Sri Lanka

Sri Lanka was granted GSP+ status again in May 2017 after GSP+ preferences have been revoked in 2010 due to human rights abuses following the country’s civil war. In compliance with the requirements under GSP+, Sri Lanka has ratified all 27 core international conventions on human rights, labour standards, environmental protection and good governence. Sri Lanka is considered a lower-middle income economy with a per-capita income of $4,020 in 2019. EU imports from Sri Lanka amounted to about €3 billion in 2019, of which approximately 53% are imported benefitting from reduced tariffs under the GSP+ arrangement.

What is 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 General 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

group

21.67 million

Population

account_balance
Presidential Republic

Government

trending_up

2.3%

GDP Growth

equalizer

4.3%

Inflation

money

$ 84 bn

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 28% of Sri Lankas 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 60% 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 consist 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 8% to the country's GDP.

Usage Of GSP+ Preferences

Sri Lanka uses trade preferences granted under the GSP+ for about 50% of its total imports. The preference utilisation rate, which represents the ratio of preferential imports to GSP+ eligible imports, currently stands at 95%.

Trade with the EU

Total trade between the EU and Sri Lanka amounted to € 3,536 million in 2019. With a share of 12% of Sri Lanka's overall trade, the EU is the third most important trading partner and the second most important export destination.

Sri Lanka and the EU

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 2.5%, noticably 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 92.2% (2018) with the minimum diversification threshold standing at 75%.

87%

A large share of Sri Lanka's current exports are eligible for tariff reductions under the GSP.

62%

With 62%, Sri Lanka makes the least use of its preferential market access among all GSP+ countries.

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 between 2011 and 2017 and only increased in 2018, when Sri Lanka was granted GSP+ preferences again after they were revoked in 2010. Over the regarded period, an average of 59% 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. Not even 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.

Five largest product sections under 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

Sri Lanka ratified 27 core conventions on human rights, labour rights, environmental protection, and good governance. Sri Lanka maintained ratification of all relevant conventions throughout the reporting period 2018-2019. A number of reports will be due later in 2020. Overall, Sri Lanka is compliant with its reporting obligations, despite a number of late submissions. A number of reports, particularly regarding the reporting on environmental conventions, are still outstanding.

Monitoring priorities during the reporting period 2018-2019

Moratorium on the death penalty

Repeal of the Prevention of Terrorism Act (PTA)

Legislation against domestic violence

Sexual exploitation of children

Prevention of torture

Anti-discrimination legislation

During the reporting period 2018-2019, the EU focussed its monitoring activities on six priority areas and engaged in an intensive dialogue with government authorities in Sri Lanka. Overall, Sri Lanka made progress in a number of areas related to human rights, child labour, corruption and drug trafficking. Some challenges remain regarding the effective implementation of the conventions.

1. HUMAN RIGHTS

Sri Lanka has ratified all human rights conventions covered under the GSP+ regulation as well as additional three conventions which are considered as core human rights treaties by the UN. According to the most recent GSP report, which covers the period 2018-2019, Sri Lanka made notable progress regarding its human rights situation. This includes extended space for civil society and media, stronger cooperation with the UN on the prevention of torture as well as progress regarding reconciliation, transitional justice, and accountability. Furthermore, the government has taken legal steps to further prevent domestic violence and the sexual exploitation of children, which also includes better support provision and awareness-raising activities. These efforts where complemented by the set-up of responsible institutions and oversight bodies. However, some political reforms have raised concerns such as the reform of the executive Presidential system and the Prevention of Terrorism Act which can pose a threat to democracy and justice, and, thus, jeopardises overall compliance with relevant human rights conventions such as ICCPR and CAT. Additionally, the situation for minorities worsened in the aftermath of the terrorist attacks on Easter Sunday 2019.

Ratified

2. LABOUR RIGHTS

Sri Lanka has ratified all 7 ILO conventions required by GSP+ and has additionally ratified three of the four ILO priority conventions. This also includes the convention on the rights of migrant workers, which is of particular importance in light of the country's labour shortages. Over the reporting period, Sri Lanka made significant progress in eliminating child labour, which was reduced to 1% of the children population. Challenges remain in effectively implementing the conventions on the elimination of discrimination due to the absence of a sound anti-discrimination law. This also relates to the position of women in the labour market, who remain underrepresented and are often paid less. The Decent Work Country Programme offers the opportunity to strengthen trade union rights. Currently, there are still reports of cases of anti-union discrimination and unfair union practices. Additionally, the ILO reports complications in inspecting labour rights in Sri Lanka's Free Trade Zones.

Ratified

3. ENVIRONMENTAL PROTECTION

Sri Lanka has ratified all conventions covered by GSP+ and is committed to the related obligations. Furthermore, Sri Lanka has ratified the Kigali Amendment to the Montreal Protocol and the Paris Agreement. Some challenges with the effective implementation of the convention remain. Sri Lanka is an important regional advocate against poaching but the country's domestic policies to effectively implement the convention on wildlife trafficking (CITES) remain insufficient. Furthermore, Sri Lanka has strong regulations on hazardous waste and currently no facilities for its disposal.

Ratified

4. GOOD GOVERNANCE

Sri Lanka shows strong commitment in tackling challenges related to corruption and introduced an Anti-corruption Strategy for the period 2019-2023, which inter alia includes an asset declaration system and the appointment of integrity officers. Likewise, Sri Lanka remains committed to the principles covered by the conventions on drug use and trafficking and was able to confiscate substantial amounts of illegal drugs which mainly originated from India and Pakistan. In addition, the government has put in place prevention and rehabilitation programmes to prevent abuse and provide treatment. This is of particular importance given Sri Lanka's increasing drug problem. In the public debate there are repeated calls for an implementation of the death penalty for drug trafficking which are strongly condemned by the UN Office on Drugs and Crime and the EU.

Ratified

EU-Sri lanka Bilateral Development Assistance

€210 million

The bilateral development cooperation with Sri Lanka amounts to €210 million for the period 2014-2020. The engagement particularly focusses on integrated rural development, democratic governance, and reconciliation. Furthermore, the bilateral development cooperation includes programmes for internally displaced persons, housing constructions, sustainable production, and consumption as well as investments in water and sanitation. In addition, the EU supports good governance initiatives and fundamental rights.

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

Most recent events

Date Event
2019‑11‑16 The EU deploys an EU Election Observation Mission to Sri Lanka to observe the presidential election
2019‑08‑26 Last GSP+ monitoring mission to Sri Lanka

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