Efforts to drive the Sri Lankan apparel sector into a new growth phase may hinge on the success of the potential free trade agreement (FTA) in the offing with China, according to Joint Apparel Association Forum (JAAF) Secretary General Tuli Cooray.
“China is a massive market. If we can capture even a small percentage of market share, it could easily lift up the entire apparel industry. An FTA which grants Sri Lankan apparel exporters access will open up a host of opportunities, particularly given the government’s policy of working towards the hub-status.
In such a large market, we can compete through niche products but we have also lobbied the government to create entrepot trading for the apparel sector and this too has significant potential in combination with the FTA,” Cooray noted.
Elaborating on the policy decisions taken prior to the abolishment of the quota system for the apparel sector in 2005, he pointed to the investments made by the larger players into valueaddition through specialized washing facilities, embroidery and the local production of buttons at a time when Sri Lanka’s importance on the supply chain was in question. Speaking during an interview with Mirror Business, Cooray stated that similar strategic initiatives and investments will be necessary within the industry in order to realign the sector towards the demands of the hub-style operations.
“There is significant additional revenue that can be earned through providing hub-services to low-cost manufactures in the region through value-addition and reexport but also through design conceptualization and logistical support.”
He added that the country stands to boost export turnover by an additional US $ 1 billion through the establishment of such hubservices.
In that backdrop, Cooray commended the government’s infrastructure push and stated that the establishment of new air and sea ports in the South along with expansion of the Colombo Port would likely play a pivotal role in diversifying Sri Lanka’s export destinations. Cooray further commended Budget 2014’s announcement against anticompetitive practices in the shipping industry, a reform which he believes will promote better cost-competitiveness for the sector. Nevertheless, some industry veterans have raised questions over the viability of such plans, given that China is still an extremely competitive market and the debate over improvements in productivity relative to cost of production in Sri Lanka.
Other new export destinations for Sri Lankan apparels targeted in Budget 2014 included Brazil, India, Japan, Turkey and Russia, another provision which Cooray welcomed. “India and Turkey are two other markets which could have a lot of potential for Sri Lankan apparels and this is another goal that we are working towards. Overall, I think the developments that take place in 2014 are likely to drive the industry in future,” he enthused.