First Gear

With tough rules of origin, Sri Lanka may be slow to draw on the benefits of the European Union’s new GSP Plus scheme, but euphoria will bring in the business.

With tough rules of origin, Sri Lanka may be slow to draw on the benefits of the European Union’s new GSP Plus scheme, but euphoria will bring in the business. The EU's Generalised System of Preferences (GSP) Plus scheme kicked in on July 1 this year, which gives countries like Sri Lanka duty free access on exports into the EU until 2008.

Sri Lanka has provisional access for six months, with a formal application to be submitted in October this year to extend it further.

The list of 7200 eligible products includes apparel, Sri Lanka's largest export, with just under half of all apparel exports shipped to the EU.

However, tough Rules of Origin, which requires up to 50 percent local value addition, effectively means that only some 17 percent of top manufacturers will be eligible for the tax breaks.

That is, until the rules are revised in 2006, and value addition levels are dropped to about 35 to 40 percent and the number of countries fabric can be sourced from is increased.

However,