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Apparel targets $ 8 b exports by 2025 from 2019’s $ 5.5 b

08 Dec 2021

  • Industry says investment in supply chains pivotal
  • Advises to capitalise on fractured China-US relationship
BY Shenal Fernando The country’s apparel sector plans to reach an export target of $ 8 billion by 2025, from the $ 5.5 billion it earned in 2019, through increased investment in the development of local supply chains, industry experts announced yesterday (7). Speaking at the Sri Lanka Economic Summit 2021 organised by the Ceylon Chamber of Commerce (CCC), the experts noted that this increased investment is a vital step for the Sri Lankan textile industry in achieving its export targets. Hirdaramani Group Director Aroon Hirdaramani stated that only around 50% of Sri Lankan garment exports qualified for the Generalised Scheme of Preferences-Plus (GSP+) tax concessions due to the rules of origin criteria which is concerned with whether the clothing is sufficiently originating from the country applying for concessions. Explaining further, he claimed: “The fastest growing segment is active and lounge apparel that requires a lot of materials that are traditionally manufactured in the far east, especially China and Taiwan. Because of that, the initiative by the Government and our industry to encourage more investment in the local fabric supply chain is crucial to our strategy. There has been a proposal to set up a textile zone in Eravur, which will be an environmentally friendly textile zone, with recycling of water and use of sustainable energy. We are working very hard to attract some key fabric players to invest in the zone and to also invest in other fabric mills.” Such investments in local fabric supply chains will improve lead times and improve industry value addition, which is currently around 55%. This strategy will not only improve value addition but reduce foreign exchange (forex) outflows and will help the textile industry qualify for more GSP+ concessions. In order to achieve an integrated supply chain which will be vital for the textile industry going forward, Hirdaramani called for the implementation of a conducive environment for foreign direct investment (FDI) in order to capitalise on the currently fractured relationship between China and the US, which has incentivised customers to move out of China. In order for Sri Lanka to gain a substantial market share as such, obtaining FDI inflows from leading raw materials players from different parts of the world will be pivotal. “There has to be consistency in policy and continued incentives given to these suppliers and many of us would like to partner them,” stated Hirdaramani. Sri Lanka’s Ambassador to the European Union (EU) Grace Asirwatham claimed that over 22% of Sri Lanka’s exports are sent to the EU, which is Sri Lanka’s second-largest export partner. Trade between Sri Lanka and the EU stood at £ 4.6 billion in 2019 with exports accounting for £ 3 billion of which £ 2.5 billion qualified for GSP+ concessions. However, in reality Sri Lanka utilised the GSP+ tariff concessions only for goods amounting to £ 1.6 billion which amounts to a 62.5% utilisation of the GSP+ concession. “There are various reasons for this low utilisation such as that some of our products do not qualify under the rules of origin criteria. Around 57% of Sri Lanka's GSP+ eligible exports are garments. However, half of the garment exports are not benefiting from the GSP+ zero tariff concession due to the rules of origin criteria and also the double transformation criteria. These are reasons why garments are not enjoying maximum benefits out of GSP+ zero tariffs. We need to encourage more investments in fabric manufacturing and also the required accessories for exports from Sri Lanka to the EU in order to avoid rule of origin-related problems”, stated Asirwatham.

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