Lanka’s apparel sector to compete aggressively in emerging markets | Sunday Observer

Lanka’s apparel sector to compete aggressively in emerging markets

Sri Lanka’s apparel sector which has an ambitious export target of US $ 8 billion by 2025, is working to expand its global footprint by aggressively competing in emerging markets andwidening its presence in non traditional countries, an industry expert said.

“We will be vigorously exploring up-scaling market access with a bigger share in emerging markets such as India, China and Brazil. It is important to consider the entire world as our market rather than depending on a few countries to expand our market share in terms of value and volume. We will be differentiating our products with quality standards and excellent product delivery to capture global demand,” Secretary General, The Joint Apparel Association Forum (JAAF), Tuli Cooray said.

Last year apparel exports grew 5%, an annual compound growth rate of more than 6% is expected to be achieved this year.

“In general, we don’t have annual targets. What we are expecting for and working to fulfill is to earn USD eight billion from apparel exports by 2025,” he said.

The apparel industry which contributes 7% of GDP (Gross Domestic Product) and 53% of export earnings is going to expand its territory to South Asian countries such as India and China and to South America.

Emphasising that traditional markets play an important role in generating foreign exchange, Cooray said that 12% of the country’s apparel exports go to other continents. We are targeting the world as the market. The penetration of our nation to the market is determined on the tariff and country of origin rules. Earlier bilateral agreements were the exception to the rule but now World Trade Organisation (WTO) regulations has become the exception while bilateral agreements are the rule, he said.

Universally, there are two specific issues that every apparel industry is bound by, the tariff payable by an importer when goods are procured from another country. This is the biggest challenge faced by retailers and wholesalers. The other issue is the country of origin.

A standard rule of the apparel industry is the double transformation principle which means converting fiber into yarn, yarn into fabric and fabric into garments. “Fiber conversion to yarn is not at all requested but minimum yarn forward rules need to be applied,” he added. However, double transformation is a theory that helps countries where vertical integration is very high. Countries such as India, Indonesia and Thailand fall into this category.

From a Sri Lankan perspective, specific recognition is not given for apparel exports. The sector contributes to the economy on its own efforts and the industrialists will be encouraged if more government support is given in terms of facilities and recognition. This will also have a positive impact in attracting young blood to the sector and ensuring skilled labour remains in the workforce, he said.

“The apparel sector also has a SME (Small and medium-sized enterprises) sector which needs to be looked after. The main challenges faced by this industry are the dynamics of the labour market. As no helping hand is given to the industry by policy makers and the present level of the trade reforms agenda lacks forward looking policies for the apparel sector, the industry is struggling to maintain its growth momentum,” he said.

The apparel industry has 15% labour force. However, the problem is that large players attract youth, while the small players don’t. Thus the scarcity of labour mainly affects the small companies. “Society doesn’t recognise the contribution made by this sector for the growth of the economy,” Cooray said.

“Currently, more people, specially the younger generation get into fields of work other than this industry. Therefore, we have been conducting programs such as ‘Matai Mage Ratatai’ to raise the awareness about the importance of this industry, benefits and opportunities that it brings to an individual.

“This also enables to change the attitude and mind set prevailing among the people with regard to this industry. It is important to create a knowledge based industry. Thus more people specially entrepreneurs will contribute to this. However, this demands investment in technology, people and ideas.

“There is a need to change the way of doing businesses to attract more buyers and workers,” he said.

The apparel industry has not still gained a stable environment. However, this year’s Budget has brought some relief. It has allowed enhanced capital for expanding a company unlike last year which had only allowed enhanced capital for new companies.

The government is trying to address many issues such as improve availability of credit, availability of skills and improve availability of finances. However, these efforts won’t give out immediate results but would support to achieve long term benefits.

The present level of trade reform agenda will not affect the export industry but the domestic market. The industry needs to be controlled and maintained on a systematic basis.

“The government has shown a positive signal with regard to this,” he said.

Cooray said that the action they are taking will not be sufficient to sustain the business because there are many serious concerns in this industry that needs to be looked into. Thus it should be organised so as to enable buying continuously or promote concepts such as rentals.

Speed is a crucial factor when it comes to this industry. Before 2005, this industry was not liberalised by a thing called quota which means that the buyers did not have the freedom to decide independently from where to buy or what to buy. Hence there was no competition among countries for apparel.

“After 2005, this system was liberalised and as a result the countries which were not in the competition earlier went into the business and in fact has surpassed us,” he added. Thus, we must understand our uniqueness. Being a country where this industry faces difficulties such as unavailability of fabric and scarcity of labour, we have to differentiate ourselves through quality and value added services.

Negotiations have been made with the government to minimise transactions with the state agencies mainly with regard to apparel exports. Further requests have been made to make all documentation processes on online basis and reduce human intervention in import and export activities.

Requests have also been made to recognise digital signatures and online transactions. Negotiations are also under way with the Sri Lanka Customs to automate the verification processes to clear the goods quickly. Through these methods speed is ensured and at the same time it is ensured that the goods are delivered to the right party at the right time.