BY Shenal Fernando
The country’s garment sector plans to reach an export target of $ 8 billion by 2025, out of the $ 5.5 billion it earned in 2019, thanks to increased investment in the development of local supply chains, industry experts announced yesterday (7).
Speaking at the Sri Lanka Economic Summit 2021 hosted by the Ceylon Chamber of Commerce (CCC), experts noted that this increased investment is a vital step for the Sri Lankan textile industry in achieving its goals of ‘export.
The director of the Hirdaramani group, Aroon Hirdaramani, said that only about 50% of Sri Lankan clothing exports were eligible for the Generalized Scheme of Preferences-Plus (SPG +) tax breaks due to the rules of origin criteria which aim to know whether the clothing is sufficiently originating in the country requesting the benefits.
Explaining further, he said, âThe fastest growing segment is loungewear and loungewear which requires a lot of materials traditionally made in the Far East, especially China and Taiwan. For this reason, the initiative of government and our industry to encourage more investment in the local fabric supply chain is crucial to our strategy. It has been proposed to create a textile zone in Eravur, which will be an environmentally friendly textile zone, with water recycling and sustainable energy use. We are working very hard to attract some key fabric players to invest in the area and to invest in other fabric factories as well. “
Such investments in local fabric supply chains will improve lead times and improve the industry’s added value, which is currently around 55%. This strategy will not only improve added value, but reduce foreign exchange (forex) outflows and help the textile industry to qualify for more SPG + concessions.
In order to achieve an integrated supply chain that will be vital for the future of the textile industry, Hirdaramani called for the establishment of an enabling environment for foreign direct investment (FDI) to capitalize on the current relationships. fractures between China and the United States, causing customers to leave China. For Sri Lanka to gain substantial market share as such, it will be essential to secure FDI flows from major commodity players in different parts of the world.
âThere has to be consistency in policy and continued incentives given to these suppliers and many of us would like to involve them,â Hirdaramani said.
Sri Lanka’s Ambassador to the European Union (EU) Grace Asirwatham said more than 22% of Sri Lanka’s exports go to the EU, which is Sri Lanka’s second-largest export partner. Sri Lanka-EU trade was worth Â£ 4.6bn in 2019, with exports worth Â£ 3bn, of which Â£ 2.5bn eligible for SPG + concessions. However, in reality Sri Lanka only used the SPG + tariff concessions for goods worth Â£ 1.6 billion, which is equivalent to using 62.5% of the SPG + concession.
âThere are several reasons for this low usage, such as the fact that some of our products do not meet the rules of origin criteria. About 57% of Sri Lanka’s GSP + eligible exports are clothing. However, half of clothing exports do not benefit from the zero GSP + tariff concession due to rules of origin criteria and also double processing criteria. These are the reasons clothing does not take full advantage of zero SPG + tariffs. We need to encourage more investment in fabric manufacturing and also in accessories required for Sri Lankan exports to the EU in order to avoid rules of origin issues, âAsirwatham said.