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Ha!
More holidays for jolly Lankans The private
sector, that much-touted engine of growth, has been shouting itself
hoarse for years, if not decades, that a country as poor as ours,
with work norms and productivity far below that of our competitors
in the global marketplace, cannot afford to have so many holidays.
All that successive governments have done is to nod their heads
in agreement, wring their hands and make empty promises to cut down
the number of holidays. As our story
said last week, the United National Front government too has maintained
the same number of holidays for next year, despite the pleas of
the business community to reduce them in an effort to improve productivity
and efficiency. The Home Affairs Ministry said there would be 25
public and bank holidays in 2003, the same as this year and last.
This means that us Sri Lankans would be on holiday for 129 days
of the year, including the 52 weekends. This is despite
the announced intention of revising the number of holidays in the
proposed National Employment Policy. As Chandra Jayaratne, the outgoing
chairman of the Chamber of Commerce has pointed out, other exporting
countries such as China, Vietnam and even our immediate neighbour
India, have far fewer holidays. What can Sri Lanka offer to the
competitive international investor community with its lower skills,
excessive holidays, politicised labour unions and low productivity,
he asked during a recent speech. Global competitiveness benchmarks
indicate that in most areas of productivity and capability of human
resources, Sri Lankans lag signi-ficantly behind other competing
nations. The business
chambers have been urging successive governments to at least scrap
the extra holiday given when official holidays fall on a Saturday
or Sunday. Patrick Amarasinghe, a former head of the Federation
of Chambers of Commerce and Industry and the National Chamber of
Exporters, has pointed out that Sri Lanka is fast losing competitiveness
because it was often on holiday while the rest of the world is at
work. He has suggested a practical way to overcome the problem,
one that allows workers their days off, but at the same time minimises
the disruption of production and, hopefully, reduces costs. That
is to "rationalise" the system of holidays by arranging
them in a manner that would allow companies to anticipate and plan
for shutdowns or reduced production. What happens
now is that office work and factory production gets disrupted for
lengthy periods of time - a week or two - during seasonal holidays
such as the Sinhala and Tamil New Year and Christmas. This is because
many workers tend to make use of their liberal allowances of leave
during this time so that when offices and factories do re-open after
closing for the statutory holidays, they are unable to function
effectively. Businessman point out that it is not productive to
run factories with minimum staff levels during such periods and
that it is better to shut down officially to save costs such as
on fuel and electricity. This is how it is done in parts of East
Asia such as China and Hong Kong during the Chinese New Year. Of
course, the government would have to make up for the lost production
time by cutting down holidays elsewhere in the calendar. The number
of Poya holidays could be reduced and holidays declared only for
the most important events in the Buddhist calendar. But the private sector has no hope of improving the productivity of a notoriously lazy workforce if even such a market-friendly and pro-business government is reluctant to cut the number of holidays. What is at stake here is the government's credibility, its technocratic credentials and commitment to genuine economic reforms. Don't
gripe - face the challenges! Most industry
sources seem to have caved in to this wave of negative publicity
and are accepting defeat more readily than even Mike Tyson at the
hands of Lennox Lewis. Let us first
look at the positives of our industry. We have an excellent workforce,
which is very literate and well trained and relatively trouble free,
though unionised to an extent. The working conditions and the compliance
to social and labour issues are the best in the region. We are probably
the only garments producing country in South Asia that can guarantee
a child labour free workforce. We also do not employ captive or
slave labour in our industry as in China for instance. We also have
no environmental issues in our garment industry. From the customer's
point of view we are a producer of medium to high quality garments,
with minimal defect and return rates. Even when there are issues
related to quality, the business ethics in the country guarantees
a speedy resolution. Global retail
giants These and many
others being the positives we have in the industry, do we use these
positives effectively in our marketing and our negotiations? The
SLAEA (Sri Lanka Apparel Exporters' Association) has made a positive
start by retaining a team of professional negotiators to work out
the modalities of a FTA with the US, but I think we should have
done this many years ago, before the global economy plunged into
crisis. We bemoan the fact that Bangladesh has obtained preferential
treatment from the EU but this did not come on a platter. For a
