Pakistan at risk of losing GSP Plus status for noncompliance

KARACHI: GSP Plus status to Pakistan is under threat for non-compliance with many conventions of European Union (EU) related to human rights and environment, the businessmen have warned on Thursday.
The European Union (EU) is reviewing its imports from Pakistan and compliance of its conventions. Its officials are visiting Pakistani factories, without notifying the government. Last week an EU Ambassador visited Karachi Fisheries Harbour, where he observed the seafood factories and had a meeting with businessmen at Karachi Chamber of Commerce and Industry (KCCI).
The move took place by EU after there was a decline of orders from Pakistan. “If the EU faces more compliance issues, it would discontinue the trade facilitation,” Muhammad Ibrahim Kasumbi, acting president KCCI told The News on Thursday.
It should be noted that the EU will have a review meeting in January.
Pakistan was granted GSP Plus status in December 2013 that opened doors to enormous opportunities but the country failed in getting full benefits of the duty free exports. GSP Plus status presents free market access to 96 percent of the items exported to the EU markets. This facility is available until 2017 provided that Pakistan implements 27 conventions of the EU.
Kasumbi said the private sector is fulfilling many of the conventions of the EU, but there is a lack of fulfilment at the government side. “Textile sector exports around 80 percent to the EU and complies with around 80 percent conventions,” he said.
Moreover, Pakistan has resumed capital punishment, which was prohibited as per the EU conventions, but continuity in the exports have shown that EU might have ignored it, as Pakistan is fighting with the terrorists who could emerge again if not punished.
Further, Pakistan has not even utilized 10 percent of its potential of exports to the EU. “We are focused on textile only as there is a need of diversification in the field of rice, surgical goods and other non traditional items,” he added.
Rabiya Javeri Agha, secretary Trade Development Authority of Pakistan (TDAP) told The News they have not received any official request from the EU officials for the review of Pakistani products. “They have not shared any review details with us,” she said.
“The education of the exporters will take some time,” she added.
Pakistan has increased its exports to the EU by 1.5 billion annually, while there is much more potential, she added.
Exports of Pakistan stood at around $5.3 billion to EU, which grew to $6.1 in 2013 and $7.2 billion in 2014.
“There has been no improvement in exports after GSP Plus,” said Gulzar Firoz, head of GSP Plus desk of FPCCI and former chairman Korangi Association of Trade and Industry (KATI).
Firoz said nearly 10,000 factories in Karachi out of around 35,000 factories are violating the conventions by contributing to pollution, while there are seven conventions on environment out of the total 27 conventions.
Majority Pakistani businessmen think that GSP Plus is only a zero-rated duty for the exporters. “They lack the understanding,” he added.
The country contributes even less than one percent in the total EU imports due to a number of reasons including low diversification, ineffective marketing and branding and promotion of CSR activities.
Pakistan is enjoying free market access into EU on several products of its interests where textiles and garments, leather articles, ethanol, footwear, processed and fresh fruits are among the top potential beneficiary sectors, said Research and Development Cell of the KCCI. However, the top six categories that constitute almost 90 percent of Pakistan’s exports to the EU, other than knitted and woven apparel, fail and do not find a place in the top 45 EU import categories.
According to estimates, there is a potential for boosting the export volume of Pakistan at least by another $1.5 billion to EU by bringing improvement in product quality, marketing and implementing good governance and practices at the manufacturing facilities.
Readymade garments and apparels are among the value added items exported by Pakistan to EU markets, which are in great demand in the region. Owing to this opportunity, the textile and garment sector is estimated to experience 15 percent growth to the overall exports of Pakistan during FY15. However, manmade staple fibers, pearls with precious metals and stones, footwear, pharmaceuticals and optical, photo, technical and medical apparatus are the other export items that are largely imported by EU from other parts of the world.
The region comprising of around 500 million consumers, provides Pakistan with set of opportunities to cater to the demand of EU markets by diversifying its exports commodities where readymade garments possesses great comparative advantage. In the EU region, Pakistan’s top export partners are UK, Germany, Italy, Netherlands, Spain, Belgium and France.
Even though Pakistan is the only Southeast Asian country other than Bangladesh having free market access to EU for exporting its products as China and India do not qualify for the tariff incentives, the country is still facing challenges from these regional competitors in almost all the fields of trade. The competition arises not only in terms of price but rather more from service and reliability of delivery of orders.
Gulzar Firoz said a large number of factories in Karachi need to treat their waste water but, with exception of few big companies, majority of them have no land, finances and techniques.
Only the combined treatment plants could work, but there is no work on them despite the allocation of the land for four treatment plants by the government.