What is the GSP+?
The GSP+ is a special incentive arrangement for Sustainable Development and Good Governance that supports vulnerable developing countries. Next to fulfilling the eligibility requirements of the Standard GSP, GSP+ countries are required to ratify 27 international conventions on human rights, labour rights, environmental protection and climate change, and good governance. In order to ensure effective implementation of the conventions as well as compliance with reporting obligations, the EU engages in monitoring activities with the GSP+ countries. GSP+ beneficiaries can benefit from complete duty suspensions for products across approximately 66% of all EU tariff lines.
At a glance: GSP+ beneficiaries' preferential imports to the EU
22,18 M
Population
Presidential Republic
Government
-7.80%
GDP Growth
48,20%
Inflation
$ 74,40 B
GDP
Facts about Sri Lanka's economy
Tea Production
Sri Lanka belongs to the world’s largest tea producers and exporters together with China and India. Sri Lanka exports tea worth $ 1.5 billion annually. Most of the country's tea exports go to Africa, the Middle East, and other Asian nations.
Export Products
Sri Lanka's top export articles are apparel products, more particularly brassieres, gloves, and trousers. Sri Lanka also exports black tea and tyres.
Trade Partners
China and India together account for approximately 30% of Sri Lanka's total trade and are an important source of import products. The US are the most important destination for products from Sri Lanka with the EU ranking second.
Economic Structure
The service sector contributes with more than 56% the largest share to Sri Lanka's GDP, followed by the industrial sector with 30%. The development of the industrial sector remains rudimentary and mainly consists of the processing of agricultural goods, telecommunications, textiles, cement, and construction. About 27% of the population is employed in the agricultural sector, although it contributes less than 9% to the country's GDP.
Usage of GSP+ Preferences
Sri Lanka uses trade preferences granted under the GSP+ for about 55% of its total imports. The preference utilisation rate, which represents the ratio of preferential imports to GSP+ eligible imports, currently stands at 66%.
Trade with the EU
Total trade between the EU and Sri Lanka amounted to € 4,184 million in 2022. With a share of 15.1 % of Sri Lanka's overall trade, the EU is the first most important trading partner (almost equally to India) and the second most important export destination.
Sri Lanka and the EU (2022)
Imports from Sri Lanka by product section
Imports from Sri Lanka over time (in € m)
SRI LANKA AND THE EU’s GSP
Economic Impact
Sri Lanka's economy can be considered vulnerable and stands with a score of 2.6%, noticeably below the threshold of 7.4%. Sri Lanka's economy is mostly concentrated on a small bandwidth of products, which is reflected in the diversification score. The country's diversification percentage stood at 92.3% (2019) with the minimum diversification threshold standing at 75%.
85%
A large share of Sri Lanka's current exports are eligible for tariff reductions under the GSP.
66%
Sri Lanka currently only makes use of the tariff reductions under GSP+ for about 66% of its eligible exports.
Preference utilisation and export diversification
Sri Lanka's imports to the EU
Preference Utilisation vs. total eligible imports
Sri Lanka's preference utilisation rate showed a downward trend until 2017 and only increased in 2018, when Sri Lanka was granted GSP+ preferences again after they had been revoked in 2010. In 2022 65.8% of eligible imports make use of the reduced tariffs granted under the GSP, which is considerably below the average of other GSP+ countries. Thus, there is room for improvement particularly given that that about 85% of imports from Sri Lanka are eligible for GSP+ preferences. The low overall preference utilisation rate can be partly explained by the small share of preferential imports in the apparel sector. Only half of eligible apparel imports make use of the reduced duties granted to GSP+ beneficiaries. A number of product sections, however, made increasing use of the preferential market access. These include fish and crustaceans, cereals, grains and seeds, fabrics and footwear and headgear.
The largest product sections under the GSP+
Imports which make use of the reduced duties under GSP+ remain largely concentrated on apparel and clothing and rubber. These two product sections together account for about 70% of preferential imports. However, preference utilisation in the apparel sector remains very low. Imports of fabrics showed the largest rise in preferential imports with an increase of 75% in 2018 compared to 2016. Likewise, imports of processed food and beverages, apparel, and machinery also experienced increases of preferential imports of about 30% over that period.
SUSTAINABLE DEVELOPMENT AND MONITORING PRIORITIES
During the reporting period 2020-2022, the Democratic Socialist Republic of Sri Lanka (Sri Lanka) engaged seriously with the EU through regular exchanges on GSP+ compliance issues. The monitoring cycle was marked by a number of developments, and therefore this report mirrors the complex situation in Sri Lanka. On the one hand, Sri Lanka withdrew in 2020 from the co-sponsorship of the UN Human Rights Council Resolution adopted in 2015. On the other hand, against the background of a severe economic and financial crisis, protests and social movements led to a peaceful Presidential transition in 2022.
Monitoring priorities during the reporting period 2024-2025
Fundamental freedoms
Prevention of terrorism act
Reconciliation process
Civil society space
Anti-corruption
Decriminalising same-sex relations
Freedom of association and collective bargaining
Drug control in compliance with human rights commitments
Environmental conventions
For the reporting period 2024-2025, the EU has focussed its monitoring activities on nine priority areas. Sri Lanka is seeking to mitigate the impact of a deep economic and financial crisis on the most vulnerable parts of the population, on labour rights as well as on environmental standards and its new administration has committed to improve good governance and to fight corruption. Yet, while efforts have been made to bring Sri Lanka’s counterterrorism legislation in line with international standards and to promote reconciliation and human rights, challenges remain. As Sri Lanka continues on the path of economic and political reform, the democratic and open spirit of the 2022 protests should not be reversed.
EU-Sri Lanka Bilateral Development Assistance
DG INTPA
Access all info about EU-Sri Lanka relations on the International Partnerships website: https://international-partnerships.ec.europa.eu/countries/sri-lanka_en
Opportunities in Sri Lanka
- Market potential in a number of expanding industrial sectors including the traditionally strong textiles sector but also the food industry, the IT sector and in the electronic and electrical component industry
- Robust economic growth of more than 6% over the last years
- Favourable geographic location with good access to major international markets
- Relatively diversified agricultural sector which could provide a basis for an expansion of the food processing industry