BBCSinhala.com | Sandeshaya | Sri Lanka "ready for GSP+ challenge"

In a statement issued on Thursday the Central Bank of Sri Lanka (CBSL) said that the government and the bank as well as many Sri Lankan exporters to the EU "have already taken many measures to deal with this risk".

CBSL says "prevailing crisis in some of the economies in the EU region has added to the difficulty of continuation of such concessions by the EU".

Therefore, CBSL states that steps already been taken to deal with the risk include ending the conflict and achieving political stability.

It said that apparel exports to EU countries constituted about 50 per cent of total apparel exports in 2009 and about 60 per cent benefited from the concessions.

Measures announced

· Improving the Sri Lankan business environment and confidence levels significantly, by ending the conflict.

· Stabilizing and improving almost all macro-economic fundamentals, including in particular;

‐ Achieving a low level of inflation, thereby significantly reducing the pressure on cost of inputs;

‐ Establishing lower rates of interest, thereby substantially reducing the cost of borrowing;

‐ Building up foreign reserves to historically high levels, thereby enhancing investor confidence in the Sri Lankan economy;

· Establishing an enabling environment where Sri Lankan businesses could access international capital and debt markets for funding requirements at lower costs;

· Achieving political stability in the country, thereby further improving confidence and reducing policy uncertainties;

· Obtaining the removal of Sri Lanka from the list of countries described a "high war risk" countries by underwriters;

· Improving internal work processes and systems of exporting entities, thereby leading to substantial productivity enhancements.

Central Bank of Sri Lanka

The European Union has warned that Sri Lanka will lose preferential trade status, known as GSP plus, unless the country commits to improving its human rights record within six months.

In a letter sent by EU foreign policy chief Catherine Ashton and Trade Commissioner Karel De Gucht on the 17th of June, the commission has requested a written commitment from the Sri Lankan government by July 1, "containing a firm undertaking to address by the end of the year, the principle outstanding issues".

Presidet Mahinda Rajapaksa has accused the EU decision on GSP+ as politically motivated.

In an interview with the Times of India President Rajapaksa has said, "when I called the elections, they immediately called for suspension of tariff concessions. It was a politically motivated decision. If the EU doesn't want to give it, let them keep it. I don't want it".

Trade Spokesman for EU John Clancy on Wednesday said, "the government of Sri Lanka is very well aware that this is a legal process that began several years ago and to suggest otherwise is simply misleading".

Sri Lanka is a major beneficiary of the trading opportunities offered by GSP+. In 2008, EU imports from Sri Lanka under GSP+ totalled EUR 1.24 billion.