ECONOMYNEXT – Sri Lanka’s ex-President Mahinda Rajapaksa under whose tenure the country lost duty free access to the European Union said the benefits of the scheme would be short lived as incomes are expected rise.
EU terminated GSP+ benefits to Sri Lanka as the Rajapaksa the regime undermined rule of law, denied justice and freedom to citizens and while dissidents including journalists were murdered or disappeared.
GSP+ has a threshold of 4,035 dollar income per person and Rajapaksa expects the economy to grow and income to rise under the current regime.
Sri Lanka’s per capita income was 3,843 in 2015 and 3,835 in 2016 which means and Sri Lanka was just 200 US dollar away from the threshold, Rajapaksa said.
"How close are to that threshold can be gauged from the fact that during my nine years in office, our per capita income grew by an average of USD 286 per year," he said.
"After Sri Lanka reaches the USD 4,035 mark in a particular year, we will be under observation for a further two years and then given a grace period of about one year before being taken out of all EU-GSP schemes."
He said businesses should be given low interest capital and skills of workers upgrade.
"Programmes should be started to help businesses prepare for the inevitable transition to a future without any EU trade concessions, through the diversification of products and markets," he said.
"Providing low interest capital to modernize factories, tax incentives for expansion, upgrading the skills of the labour force may be some of the measures needed to facilitate this transition.
"It is hoped the government will give due consideration to these matters."
Sri Lanka’s weak export performance and competitiveness is partly blamed on trade protectionism which has made effective protection extremely high.
Due to protectionist taxes on steel and other building materials even sectors like tourism are lagging competitiveness to free trading nations in East Asia.