GSP Plus Threat Puts GR Regime On Notice

Dr. Ameer Ali,
School of Business & Governance,
Murdoch University,
Western Australia

After UNHCR’s hard hitting resolution in Geneva last year, a foreign policy disaster for GR regime, the looming threat of GSP+ withdrawal by European Union has put the regime on notice, and given a choice either to comply genuinely with Geneva stipulations or face economic constraints.

The situation is more serious than what Nivard Cabraal, State Minister for Economic Reforms for instance, was trying to convey by citing past experience. Comparing what happened in 2010 when the previous withdrawal happened, and when exports, instead of falling, as feared by many, actually increased from $2.9 billion to $ 3.6 billion or by 20% the following year, the minister tried to inject some false confidence by ignoring the fact that there was no pandemic driven global economic downturn at that time.  Since EU is the largest market for Sri Lankan exports, produced mostly by small and medium size enterprises (SMEs), it would be very difficult to find an equivalent size market or a collection of markets to compensate for the loss. Even within EU, SMEs would find it hard to market their goods in open competition. A few enterprises may survive but many would face bankruptcy.

Not only that, if EU withdraws its concessions what would US, another huge market for Sri Lankan products, do in support of EU’s action, is difficult to predict. International politics could complicate matters and add to Sri Lanka’s woes. Perhaps, it was this realization, in addition to US Congress’ resolution to recognize the island’s North and East, Tamil Homeland, that must have prompted Foreign Minister, Dinesh Gunawardena to assure US government that Sri Lanka would be prepared to work with US.  He should however, match his words with action.

Reality is that the Sri Lankan economy is rapidly descending towards prolonged stagnation. Negative reaction by currency markets and international rating agencies, although dismissed as unwarranted speculation by the Chief of Central Bank, is driving down the purchasing power of local rupee. At the same time, erratic fiscal and import policies together with domestic market rigidities have combined to escalate the cost of living and thrown millions of families into clutches of poverty and misery. Mismanagement of the pandemic only compounded this adversity. Optimistic growth forecasts and confidence building speeches by the Central Bank and state ministers respectively are no substitute for the sad reality experienced by millions of households. Instead of dismissing the critics as doomsayers and their views as politically motivated, it is time that President GR and policy makers address seriously issues that may not be directly related to the economy but have impact on it.

UNHCR resolution captures in a nutshell some of those issues which call for immediate attention, and with which EU’s GSP+ threat is arguably connected. Reforming the draconian Prevention of Terrorism Act (PTA), under which many have been arrested and detained arbitrarily, including politicians, community activists, journalists, writers and professionals, needs be given priority and amended substantially or removed completely in order to stop human rights being trampled under the feet of a militarized regime. Although the foreign minister has informed the UN body that his government is addressing the issue nothing in substance has happened so far. But PTA is only one of the issues. There are others of which three i.e., increasing militarization of civil administration, erosion of independence of the judiciary and marginalization of minorities, which ultimately impact economic productivity and performance. Those economists and technocrats who refuse to see this connection are misleading their masters. No society or government that ignores or undervalues the role of human factor can enjoy economic prosperity and splendour. History is witness to this eternal truth.

Presently, not only the minority communities but also a significant proportion of the majority in the country are disgruntled and dissatisfied with the way the regime is managing the country’s economy and polity. Psychologically, such a dissatisfied population will not be willing to contribute its maximum effort and energy to national development. They would prefer to grab the maximum they could with minimum contribution to national effort. If this attitude spreads and become universal the size of the national cake will shrink and so will be the size of its communal shares. It is no use blaming the pandemic for this difficulty, as President GR did in his latest address to the nation. It is the failure of his regime to harness the energy of the total population towards a united effort for growth and development. That failure is the result of his sectarian, militarized and authoritarian rule, and it is against that rule UNHCR, EU, US, UK and some other nations have rallied together and put the regime on notice. True, GSP+ is a politically initiated economic instrument to make the rulers act and not just talk. It is not a threat to national sovereignty as Cabraal tries to mislead. Even if so, where is the sovereignty in Hambantota, Colombo Port City, Norochcholai, and the three small islands close to Jaffna?

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