Lack of infrastructure a drawback to compete in post MFA global market - Dr. Jayasundera

by Elmo Leonard

The lack of infrastructure is a major factor which impedes the bold attempt of Sri Lanka's apparel industry to compete in the post-MFA global market scenario, Secretary to the Treasury, Dr. P. B. Jayasundera said. In lighter vein, he said that Sri Lanka does not even have a clear foresight to clear its garbage.

Complimenting the Sri Lanka Garment Buying Offices Association (SLGBO) and the Apparel Exporters Association 200GFP, for getting together, to hold this forum Dr. Jayasundera spelled out government's plans to move away from the 65 percent fuel-driven energy to a mix of hydro, coal and alternative sources of energy. Also, a $150 million textile processing zone, to come up shortly.

"If we can fast-track infrastructure, you will be much better equipped to start planning for the next 10 years," he said.

The $3 billion apparel export industry incurs $1.5 billion in imports of fabric and accessories, while employing a million people, directly and indirectly, Dr. Jayasundera said.

SLGBO and 200GFP held a sundown meeting, open to all stakeholders in the apparel industry; its aim being to bring about a "degree of understanding" of the critical areas in the industry, so that the manufacturers and buyer representatives could adapt themselves to meet the diverse demands of the trade and the buyers.

Chairman, Joint Apparel Association Forum, Ashroff Omar, said that the small growth, pricewise, registered by Sri Lanka during the first year of post-MFA trading and 2 percent increase in exports to the United States during the first six months of this year did not give the correct picture.

The GSP plus scheme, Sri Lanka entered into, with the EU had played a strong part in Sri Lanka's success, thus far. The restraints brought about by the US and EU on China, on exports from China into these two largest global trade blocs, allowed Sri Lanka to fare as well as she had.

The categories which do not restrict China saw that nation make 40 percent gains into these markets and in catalogues where China is not restrained, Sri Lanka was strangled. China's restrictions end 2008.

As a region, Sri Lanka had shown only 1 percent growth, since the scrapping of the MFA, while India had a 21 percent growth rate. India and Pakistan had been extremely aggressive, and had invested very heavily in readyness to counter the MFA withdrawal.

Nepal, another SAARC nation has already had its industry wiped out, with no base of material manufacture, Omar said.

Africa, as a region had done little. Central America, with easy access to North American markets had done little to justify expectations of crashing into the United States and Canada, Omar said. He called on the government to work out a duty free agreement with Canada and to revive the stalled free trade deal with the United States.

Also, for backward linkages, not only for the supply of fabric but to qualify for country-of-origin status.

CEO of Goodman Co, Romesh Fernando put down the post-MFA situation to a buyers market, where the consumer is being offered lower and lower priced garments bearing the most prestigious brand labels.

China was capitalising on this scenario, securing the best brands, while compensating its labour force with low wages such as $40-45 per month.

Sri Lanka is surviving well in the niche markets and doing poorly in the mass market. Sri Lanka's COP is going up, partly driven with the escalating oil prices. The next two years will be critical for Sri Lanka, Fernando said.

Dr. Jayasundera recalled instances of a past US ambassador in Sri Lanka who had told him that post-MFA Sri Lanka's apparel industry will live to fight, because of an apparent dialogue between all stakeholders within it. Also, of a Chinese friend who had said that China's labour was not cheap, but productive labour.

Fifty percent of China's success is human resources management, Dr. Jayasundera said.

Responding to the call for free trade agreements with trade blocs, the Treasury Secretary, said that such complexity was not always possible to work out, but, going up-market was always a viable proposition.

With Rs. 1 billion refunds on VAT due to exporters, shippers called for speedy reimbursement and Dr. Jayasundera said that the process was being speeded up.