Sri Lankan apparel eyes India’s gain, China’s loss

By Madhusha Thavapalakumar

The anticipated decline in China’s apparel exports, driven by its higher domestic consumption, and the growth in India’s market present opportunities for Sri Lanka which it must capitalise on, notes Sri Lanka Apparel Exporters Association (SLAEA).

Addressing the media during the 36th Annual General Meeting of the SLAEA on Tuesday (22), Sri Lanka Apparel Exporters Association (SLAEA) outgoing Chairman, Felix Fernando said: “The reduction in China’s contribution to the global economy in 2025 will correspond to a value of $ 50 billion for which other apparel exporting nations will compete.”

According to Fernando, the beneficiary nations from China’s decline in contribution would be Vietnam, Ethiopia, Kenya, Myanmar, Bangladesh, and India, owing to competitive manufacturing costs, advantageous retail agreements, and good export infrastructures.

“Sri Lanka has to try hard to get there,” he said.

However, these countries have to develop their textile capability, large-scale manufacturing, and product development services despite signing comprehensive free trade agreements (FTAs), as China thrived without them (FTAs).

China and India stand as leading apparel manufacturing countries with an estimated market value of $ 325 billion and $ 95 billion respectively, and in the next three years, the apparel markets of China and India are expected to grow at 7.5% and 11.1% respectively, despite global uncertainties.

“The Chinese market posted an annualised growth of 15%, whereas the Indian market registered a growth of 11% and have performed better than the largest consumption regions like US, EU, and Japan,” Fernando added.

He further discussed Sri Lanka’s preparedness to undertake necessary changes in the industry, aligning with the global market.

He stated: “Sri Lankan industry exports are currently focused in US with 45% and EU with 42%. Only a mere 30% of exports go to other countries. It is true that US and EU were vital markets, but we need to adapt to the aforementioned market changes for continued growth in the industry.”

Sri Lanka’s apparel sector has surpassed $ 5 billion in 2018 and has set an ambitious target of $ 8 billion to be achieved by 2025, according to Fernando.

Newly elected SLAEA Chairman Rehan Lakhani, delivering his speech, stated that uncertainty is the biggest challenge for the apparel sector in 2019.

“Uncertainty remains the single biggest challenge in the apparel industry in 2019; ranging from a more volatile global economy, unpredictable US-China trade talks, and various scenarios,” he said.

Speaking of apparel trade between Sri Lanka and India, Lakhani noted Sri Lanka’s dependency on India.
“We as an industry are heavily dependent today on India, not only for imports such as fibre, yarn, and fabric but also for finished products to the amount of $ 700 million per annum.”

However, highlighting limited apparel exports to India, which stands at $ 14 million, he called for sectorial liberalisation through the ETCA and interim measures that need to be taken to enhance the quota of 8 million pieces with no strings attached.

“We have requested our authorities to negotiate sectorial liberalisation through the ETCA, but we see serious reluctance in the negotiation process. We are hopeful that negotiation is feasible,” he added.

He too highlighted points with regard to the policy agenda of the Government and requested the Export Development Board (EDB) to ensure the continuation of preferential treatment from UK, even after Brexit.

“We will continue to impress upon our Government for the continuation of the trade policy agenda that we have begun because world is the place we rely on. The United Kingdom is considering the continuation of the preferential treatment related to the EU GSP-plus scheme. We request the EDB to be vigilant on this issue.”

According to Lakhani, Sri Lanka’s apparel industry needs to penetrate more emerging markets such as India, China, and Brazil. Thus, market promotion is the need of the hour.

Meanwhile, former Chairperson of the EDB Indira Malwatte stated that Sri Lanka has been utilising only 55% of its GSP-plus concession and emphasised the need of penetrating into Central European markets.
“When we think of new markets, we always think of few countries which are UK, Germany, France, Italy, and Netherlands. We have not looked at the Central European markets,” she said.

Malwatte said that the EDB with the Ministry of Foreign Affairs was conducting few studies to know the potential penetration of Sri Lanka’s exports in the Central European market, where they expect good opportunities.

She was also optimistic in increasing Sri Lanka’s exports to India, which almost doubled in 2018 compared to 2017.

“In 2017, our exports to India were $ 43 million which has grown to $ 80 million in 2018,” she said.
According to Malwatte, at the end of this month, eight companies sponsored by the EDB are to attend the state apparel show in New York which will be followed by G2G meetings.