Govt. goes for GSP+ in Britain-minus-EU

Deputy Foreign Minister Dr. Harsha de Silva 

By Uditha Jayasinghe 

The Government yesterday handed over its formal application for regaining GSP+ and played down fears of Brexit having an immediate impact on the economy but acknowledged it would have to “jump the queue” to fast track Free Trade Agreements (FTAs) and be judicious on when to go to the market to sell a possible $1 billion bond.   

After a week of informal talks Sri Lankan Government officials on Tuesday afternoon handed over the formal application of GSP+ to European Union (EU) officials in Brussels, Deputy Foreign Minister Dr. Harsha de Silva told reporters. 

“We are confident that GSP+ will be returned to Sri Lanka. The EU is likely to take six months to deliberate the application and we expect an additional two months to sort through bureaucratic formalities. So we hope to have GSP+ officially regained about eight months from now,” he said.   

However, if the UK decides to invoke Article 50 and begin the countdown to leave the EU in two years GSP+ would have limited positives for Sri Lanka. Currently as much as 35%-40% of Sri Lanka’s exports head to the UK and Britain is the second largest buyer of Sri Lankan goods, mostly apparel, after the United States. 

British tourists also make up the largest contingent of travelers from Europe and are among the highest spenders. With the pound depreciating against the dollar and many Britons likely to see a drop in earnings the local tourism industry could get hit, Dr. de Silva noted. Sri Lanka’s debt payments would also become heavier if the dollar continues to appreciate against the pound, Dr. de Silva warned.  As a first step the Government will appoint Amari Wijewardene as a permanent ambassador to UK, a position that has remained vacant since the Government came to power in 2015.  

Dr. de Silva also praised Government moves to secure the International Monetary Fund (IMF) program as it gave Sri Lanka a better chance of weathering the Brexit storm. 

To counter this the Government has already decided on a twofold strategy; engaging with the UK to hammer out an FTA and also fast tracking existing discussions on trade deals with India, Pakistan, Singapore, Korea and Japan. But since many countries will be lining up to ink similar agreements “Sri Lanka will have to find a way to jump the queue,” admitted the Deputy Minister.  

“This situation clearly calls for Sri Lanka to speed up discussions on the Economic and Technology Cooperation Agreement (ETCA) with India. Prime Minister Ranil Wickremesinghe is likely to formally kick off talks with the Singaporean Government on an FTA when he undertakes a tour there next month.” 

Deepening an existing FTA with Pakistan to possibly include services and increasing momentum on trade deals with Korea and Japan are also in the pipeline, Dr. de Silva said. 

He acknowledged that the Government would have to be cautious when approaching volatile financial markets that have seen billions of dollars wiped off their value in the last two days. The Government had earlier announced it has plans to issue a $1 billion or $1.5 billion bond later this year.  

“We will have to determine the right date as we do not want to go to the markets when the situation is so volatile. Fortunately there has been some movement towards stability today.”  

Breixt panic, according to Standard & Poor’s, wiped out more than $2 trillion off the value of stocks in just two days, surpassing the turmoil in the wake of Lehman Brothers’ bankruptcy at the height of the 2008 financial crisis.  

On Tuesday markets steadied and a pound recovered from its mammoth slide but analysts were reserved in their forecasts with more political turmoil looming on the UK as the country readies for a new prime minister and possible general election.