The impact of GSP Plus on the economy of Pakistan
By: R. Raheem Sherazi
Pakistan is a country which has been gifted with abundant natural and human resources. Geographically it is situated in a very important place as it is surrounded by great powers like China, India, Afghanistan and Iran. It has very beautiful landscape. Pakistan has more than 185 million populations according to the yearly report,2014. that made her the sixth most populous country in the world. Economically it is an agriculture country. Wheat, cotton, rice, textile products and fruit are the main products of the country which are being exported to the European market, China, UAE, Kuwait, Japan and Singapore. Initially textile products and fruits were not exporting from Pakistan to the European market due to trade barriers and export.
In 2013 the European Commission granted preferential treatment in export under Generalized System of Preferences (GPS Plus). GSP Plus is a long term package for 10 years under which the countries like Pakistan from developing countries are encouraging to export the goods which are in high demand and liked in the European market without export taxes and other duties. It would enable export oriented companies from Pakistan to increase their export and fetch good prices from European market that comprises of 28 countries.
Economy of Tomorrow is basically an inclusive economy, which brings socially ecologically and interaction with society. For a sustainable and growing development the thinkers and the experts are focusing on a new model which brings a real and economical change in the country. Where they haves started to brainstorming with the economists from different part of the country especially with Asian countries. The one and interesting topic of sustainable economical growth was social justice, sustainable and a productive dynamic grow in the economy. Fair income distribution in the society with capability and talent. How to bring these sustainable and prolong dynamic growth in our puncture society, where social justice is using only by word but practically its dead and the poor society is gradually moving downstream below the poverty line instead of moving up. A poor man or woman cannot rise his or her own voice for justice due to fear of the capitalists or landlord who don’t want these people to be well off or developed and sea them in a common society. There for making the social justice sustainable the labor unions are encouraged to move on and make a strong relation with the labors to identify their common problem and issues to discuss it with the federal ministries through a proper channel. The labor unions and federations which are dead or not functioning, are need to be making active and support them for social justice and for a dynamic society. Which is formed and need to make them empowered.
It’s indeed a good omen for our country to have such a beneficial package from EU through which we can promote our export and build our relationship with EU. Before this package we were exporting the aforementioned goods to China, UAE and Saudi Arabia due comparative advantage of exporting in absence of export barriers The European Commission came to this point that why not to encourage Pakistan and other developing countries to increase their export in the 28 counties of Europe. Pakistan was exporting 72 items to the European countries. Leather, Ethanol, sports equipment fresh and processed fruits, footwear and plastic have great potential to take the advantage of this scheme; thus recorded a progressive grow in the export sector.
Pakistan exports to the EU, 72 different goods and that increased the growth in export 15.76 % ( $333.18 million) in previous year,2014. After GSP Plus scheme, from January to April, 2014, was $2,446.52 million, which was $2113.34 million in 2013.In the first four month of 2014, the export in textile was $300 million. The export increased in the 2014 from $5.3 billion to $6.38 billion, which is 20% more than previous year. This shows that we have a potential and need to make a suitable solution to keep this development in our export sector and to make the policies which are just in shape of files but functioning practically, need to bridge a relationship between exporters and importer for a long term relationship.
Before the GSP Plus there were few items which were exporting from Pakistan without any export duty to EU like surgical instruments, basmati rice, guar gum, spices, onyx, fans etc. But now all the goods produced in Pakistan will be duty free and they will be able to sale them in the EU market which will give a good profit. The labor will also get well off from these policies. The duty free export will bring change in the labor’s life through enabling them to get good salaries and benefits. The scheme is basically designed to improve the quality of life as well as to reduce poverty.
In the year 2014-15 after the GSP Plus Pakistan has increased 15% export in textile and garments sector. we need to improve the growth and export of fruits like Kino, nuts and beans are the most exportable goods and which can help increase the export and as well as the economy.
This sort of package is first time introduced by EU Commission to the developing countries for the betterment of the economy of the developing countries. The labor rights and the wages of the labor force would also be highlighted through the labor unions and federations. The labor union and federations will take stance and train their partners regarding the labor rights, trainings and skill developments programs. This scheme is designed specially to increase the export in EU,without paying any single penny. That incentive will not be beneficial for the companies but also for the labors. Before the GSP Plus the most budget of the export were going in different expenses like taxes, export duties etc. That extra money would be saved now and will be used for the labor rights and their better living standards to encourage them morally and financially.
The FES (Friedrich Ebert Stiftung), a German foundation is also focusing on it and arranging different events for the Labor Union to come forward and fight for the labor rights. Which will equally distribute the subsidies to the labor and the trend or the scheme of GSP Plus would be more effective. For this purpose the FES has organized a one day workshop on “Trade Union Strategy on Labor Compliance and GSP Plus in Islamabad hotel, where the European Commission’s country representative, Mr.Stefano Gatho also gave a detail briefing on GSP Plus and its importance. There are some requirements from the EU that needed to fulfill by the country that wants to export more goods to the EU countries which will give them good benefits. The exporters and trade union need to understand the policy which is indeed for a long period, for 10 years, during which they can make a good progress in exports and improve the quality as well as the volume of the goods.
Economically if we take a glance on the economic performance of the last years and decades, we may not be able to find such an advantage which European Union gave recently to the developing world. Economy of Tomorrow is based on social justice, equal rights and distribution of income to the labor on basis of talent and dynamic progress. The GSP Plus is basically an incentive but through this incentive the social justice and equal distribution of income will also help to make the growth of EOT .Now it depends on the economic policy maker, that how they would make this scheme fruitful with cooperation of exporter unions in the near future.
In the backdrop of such preferential treatments and export promotion schemes, we have not been able to take full advantage in past decades. Therefore, we can say that it depends on the economic policy maker how they would make this scheme fruitful with cooperation of exporter unions in the near future to maximize profit out of this preferential trade agreement with EU under GPS Plus.
GPS Plus scheme is a special incentive arrangement aimed at promoting good governance and eradicate poverty in developing countries provided under a convention which bounds Pakistan to follow and fulfill the conditions outlined under the convention. i.e. corruption, gender rights, human rights, environment etc. Many countries have graduated out from this preferential arrangements , like India, China and even Bangladesh. Anyhow, the million dollar question here is, can Gilgit-Baltistan take advantage under this special scheme ? the answer is Yes ..GB is producing some of the world’s best varieties of fruits. GB government, NGOs, GB chamber of commerce, private sector or any trade development authority, if exists there..should take practical steps to attract investors/exporters to take advantage of this special arrangements. This is best time to explore and enter into EU markets. at last i would say unless GB government in collaboration with other stakeholder state institutions would not venture in this sector. it would be difficult. we can only hope.