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Asian Tribune is published by World Institute For Asian Studies|Powered by WIAS Vol. 12 No. 2864

Sri Lanka should strive to gain additional garment export market

By Quintus Perera - Asian Tribune

Human development and improved market access are musts to develop the garment export industry in Sri Lanka in the face of heavy competition from countries like India and China which have performed excellently well said Dr Saman Kelegama, Executive Director, Institute of Policy Studies making a presentation on "The Garment Industry in a Non-Quota Trade Regime” held at the Sri Lanka Association of Advancement of Science Auditorium, this week.

He said there should be make or break situation for the weak and vulnerable economies until 2008; address supply side constraints requires innovative approaches, beyond conventional issues like trade facilitation, creation of EPZ, improving access to finance and improved delivery of technical assistance; need to reduce dependence on developed countries for market, capital, technology and training and South-South cooperation and public –private partnership could be useful instruments.

Dr Kelegama said that though pessimists predicted non-quota would wipe out the ready made garment industry in Sri Lanka, but Sri Lanka’s performances with 3.4 percent overall increase, have been moderate along with several other countries. But he pointed out that it was achieved at a price as in 2003 there were 891 factories manufacturing garments, but in 2005 the number has diminished to 733, while loosing 130,000 jobs. He said in 2003 there were 340,367 workers and it was reduced to 273,600 and most displacements were in the Small and Medium Industry sector.

In 2002 Indian garment exports were US $ 6 billion and the forecast for 2015 has been US $ 25 billion, while the objectives of the Joint Apparel Association Forum (JAAF) is to increase the turnover from US $ 2.6 billion in 2001 to US $ 4.5 billion in 2007 and though Sri Lanka has performed well with substantial restructuring, in the face of mighty India and China, Bangladesh, Sri Lanka cannot relax its efforts, but should strive relentlessly to improve the industry.

Dr Kelegama said there are constraints facing the industry in Sri Lanka and in the supply side there are common problems like the lack of strong linkages with other economic activities in the country; low level of human capital; high transportation, transaction costs; and cost of capital. In the demand side those problems could be: discrimination within the global trading system, and lack of negotiating clout, skills and capacity.

There is large number of vacancies in the garment industry, but girls are reluctant to accept them due to poor accommodation conditions where in small cubicles several girls live together. Girls are harassed when they return from night shift and due to the bad sanitary conditions and congestion in the boarding houses; they could contribute to absenteeism and poor productivity.

He said Sri Lanka is not alone when comparing the constraints faced after the Multi-Fibre Agreement came to an end as in India out of the 33,000 firms in 2002 nearly 10,000 wound up by the consolidation process.

As in the case of ahead of Y2K the predictions were that countries depending on the quota system for their ready made garment industry exports would collapse, the optimism has been the adverse impact would be less due to preparatory work done by most countries with large ready made garment sector.

Dr Kelegama said the share of Asia in the European Union and US imports exceeded 50 percent. While 90 percent of our garments are exported to US and European markets. The best performers have been China and India. The moderate performers are Bangladesh, Cambodia, Indonesia, Lao PDR, Pakistan, Philippines, Sri Lanka, Thailand and Vietnam and the worst performers are Fiji, Maldives, Mongolia and Nepal.

In the general trends of the industry he pointed out the tyranny of averages such as intra-regional countries like China and India have gained, among others, at the cost of the least competitive countries like Fiji, Maldives, Mongolia and Nepal and in the intra-country scenario even within the countries where overall growth of textile and clothe exports have been reasonably good, job losses are taking place or are likely to take place due to structural transformation as in the case of Indonesia and Sri Lanka.

Dr Kelegama explaining the current state of play said, the safeguards on Chinese exports have provided a breathing space to the relatively uncompetitive players to restructure their industry and enhance their competitiveness (2005-2008: safeguard and anti-dumping legislation against China: 2009 to 2015 only anti-dumping against China; and after 2015 China no longer a ‘non-market economy.’) Those countries have time up to December 2008 to do this, failing which their textile and clothes industries would face extinction and market access initiatives, though important, have not produced desired results so far.

According to Dr Kelegama , the positive features in Sri Lanka could be the top textile and clothe export items accounted for 33 percent of exports, while in Nepal the same accounted for 76 percent. There were conscious efforts to move to high value added ready made garments exports.

The JAAF objectives to increase the garment exports are to increase turnover from US $ 2.3 billion in 2001 to US $ 4.5 billion in 2007. Transformation of the industry from ‘contract manufacturer’ to provider of fully integrated services’. Focus on value added ready made garments, not on low cost and to focus on premium market segment. Consolidation of the industry and establishment of a reputation on four products; sports wear, casual wear, children’s clothing and intimates.

He said the areas key to fully integrated services could be to encourage backward integration, improving Human Resources/technology, changes in labor laws and regulations, image promotion: High Labour Standards, catering to the needs of the SMIs, strengthening bilateral/multilateral links, lobby with government for better infrastructure and mobilizing funds for the work.

In the human resources development he suggested the strengthening of marketing capability, creation of design capability, improving productivity within organization, developing technical competence, enhancing grassroots level skills and encouraging a Cohesive focus for textile and clothing education.

The steps so far taken for HR development are creation of graduate diploma in Apparel Marketing since June 2002 which was developed in collaboration with the Chartered Institute of Marketing UK, commencing Bachelor of Design in the University of Moratuwa since 2001 with the support of the London College of Arts and in 2004 November starting a Productivity Improvement Prgramme.

JAAF has facilitated the establishment of collaboration between CITI/TTSC and the North Carolina State University; to raise the standards of both institutions to world standards with the support of government funding and 30 out of the 189 vocational training centres are to be geared towards providing training in the ready made garment sector.

Trade facilitation should be improved by economy-wide benefits, reduced transaction costs – short and long term and aid for trade and enhanced Integrated Framework. Innovative sourcing strategies should be adopted with central bonded warehouse and free trade areas at the regional level with improved trade facilitation.

Cross cutting measures should be adopted to reduce dependence on the developed countries. Extended use of South-South cooperation should be obtained by exploration of market opportunities, investment flows, transfer of technology and training and capacity building.

- Asian Tribune -

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