Economic shock over twin blows and lessons for the future

The Sri Lankan corporate fraternity is reeling from twin shocks this week that augurs ill for prospects of development and governance. Perhaps more significant is the European Union report with regards to GSP Plus concessions. With a proposal to remove the additional trade preference already on its way, Sri Lanka’s USD 8 billion export industry faces a stiff challenge which could result in job cuts and adverse corrective measures. For Sri Lanka, the options seem limited, save lobby for a broad-based standpoint with regards to its commitments. Whilst government must lead that lobby with a steadfast pledge on alleged violations, this process must constitute the combined voice of our parliamentary opposition and business. Sri Lanka must demonstrate it deserves, it needs to put in place necessary checks and balances of these conventions we claim to espouse but allegedly violate. We need to be accountable.
For a nation emerging from the throes of conflict, the loss of GSP Plus concessions poses a serious concern to its want for development. We need to look beyond our mental confines of garments and ceramics and identify the opportunities posed to the over 70 sectors covered by GSP Plus. Sri Lanka is a manufacturer of very high-quality; an accolade that comes at a high price. Zero duty is thus essential to maintain its competitive edge within a depressed global market looking for compromise. We need to secure such facility.
According to the European Commission’s estimate, the total value of benefits in terms of lower import duties under the GSP+ scheme for the year 2008 was euro 78 million which is only 1.4% of Sri Lanka’s total exports in the same year. Citing this, the Central Bank yesterday claimed that the loss of preferential duty margin by around 6-7% arising from a potential withdrawal of the GSP plus facility is not expected to have an adverse impact.
However it must be stressed that the GSP Plus tariff concession scheme has been a lifeline to the Apparel and Garment Industry in Sri Lanka, which directly employs over 300,000 persons and nearly a half a million persons indirectly. The denial of this concession will severely compromise Sri Lanka’s competitiveness and perhaps sound the death knell for the industry.  In our front page main story, we have highlighted concerns from both the apparel and ceramics industry whilst GSP+ concessions also cover agriculture and aquatic exports.
It must be recalled that in the midst of conflict, Sri Lanka managed to obtain and preserve this cherished facility. What prevents us from doing so in a time of peace? We must explore in depth and objectively the reasons that led to such concern. We must stem such rot. In the lead up to January, where the EU will make known its verdict, both government and private sector has a lot to do to with regards to strategy and lobby. It is imperative that we evaluate every possibility, and safeguard vulnerable sectors that could be hit hardest – again a process of national planning.
The GSP+ issue saw vocal opinion expressed in Parliament yesterday and it is the bounden duty of all political players to make a united stand on this key concession.
Also on record this week was the blow on governance all round – with the unfolding drama that is Raj Rajartnam. The news and its many developments sent shockwaves across the enterprising and political arenas, with much more expected to come. Amidst the many questions that have risen with regards to the purpose and reactions to his action, the Rajaratnam scandal would cast a lingering shadow over corporate Sri Lanka. As markets tumbled, executives rushed to study the length and process of transactions made, as Rajaratnam’s holdings run deep into some of Colombo’s biggest blue chips. It is the wider political and national implications of his action both here and overseas that could well propel this case beyond conventional heights. A blow to good governance in the US, nonetheless a blow to governance in Sri Lanka as well. Governance is not an issue for surveillance systems alone to fix.
Lessons on GSP+ issue is for better governance on the part of the Government whilst the key take from Raj’s fiasco for private sector is also good corporate governance. It is good governance all round that will strengthen the state and the private sector for the greater good of people of the country.