GSP plus for Pakistan

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Pakistan has finally succeeded in getting Generalised System of Preferences (GSP) plus status that would allow various Pakistani products especially the textile ones, to have tax free access to European Union markets. The European Parliament approved the Single Delegated Act under which ten countries including Pakistan are entitled to Generalized System of Preferences Plus (GSP Plus) Scheme. The Act came into force from 01 January 2014.

Pakistan was able to secure 406 votes in the European parliament, which comprises 766 members. Pakistan had been vying for this status since long and one must give credit to the erstwhile PPP government, which tried its best to convince EU for this status however the dream could not come true during its tenure.

It is expected that with the implementation of the Single Delegated Act, Pakistan’s trade with EU will receive a substantial boost, particularly in the textile sector. It will also help generate a lot of economic activity create more employment opportunities and improve security situation in Pakistan.

I was part of the delegation of the former Prime Minister Yousaf Raza Gillani that visited Brussels in 2010 for Pakistan, EU summit. Pakistani side was somehow disappointed when it could not get any green signal on GSP plus. The Pakistani side was told, at that time, GSP plus would only be given provided Islamabad ratifies and implements 27 conventions mainly dealing with human rights. Now, interestingly those very conventions are still to be implemented in letter and spirit but even then the status has been granted. From the face of it, the decision to grant GSP plus to Pakistan turns out to be a political one, however the EU says it would’ strictly’ monitor the progress on implementation of human rights conventions.

The EU ambassador in Pakistan Lars Gunnar Wigemark told me in 2012 during an exclusive interview that Pakistan stands bright chances of getting the GSP plus status adding certain conditions including implementation of certain conventions will have to be met. He had said, “ The conditions that are required to be fulfilled to get that status are tough and the final version of the new EU regulation has yet to be adopted by the Council and the European parliament……….. There are issues of child labour and we are told that the government is trying to address this issue, which is a step in the right direction”.

With the GSP plus now in vogue with effect from January 01, 2014, Pakistan’s exports are likely to register a considerable boost provided industries get sufficient energy to cater to their needs. While this facility may benefit a handful of labourers, as job vacancies are likely to increase, however the facility provides the big business tycoons with an ample chance of jackpotting their businesses and bank balances. The govt would hardly get anything as most of these business tycoons do not pay full taxes. Govt’s kitty can only be filled if taxation system is improved and applied across the board. The prime minister on December 30 admitted that there are certain flaws in the taxation system and he directed the FBR to streamline it in order to fetch more and more revenue.

Pakistan is likely to compete with Bangladesh in textile sector and if it really wants to capture the European markets then it will have to not only improve its quality but will have to ensure timely delivery as well. Likewise, Pakistani products have been facing anti-dumping duty issues as well. This issue will have to be kept in consideration now.

Despite all reservations, one has to admit that the GSP plus status is a landmark development and now it is up to the Pakistani side that it fully utilizes this opportunity. Similarly, the European products are also likely to land in Pakistan on zero duty because this arrangement is bilateral and offers similar facility to European products as well. Consumers in Pakistan may have a chance to buy various European products on comparatively cheap rates after this arrangement, provided European companies decide to do business in Pakistan. The local manufacturers will have to foucs more on quality and cost-effectiveness of their products if they really want to do well in the post-GSP plus scenario.