Lanka Business Online, 01 May 2005
Garment and textiles were up by a fifth in February this year to US$ 233 million pushing up Sri Lanka’s total exports. Garments and textile make up almost half the country’s exports.
However experts who spoke at seminar looking at post Multi Fiber Agreement (MFA) challenges said Sri Lanka’s current over reliance on duty concessions won’t help the industry in the long term. The Multi Fiber Agreement gave Sri Lanka and other apparel exporters some breathing space.
Apparel exporters here benefited from the guaranteed access to high spending market like the US and Europe.
The agreement under the World Trade Organization ended last year.
However Sri Lanka is still looking for duty concessions to its main apparel export markets through bilateral deals.
Lower duties will make Sri Lankan garments more attractive to buyers.
But experts say duty concessions should be seen as a compliment to overall competitiveness.
“You have to be competitive in order to gain from an FTA,” says Denis Audet, an International Trade Advisor.
The industry was confident of retaining market share even after the MFA ended last year because it had lined up lower duties to the European market through the GSP plus scheme.
However bureaucratic delays in Europe derailed a smooth transfer.
Europe is expected to loose up to Euro 2.2 billion in tax revenue when they transfer to the GSP plus scheme.
Delays are showing on the order books of apparel makers here.
Many buyers withdrew orders from local factories that were due for delivery before June.
Trade experts at a seminar on the future of the industry organized by the Institute of Policy Studies (IPS) and the Friedrich Ebert Stiftung Institute of Germany said duty free access to Europe in June is also still to be confirmed.
Denis Audet an international trade consultant said that by relying solely on free trade agreements it is similar to putting all your eggs in one basket.
Instead, he advises countries to invest in infrastructure development so that the risks will be tapered down to a minimum.
He says countries could take a leaf out of the China’s book of industry best practices.
Since 1999 China has been investing heavily in modern machinery that which would ensure high quality products.
“The feeling of buyer today is that you can buy good quality at competitive prices,” Audet says.
Seamless backward integration and efficient supply chain management is also a key element that sets China apart.
Currently Sri Lanka manufactures only 30 percent to 35 percent of its textile requirement.
The rest are imported from China, Hong Kong, Thailand, Malaysia and Indonesia.
An institutional arrangement for tariff relief on imports of textiles not produced domestically is one way of trimming the cost.
“It makes sense for Sri Lanka to apply low tariff on their imports of fabrics. They need fabrics. They should not impose tax on production of clothing that is exported ultimately,” Audet says.
Cheaper power, better highways and logistics will definitely boost competitiveness.
Not all this is can be done by an industry.
But analysts say the industry should leverage on its contribution to half the country’s export earnings.
They say only a stronger focus on buyers through better competitiveness can sustain long term growth in the industry.
