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Impact of gsp on textile export

GSP Plus status impacts on Pakistan's Export

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Impact of gsp on textile export

  1. 1. GSP Plus & Its Impacts on Pakistan Export Presented By: Mr.Furqan Ilyas Manager HR & CSR-Shahkam
  2. 2.   The EU’s "Generalised Scheme of Preferences" (GSP) allows developing country exporters to pay lower duties on their exports to the EU. This gives them vital access to EU markets and contributes to their economic growth. The reformed GSP, which will apply as from 2014, will further focus support on countries most in need.
  3. 3.     GSP the standard GSP scheme, which offers generous tariff reductions to developing countries. Practically, this means partial or entire removal of tariffs on two thirds of all product categories. GSP Plus the "GSP+" enhanced preferences means full removal of tariffs on essentially the same product categories as those covered by the general arrangement. These are granted to countries which ratify and implement international conventions relating to human and labour rights, environment and good governance;
  4. 4.  Concentrating GSP preferences on countries most in need. A number of countries, which do not require GSP preferences to be competitive, will no longer benefit from the scheme as from 1 January 2014, including: ◦ Which already have preferential access to the EU e.g. Free Trade Agreement. ◦ which have achieved a high or upper middle income per capita, according to World Bank classification. ◦ which have an alternative market access arrangement for developed markets.     Reinforcing the incentives for the respect of core human and labour rights, environmental and good governance standards through GSP+ arrangement. Strengthen the effectiveness of the trade concessions for Least Developed Countries through the "Everything but Arms" scheme. Reducing GSP to fewer beneficiaries will reduce competitive pressure. GSP + scheme will last 10 years, instead of three previously. In addition, procedures will become even more transparent, with clearer, better defined legal principles and objective criteria.
  5. 5.   The EU has adopted a reformed GSP law on 31 October 2012 - (Regulation No 978/2012) . In order to allow ample time for economic operators to adapt to the new scheme, the new preferences will apply as of 1 January 2014. Until the end of 2013, the preferences under the previous scheme will continue to apply on the basis of Regulation No 732/2008 , extended by the GSP "Roll-over" Regulation .
  6. 6.    EU Parliament will formally approve GSP Plus status for the applying countries on December 6, 2013, with commencement from January 1, 2014. this will eliminate import duties on more than 6,000 items thereby helping to make Pakistan more competitive in the EU marketplace. GSP-plus status will have a positive impact on both unfinished and value-added textile exports of Pakistan. • Last year, Pakistan exported around $13 billion worth of textile products.  • The fall of rupee has been seen as a positive sign for exports of Pakistan. The rupee has fallen 8% since the beginning of 2013. Moreover, it depreciated faster in the last two months, as it went down by a sharp 4% against the greenback. With a share of over 50% in the country’s total exports, the textile industry is expected to emerge stronger in FY-14.
  7. 7.       The GSP Plus status will likely result in an increase in textile exports, particularly in the higher value added segment in textile. According to the Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA), total textile exports to the EU can increase by $580 million to $700 million per year (increase of 9.5 percent to 11.5 percent versus FY13 exports). Analysts say home textiles are not likely to benefit significantly from the arrangement as Pakistan already has a high market share in the segment. Fabrics, readymade garments and made ups should end up as key beneficiaries. Growth in total textiles exports under the GSP Plus scheme is capped at 14.5 percent per annum. Within this backdrop, individual companies that manage to increase their proportional share in exports to the EU should emerge as relative winners.
  8. 8.   Most of the benefits under GSP Plus should be delivered from volumetric sales as the bulk of decrease in unit prices post duty elimination is passed onto end-consumers. Analysts believe that Pakistan’s textile exports are going to benefit from two more reasons. Firstly, China is focusing more on the technology sector instead of textile, but yarn demand from China is growing. Secondly, Bangladesh – the second biggest textile exporter in the world after China – is not getting the same number of export orders as it was getting a year ago. The country is facing major challenges in safety concerns of textile workers. Recent fire incidents in factories of Bangladesh, where hundreds of workers had died, attracted negative international media coverage.
  9. 9.    Weakness- Leading textile industrialists insist that the rise in gas tariff for captive power plants by 17.4% and electricity rates for industrial units by 57% in recent months are going to hit the profitability of the sector in the ongoing fiscal 2014. strength- However, despite these expected increases in the cost of production, analysts are upbeat on the profits of the textile industry in the fiscal year. Opportunities- Pakistan is trying to get duty-free access to the United States – one of the world’s biggest markets for textile products – where Bangladesh exports its textile products in huge quantity and has managed to become a dominant player. On rising concerns of international labour rights associations, the US is in the process of suspending the GSP-plus status to Bangladesh. If this happens, it will give another boost to Pakistani textiles exports to the US in the coming years.
  10. 10.   Pakistan only holds 1.5% of the global market share in textiles, which means that this industry has strong prospects to grow. Analysts believe that Pakistan’s textile exports will likely double in the next five years to $26 billion if the country receives the GSPplus status from the EU. Threat- Pakistan is in the middle of cut-throat competition from India – the country’s regional competitor in textile exports. India – the third biggest exporter of textile goods in the world – is looking forward to make the most of these changing trends in the regional market and is targeting $17 billion textile exports this year.
  11. 11. Presented By: Mr.