Garment industry wants more homemade fabric
\nSunday Times.lk, Sri Lanka
\nBy Dilshani Samaraweera<\/p>\n
<\/p>\n
The garment export industry says it needs more home made fabric to remain competitive and wants the Board of Investment (BOI) to give better incentives to pull in more textile investments.<\/p>\n
The industry says it could benefit from lower lead times, as well as potential cost savings, if the fabrics were made at home.
\n\u00e2\u20ac\u0153We need to come with new strategies to attract investments in textiles. Other countries in the region are now offering better incentives. So we need to think creatively about this because we have to offer better incentives to attract investors,\u00e2\u20ac\u009d said Deputy Chairman of the Joint Apparel Association Forum, A Sukumaran, at the recent Ceylon Chamber of Commerce and BOI Sri Lanka Economic Summit 2014.<\/p>\n
Although garment exports bring in nearly US$ 3 billion annually the industry also spends almost half this income, US$ 1.2 billion, on importing fabric. Another US$ 181 million is spent on importing other inputs. To retain more profits within the country the industry says it needs more fabric mills at home.<\/p>\n
During 2003 to end 2014 total fabric imports from all over the world increased by 9% to feed Sri Lanka\u00e2\u20ac\u2122s growing garment export industry. In the first quarter of this year alone garment exports grew by 13.8% compared to the first quarter of last year.<\/p>\n
Growth over the last few years is mainly seen in clothing made from knit fabrics. From 2003 to end 2014 the export income from garments made from knit fabrics increased by 64% while income from woven fabric clothing reduced by 1%. Overall, during the period 2003 to end 2014, export income increased by 21%.<\/p>\n
Sri Lanka\u00e2\u20ac\u2122s production of fabric also increased over the past few years to feed this export growth. But the export industry says production by the seven local fabric mills is still far from enough to meet export demand.<\/p>\n
\u00e2\u20ac\u0153The number of fabric mills increased from 4 to 6. Fabric mills have also increased their capacity. They have understood that it is a viable business and have expanded production. But the challenge now, is to bring in more players. We have to make the country attractive to investors and we have to provide sector specific incentives,\u00e2\u20ac\u009d said Sukumaran.<\/p>\n
Domestic production of non fabric inputs has shown better progress than the textile sector.<\/p>\n
\u00e2\u20ac\u0153Non textile backward integration has been better. In 2003, we spent US$ 194 million on importing accessories. By 2014 this had reduced to US$ 181 million despite the increase in exports,\u00e2\u20ac\u009d said Sukumaran.<\/p>\n
Increasing costs
\nWhile there is a market opportunity for the production of export quality fabric, a major obstacle to the growth of the domestic textile industry is the domestic cost of capital.<\/p>\n
\u00e2\u20ac\u0153This is a highly capital intensive industry and as you know the cost of capital has become exorbitant. The cost of capital needs to come down, in line with the going rates in the region. We are not asking for lower rates. We just want it to be competitive,\u00e2\u20ac\u009d said Sukumaran.<\/p>\n
The price uncertainty of essential utilities like electricity and fuel, is another industry headache.<\/p>\n
\u00e2\u20ac\u0153The increasing cost of utilities is bad enough but the uncertainty is a bigger problem. When prices change so often at short notice it is more difficult to plan our business, because we don\u00e2\u20ac\u2122t know how much it will cost to operate a few months ahead,\u00e2\u20ac\u009d said Sukumaran.<\/p>\n
The industry is calling on the authorities to provide economic stability, good governance and permanent peace to attract new investments and to support industry efforts to facilitate growth.<\/p>\n
Regional imports
\nGiven the limited growth of domestic textile production imports from neighbouring countries like India and Pakistan, shot up over the past few years.<\/p>\n
The value of fabric imports from India increased by 46% while imports from Pakistan almost doubled. Imports from Bangladesh also increased by 2%. In total the Sri Lankan garment industry bought US$ 143.9 million worth of fabric from South Asian neighbours in 2014, compared to US$ 87.8 million in 2003. But regional imports are still only a small portion of industry requirements.<\/p>\n
\u00e2\u20ac\u0153Fabric imports from the region increased by 64% in value terms from 2003 to 2014. The biggest growth is imports from Pakistan that has increased by 99%. But regional fabric imports are still only 12% of total fabric imports. So regional imports can increase a lot more,\u00e2\u20ac\u009d said Sukumaran.<\/p>\n
The garment industry says the increased sourcing from South Asian countries is due to the EU\u00e2\u20ac\u2122s GSP+ trade scheme. Sri Lankan garment exporters can use the GSP+ to export duty free into the EU, by sourcing inputs from the South Asian region. In the first quarter of this year garment exports into the EU increased by 21% compared to the first quarter of last year.<\/p>\n
The GSP+ scheme has helped create new market opportunities in Europe for the garment export industry that is now facing severe competition in its main export market, the US.<\/p>\n
To maximise on the European market opportunity, Sri Lanka has requested that the EU relax some of the GSP+ rules. Given the high import dependence of the garment industry Sri Lanka has asked that the domestic value addition requirement be reduced from over 50% at the moment, to 35%. The EU is yet to announce a decision on this request.<\/p>\n
Better education opportunities
\nThe garment industry is also asking the government to open up higher education to private service providers, to allow new skills and technologies to enter the local industry.<\/p>\n
\u00e2\u20ac\u0153We strongly believe that private education must be allowed. The government must open education to the private sector. Already a very sizeable amount of money is going out of the country because of people sending their children abroad for degrees. We can save this money and also supply more new skills for the industry if private education establishments were allowed to offer their courses here,\u00e2\u20ac\u009d said Sukumaran.<\/p>\n
At the moment the garment industry provides jobs for nearly 300,000 people directly in their factories while indirect employment is estimated at close to 1 million. But much of the employment is in shop-floor jobs and the industry is now looking for more value added, specialised skills. Garment industry oriented specialised skills like design and development, marketing and international trade skills are now in demand for the industry to upgrade itself from a cut-and-sew operation into a full scale service provider.<\/p>\n","protected":false},"excerpt":{"rendered":"
Garment industry wants more homemade fabric Sunday Times.lk, Sri Lanka By Dilshani Samaraweera The garment export industry says it needs more home made fabric to remain competitive and wants the Board of Investment (BOI) to give better incentives to pull in more textile investments. The industry says it could benefit from lower lead times, as […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[],"yoast_head":"\n