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| Sunday, 4 May 2003 |
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Apparel industry can survive in quota-free era - CB The decline in demand for Sri Lanka's apparels in the international markets following the abolition of the quota system in 2005 may not be as high as many argue, the Central Bank said in its Annual Report 2002. Sri Lanka's dependence on quota-based exports have declined over the years, accounting for only 53 per cent of the total apparel exports in 2002 as against 63 per cent in 1996. This trend is expected to continue at a higher rate in future as the industry is preparing for a quota-free trading environment after 2005. The island's dependence on quotas is lower than its neighbours' in the South Asian region. Quotas account for 73 per cent, 80 per cent, 90 per cent and 95 per cent of the apparel exports of India, Nepal, Pakistan and Bangladesh respectively, the Central Bank (CB) report said. Output and employment in Sri Lanka's apparel industry are concentrated in a few large-scale manufacturers. Twelve per cent of the exporters account for about 72 per cent of exports while about 28 per cent account for 62 per cent of employment in the industry. These large-scale manufacturers have developed marketing links with foreign buyers, reducing their dependence on quotas. Even though small-scale and some of the medium-scale manufacturers may face problems after 2005, the total loss of exports would be only 17 per cent. Loss of employment is estimated to be around 20 per cent. However, the actual loss of exports and employment is expected to be lower as most small and medium-scale industries may subcontract for larger manufacturers. Large-scale industries may also absorb a portion of the job losers as they can increase production volume in a quota-free environment, the CB said. The quota system bolstered Sri Lanka's apparel industry during the last two decades, aided by liberalised market policies, foreign participation in the industry and availability of low cost labour. Garment and textile exports accounted for 53 per cent of the total export earnings, contributing to 5.3 per cent of GDP last year. The sector provides direct employment to more than 330,000 in over 1,000 factories with 50 of the largest factories accounting for 50 per cent of the total output. The challenges presently facing the local industry include increasing competition from low cost manufacturers like India, China, Vietnam and Cambodia; expansion of rival trading blocs causing trade diversion; and slow progress in domestic infrastructure development. According to the Central Bank, non-tariff barriers are expected to become more effective in governing international trade after the phasing-out of quotas in 2005. International labour standards including non-discrimination among workers, prohibition of child labour and forced labour, health and safety measures and wages, benefits and work hours will also play a leading role in governing the industry. Such standards being higher in Sri Lanka than among its competitors is expected to be a plus point for the island. The local apparel industry has already made plans to face the quota-free era, in the areas of product specialisation, technology transfer and marketing strategies. A five-year strategy for the future development of the industry has also been prepared by the government in collaboration with the private sector and academic institutions. Sri Lanka should concentrate on moving up the value ladder by supplying niche markets; promoting the brand through international marketing campaigns; specialising in identified product categories; linking with international fashion designers and obtaining feedback from buyers on sourcing strategies; lobbying for preferential trade concessions from major markets; and improving productivity, for the industry to survive, the Annual Report said. |
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