EU envoy explains how Pakistan can carry on benefiting from GSP+ regime beyond 2023

ISLAMABAD: The current GSP+ regulation expires at the end of 2023 and Pakistan will carry on with the present regime as long as it continues to demonstrate its tangible commitment to the 27 international conventions, said the European Union (EU) Ambassador to Pakistan, Androulla Kaminara.

“The last report that the EU made public in February on GSP+ progress of Pakistan identified both the progress in some areas but also some areas for which there was very little progress, as well as, a few areas that backtracking was seen. It is hugely important to continue progress and to address the concerns raised in order not to have any negative consequences before end of 2023”, said EU Ambassador at a press meet-up after the launch of EU Pakistan Forum for Small and Medium Enterprises (SMEs).

She further said that currently a lot of work is being carried out in Brussels in order to draft the proposal for a new, successor trade regime, which will be in place from 2024.

“This new regulation is being finalised. The new regime will be a continuity as regards to the basic principles of GSP+ with the 27 Convention and possibly add some additional ones. However, it is important to know that if Pakistan – or any other country for that matter wishes to avail itself of the benefits of new regime – it will have to re-apply again under the new system, an exercise which signifies heightened scrutiny by the European Institutions” said the EU ambassador, adding that together the benefit of GSP+ can be expanded and identify new beneficiaries and new sectors to lead to more mutual benefit for both Pakistan and the EU.

She said that the current GSP+ regulation expires at the end of 2023 and in any case – and for all countries under this regime is only available until end of 2023. Pakistan has GSP + status till December 2023 and after that the EU and the European Commission will take a decision keeping in view the progress of Pakistan.

The EU review legal and other matters of member countries and if Pakistan meets the required criteria, the GSP+ status will be extended.

Due to GSP+, Pakistan exports to EU countries increased by $7.5 billion as it has very positive impact on the country.

Replying to a question, she said that EU has some concerns regarding freedom of expression, forced disappearances and human rights issues. Pakistan has to satisfy the EU over freedom of press and forced disappearance.

According to the latest EU report, Pakistan is on the list of human rights. She further said that a meeting was held with federal minister for Information Fawad Chaudhry and freedom of expression was discussed. However, she said that currently the draft of Pakistan Media Development Authority (PMDA) was not available.

The EU Ambassador said that Pakistan had performed well in the FATF and had implemented 26 of the 27 points of the Action Plan. The European Union recognizes Pakistan’s role in the FATF. She urged for the fulfilment of 27 to remove from grey list of FATF.

Responding to a question on SMEs, she said that in the first phase, four sectors have been included and over time, more sectors will also be included.

The EU development cooperation, which has had an average budget of close to 100 million EUR; and the EU-Pakistan trade relations and in particular GSP+ trade regime.

Kaminara said, “To make it easier for SMEs to operate in the EU single market and beyond, the European Commission took actions to remove regulatory and practical obstacles to doing business for the SMEs which provided opportunities for them to scale up their presence in the EU. I wish to replicate this in Pakistan and am prepared to help the Government and Pakistan’s business sector to achieve this together. Diversification into other sectors will boost trade and ultimately allow Pakistan to take full advantage of GSP+”.

Due to the preferential access to the European Single Market that GSP+ affords, Pakistan’s exports to the EU grew at an impressive pace. Since Pakistan 2014 when the GSP+ status entered into force until the global economic shock due to Covid-19, Pakistan’s exports registered a cumulative increase of 66 percent.

The EU is the most important export destination for Pakistani goods – representing about 30+ percent of Pakistani exports, double the percentage from the next export destination, she stated earlier while addressing at the launching ceremony.

But the beauty of GSP+ is not only expressed in trade figures.

If Pakistan continues to take advantage of the greater market access to the EU and to implement the 27 International Conventions covered by the scheme, it will of course have faster economic growth; but equally importantly it will support Pakistan in improving the rights of all citizens, accelerate reforms towards more modern state structures to the benefit of all. And these two aspects are mutually reinforcing. Compliance with the Conventions will generate better economic opportunities and vice versa, she added.

The existing trade between Pakistan and the EU under the GSP+ has two main characteristics: Even though the preferences cover 66 percent of all tariff product categories, Pakistani exports are concentrated on just a type of products – 78 percent of all Pakistani exports concern textiles – which of course is very positive for the textile manufacturers.

The other characteristic is that Pakistani exports tend to come from a relatively small number of quite big companies.

