Prof. Peiris (left), Cabraal review the GSP Plus scheme.

The Cabinet with assistance from the Central Bank is formulating a US$ 150 million bailout package to the apparel sector in the event the GSP Plus scheme is not renewed.

The government has decided to compensate the apparel sector in the event GSP Plus concessions are not renewed, which will also include other sectors such as fisheries, gem and jewelleries and leather products under its support programme.

Export Development and International Trade Minister Prof. G. L. Peiris said that the duty free benefit of GSP Plus was about US$ 150 million a year and the government was committed to support the industries, particularly apparels, recover the US$ 150 million if GSP Plus concessions are lost.

"The cabinet is committed to assist the apparel industry so that the transition from GSP Plus to a non-GSP Plus situation will be smooth, where orders can continue to be met," he told journalists yesterday when he and Central Bank Governor Ajith Nivard Cabraal announced that a programme was being worked at will provide the industry with benefits amounting to GSP Plus concessions.

Prof. Peiris said that the government is strongly against the EU wanting to carry out an investigation in the country to ascertain whether or not civil and political rights and other international labour conventions were put into practice.

"We submitted our application for a renewal of the GSP Plus scheme on the 10th of October because we believe we are in compliance with the conditions. But, even before the application was submitted the European Commission in September said it wanted to conduct an investigation," he said.

"An investigation is unacceptable because it undermines our sovereignty, dignity and self respect of the nation. We have instructed the Sri Lankan mission in Brussels to convey this message to the European Commission. However, the government is prepared to continue its dialogue with the commission," Prof. Peiris said.

The Central Bank Governor said that the bank had carried out a study on how the removal of GSP Plus concessions would affect the US$ 3.2 billion apparel industry which accounts for 45 percent of the country’s total exports, contributes 10 percent to GSP and employs close to 300,000 people.

"Being advisers to the government, the Central Bank already knows what needs to be done but we can only make an announcement of how we hope to deliver the support package, and in what form, after consultations with the industry," Cabraal said.

"In the possible event GSP Plus concessions are not renewed, we have told the government that any assistance should be provided during the first year so as to mitigate the shock the industry would face," he said.

Although not specifying exactly how US$ 150 million is to be expended, Prof. Peiris and Cabraal both ensured that it would be used is such a way so it would be business as usual.

However, they warned it would only be a short term measure designed to assist in the transition and not a long term protectionist measure.

Prof. Peiris said the government would meet industrial representatives to discuss the proposed package next Tuesday, the 28th October.

Under GSP Plus, buyers in the EU are given tax concession to export products from Sri Lanka. With taxation, the exchange rate and inflation already squeezing margins, exporters fear that if the GSP Plus scheme is not renewed it will make Sri Lanka’s apparels less price competitive.

An industry analyst said that about 200 factories had closed down over the past two years and that presently, big companies were buying up some of the SMEs.