FDI lottery in EU GSP+ surpasses exports promise

An unprecedented basket of exports from Sri Lanka is now available as a result of the country’s renewed GSP plus eligibility, as is the prospect of more FDI.

“The enhanced market access that Sri Lanka gets from the EU’s GSP+ is very significant,” said the Minister of Industry and Commerce Rishad Bathiudeen on 28 June. 

Minister Bathiudeen was responding to New Delhi-based Tunisian Ambassador to Sri Lanka Nejmeddine Lakhal, who was making his first courtesy call on the Minister at the Ministry of Industry and Commerce and who asked Minister Bathiudeen of the joint venture potential between the private sectors of both countries. Joining the discussion was the Honorary Consul General of the Consulate of Tunisia in Colombo Mukthar Marikkar and officials of the Department of Commerce.  

“Tunisia-SL trade is far below its potential and it is time we take a close look,” said Tunisian Ambassador Lakhal. “We both have similar trade and investment challenges and we can work for a win-win. Tunisia can partner Sri Lanka in joint ventures and exports for the Asian and African markets.

“Tunisian investors can benefit from joint ventures with Lankan firms exporting to EU, especially since our recent GDP plus eligibility. Tunisia is closer to the EU therefore Tunisian manufacturers cannot go for South Asian markets but by setting up JVs here they can solve this,” responded Minister Bathiudeen,  adding: “They can use Sri Lanka’s FTAs with India and Pakistan to export 8,000 products tariff free to these two countries. Our Government is also working on FTAs with China and Singapore. Therefore the increase in market access is huge, and the bigger surprise is the increased FDI appeal for Sri Lanka. I and my Ministry are ready to extend our fullest support to Tunisian investors setting up here to exploit these trade facilities. This can also help kick-start the non-existent bilateral trade between Tunisia and Sri Lanka which though small, shows a strong growth trend. Therefore I believe it is time to commence our trade in a stronger way.”

The two-way trade between Sri Lanka and Tunisia in 2016 was a mere $ 2.13 million and therefore both countries are virgin markets for each other. Despite the low volumes, trade showed a growing trend, doubling from 2015’s $ 1 million. Nearly half of Sri Lanka’s exports to Tunisia last year comprised Ceylon Tea. The main imports from Tunisia to Sri Lanka were electric switches and transformers.

Responding to Tunisian Ambassador Lakhal’s query on new potentials from the recent EU GSP Plus, Minister Bathiudeen explained: “According to the Department of Commerce under me, 6,200 products from Sri Lanka are benefitting from EU GSP Plus. The 6,200 can be exported duty free to EU. The other benefit is Sri Lanka in return need not give similar zero tariff for any EU products since it’s a unilateral concession from the EU to us. This makes the GSP facility a very attractive opening for our exporters, manufacturers and more importantly, for international investors setting up here, including Tunisian. The EU is Sri Lanka’s biggest export destination. Two-thirds of export tariff lines to the EU are now duty free, among them textiles and fisheries. We believe the increase in annual export revenue from GSP plus to be $ 350 million or more. We are also excited of the FDI potential due to GSP since studies show bigger FDIs possible from GSP Plus.” 

International studies on the economic effects of EU GSP Plus have shown a 30% surge in exports for the beneficiary. As for FDIs, the potential for increase for the beneficiary (post-GSP Plus) is more than double the pre-GSP Plus FDI quantum - a 213% increase.