So what we see is both a strong positive message, but also a question mark: Exports to Europe constitute a huge potential for the Pakistani economy, not the least thanks to GSP+ preferences – the window is wide and it is wide open; Why have Pakistani companies not availed of this opportunity more broadly? And it is this question which made me initiate the EU-Pakistan Business Forum.

The SMEs are an important engine of a sustainable economy and they represent by far the biggest opportunity for employment in Pakistan. There are 3.3 million SMEs. They provide employment for large parts of the population, are part of the local social and economic fabric. They are drivers of innovation. Many SMEs are owned and managed by women, and are thus, an important factor of women’s empowerment. Focusing on SMEs gives opportunities for exports to those parts of the economy, which have more of a need for support and the least knowledge on average of how to proceed. At the same time, they offer the biggest potential. This is why today’s Forum is focusing on SMEs.

“Our meeting today is reflective of both these points. We want to promote SMEs contributing to the country’s exports and simultaneously help Pakistan diversify its export base making better use of GSP+ to the benefit both of the EU and Pakistan. Since we could not cover all sectors of business activity, we decided to focus on 4 sectors that have a huge potential and learn from this event and expand the list of sectors in the future. Therefore, we chose some other sectors that can be accessed under the GSP+ status and these are handicrafts and fashion, information technology, gems, jewellery and mining, and travel and tourism,” she added.

In addition, these sectors have a great potential also for women entrepreneurship through the SMEs.

Our goal is to support Pakistan diversify and develop even more efficient partnership between the EU and Pakistani SMEs. Only a mutually-beneficial trade regime between the EU and Pakistani firms can lead to a bilateral sustainable trade regime. Through this Forum, we very much look forward to demonstrating potential solutions and identifying solutions to obstacles for even higher exports, she said.

The increase in the EU-Pakistan trade is a witness of the fact that the potential is immense. SMEs, if included in the export regime will directly address poverty at the grass roots, bring more jobs to the market and be competitive in world trade arena. Digitalisation and e-commerce tools are a catalyst in this regard.

The broad aim of this set up is to know the difficulties that are faced by small and medium businesses in Pakistan and how the EU could support some of the needed solutions. Difficulties could be due to trade barriers, non-tariff regimes, standards and other competitiveness-related issues. But we are trying to address networking and awareness as well, emphasise technology transfer for SMEs to flourish rapidly and become export oriented.

That is where the second, strong pillar of the EU-Pakistan engagement comes in: the development cooperation. We are at the start of a new seven-year period, which defines our priorities in terms of development cooperation. Harnessing the potential of the SMEs will be an important element.

The observations and recommendations of the EU-Pakistan business forum will feed into the initiatives, which will be funded by the European Union in the coming years. We are aware that we will not be able to address all the challenges that SMEs are facing. But in cooperation with our Pakistani partners, we will identify some which we belief we can tackle and thus, contribute to sustainable development of Pakistan, she said.

The delegation of the European Union to Pakistan launched the first-ever EU-Pakistan Business Forum for SME, here on Wednesday.

The inaugural event was attended by representatives of local SMEs from four sectors: gems, jewellery and mining, information technology, handicrafts and fashion-wear as well as travel and tourism.

The EU-Pakistan Business Forum initiative aims at to provide opportunities for both EU and Pakistani businesses to work together to become engines of development and partnership and contribute to enhancing bilateral trade. During the first Islamabad session, the participants were apprised about how they could benefit from the European Union’s GSP+ Scheme that provides two thirds of tariff lines duty free access to the EU market with the rest on preferential duties.

Other sectors including the agricultural and auto-parts manufacturers will be included in subsequent meetings.

The Pakistani economy consists of almost 3.3 million SMEs comprising service providers, manufacturing units and start-ups. SMEs make up over 30 percent of Pakistan’s GDP, account for approximately 25 percent of export generation and provide over 70 percent industrial employment.

While in the EU, Europe’s 25 million small and medium enterprises (SMEs) are the backbone of the EU economy.

The SMEs provide two out of three industrial jobs in the EU. The Business Forum will play a key role in bringing together SME’s from the EU and Pakistan to enhance their export orientation as well as collaboration in technology transfer and promotion of businesses.

Both Pakistani and European companies struggle with impediments regarding the ease of doing business in Pakistan.

The EU-Pakistan Business Forum aims at addressing the following issues: (i) Pakistani companies not utilising the GSP+ opportunity fully; (ii) SMEs not exporting to the EU, despite duty-free access for the EU market; (iii) EU companies not fully benefitting from doing business with Pakistan (including imports from Pakistan as well as investments in the country); and (iv) trade and business with and in Pakistan stymied by multiple barriers and impediments.

Copyright Business Recorder, 2021