferences Plus (GSP+), which provides additional tariff preferences.
The move was an acknowledgement that the country had committed to ratifying and implementing 27 international conventions covering issues such as human rights, labor conditions, environmental protection and good governance.
The restoration of Sri Lanka’s GSP+ status means tariffs on more than 6000 products have been removed, with the complete lifting of duties on some two-thirds of all tariff lines.
The easing of the tariff barriers will likely serve to increase trade flows even further, to Sri Lanka’s benefit, the OBG says. Of the nearly €4bn in bilateral trade recorded last year, Sri Lankan exports to EU member states accounted for €2.6bn, giving it a strong trade surplus.
With some estimates putting the immediate boost in revenue from the lifting of many of the tariffs at €300m, and the opening up European markets to Sri Lankan products set to increase this further, prospects for local exporters are on the rise.