The current GSP+ regulation will expire 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 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 the end of 2023,” said the EU Ambassador while talking to media after the launch of the EU Pakistan Forum for Small and Medium Enterprises (SMEs).
She said that the current GSP+ regulation will expire by December 2023 and in any case — and for all countries under it — this regime is only available until the end of 2023. She added that currently, a lot of work is being carried out in Brussels in order to draft a proposal for a new successor trade regime to be in place from 2024.
“This new regulation is being finalized. The new regime will be a continuation with regard 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 the new regime, it will have to reapply 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 will identify new beneficiaries and new sectors to lead to more mutual benefit for both Pakistan and the EU.
Compliance With FATF Conventions Will Reinforce Pakistan
With reference to the FATF conversations, she said there were some issues related to Pakistan entering the next GSP+ status and the Government of Pakistan has to satisfy over freedom of press, forced disappearances, and some other issues. She maintained that if Pakistan satisfied the EU over these issues, it could enter a new phase of GSP+. About FATF conditionalities, she said Pakistan met 26 out of 27 conditions. She urged Pakistan for the fulfillment of 27 conditionalities to get removed from the gray list of FATF.
The EU development cooperation has had an average budget of around EUR 100 million for the EU-Pakistan trade relations, and in particular, the GSP+ trade regime. Due to the preferential access to the European Single Market, Pakistan’s exports to the EU grew at an impressive pace. Since 2014, when Pakistan entered the GSP+ status 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 of the next export destination.
However, the essence of GSP+ status is not only expressed in trade figures. If Pakistan continues to take advantage of the greater market access to the EU and implements 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 toward 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.
The existing trade between Pakistan and the EU under the GSP+ has two main characteristics. Even though the preferences cover 66% of all tariff product categories, the 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 the 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 this opportunity more broadly?
Focus on SMEs Could Help Drive Export Verticle
SMEs [Small and Medium Enterprises] 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 how to proceed. At the same time, they offer the biggest potential.
“Our meeting is reflective of both these points. We want to promote SMEs contributing to the country’s exports and simultaneously helping 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 the sectors of business activity, we decided to focus on four 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, Jewelry, Mining, and Travel and Tourism,” she added.
In addition, these sectors have a great potential for women entrepreneurship through SMEs.
“The increase in the EU-Pakistan trade is a witness to the fact that the potential is immense. SMEs, if included in the export regime, will directly address poverty at the grassroots, bring more jobs to the market and be competitive in the world’s trade arena. Digitalization and e-commerce tools are a catalyst in this regard. We recently developed an e-business platform for SMEs to help them shop online using WhatsApp and Facebook applications, which was presented earlier. I strongly believe that a huge potential exists, provided the network between industries and SMEs is developed and they are exposed to the new techniques of business development and prepared for absorbing technology transfer, added the Ambassador.
“The present Business Forum is just the opening and the start of a conversation. We envisage having two more subsequent forums — one in Lahore and the other one in Karachi. We will add new sectors like auto-part manufacturing and dairy products in Lahore and Karachi,” she added.
First-ever EU-Pakistan Business Forum For SMEs
The EU delegation 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 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, which 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. 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.
EU Ambassador to Pakistan Androulla Kaminara shared her vision to enable Pakistani SMEs to benefit from a wide range of GSP+ concessions. She 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+”.
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:
- Pakistani companies not utilizing the GSP+ opportunity fully;
- SMEs not exporting to the EU despite duty free access for the EU market;
- EU companies not fully benefitting from doing business with Pakistan (including imports from Pakistan as well as investments in the country)
- trade and business with and in Pakistan stymied by multiple barriers and impediments.
Team Europe will continue to support Pakistan’s recovery and socio-economic development over the next 7 years, which is the timeframe of our current Multiannual Financing Framework.