country that started the apparel industry long after us, their administrators
were astute enough to realise the importance of positive marketing
and retained professional negotiators almost seven years ago. Some of the
major impediments to the industry sighted by our industrialists
are, low productivity, high labour costs, high power costs, etc. In terms of
a survey done by WERNER International in the region Sri Lanka enjoys
higher productivity rates than both Pakistan and Indonesia and comes
a close second only to Bangladesh, primarily because of product
specia-lisation in the Bengali factories due to the quota free situation
for EU. In terms of labour costs:
Higher productivity
and low labour costs are touted as the panacea for all ills, but
I think this premise is unfounded. No doubt factories must strive
to achieve higher efficiencies and lower manufacturing costs but
I don't think therein lies the solution. In reality
the making (manufacturing) cost constitutes a very small percentage
of the FOB value of the garment. Example - A blouse with a FOB price
of $ 10 may have a making cost of $ 2.50 and the balance would be
consumed by fabric and other trim items. Assuming you
achieve a 10 percent saving on this $ 2.50 by an improvement in
productivity and efficiencies, etc, the saving translates to only
$ 0.25 cents on a FOB value of $ 10 which in percentage terms is
only 2.5 percent. In terms of the price competition with our neighbours
we are not looking at a difference of one or two percent but at
a difference in the region of 10-15 percent. So what is the solution? Alliances Most factories
are at the mercy of these middlemen as they have not developed any
wherewithal to source fabric and accessories at competitive prices
and end up paying maybe $ 30 - 80 cents more per metre of fabric,
which translates to almost a 16 percent saving on the FOB value
of a $10 blouse which in effect is the difference between our competitors
and us. Another common
complaint is that we do not have adequate backward linkages to the
industry which is not totally correct as we have sufficient linkages
in products like woven/printed labels, paper hangtags, price tickets,
plastic hangers, buttons, interlinings, polyfil, elastic and other
packaging materials. Linkages Why has it
not happened up to now? Again I find the industry at fault for adopting
this arrogant and negative attitude of saying that Indian piece
goods are poor in quality and the mills are difficult to deal with;
and deliveries are not on time, etc. Whilst there may be some justification
in these arguments are they really not the same, when we started
trading with Hong Kong, Korea, Taiwan, China or wherever. Again
I think the industry is guilty of taking the easy road out and not
forging any alliances with the larger Indian manufacturers. We have been
blinded by negative perceptions for far too long, especially about
India. Look at how Tirupur has evolved from a knitwear cottage industry
to being one of the largest knitwear producers in the world. We routinely
complain of the lack of infrastructure facilities, Tirupur has none,
not even a single star class hotel or an airport and is located
in a most inhospitable place. So if there is a will there is a way. It is also
foolhardy to believe that the developed markets like Hong Kong,
Taiwan, Korea, etc. are totally self-reliant. With the cyclic nature
of the business and with its rapid changes in fashion, no country
is self-reliant in fabric and all fashion trims. All of these
countries still import substantial volumes of fashion fabrics and
accessories from Italy, Germany, the US, etc, but the difference
is that they cope with such situations with great speed using the
global advancement in communication and transportation links. So
one should not view these as major impediments. EDI links
With this system
in place most retailers feel they can maximise their sales and have
the right merchandise for the customer at all locations, all the
time. Can our manufacturers
fit into such a system even with EDI? Yes I believe they can, but
how many manufacturers have even attempted to form some strategic
alliances with such global players to maximise their market penetration?
Just a handful maybe and again it shows some certain lethargy on
the part of our manufacturers. Our manufacturers
have over the years enjoyed a comfortable slumber on a large bed,
blissfully unaware that our envious neighbours were quietly creeping
up to our bed to enjoy our bliss, and eventually got on the bed.
The bed is
now crowded. What do we do? Do we just get off and walk away? No,
we must fight and now is the time to lay down all barriers and declare
war. For us in Sri
Lanka this is relatively easy, as we are fully aware and have been
aware of what our problems are. The quota disappears in end 2004,
a fact known for the last five years. America is a market of 274
million people and the EU including the UK of 320 million which
are our principal markets. Both have very low population growth
rates. Shifting
priorities The focus of
the clothing industry is evolving in sizes from infants to toddlers,
to teenager, to adults, with the passage of time. We are all aware
of these facts but are we mindful of them? If you look at our market
penetration which is 1.7 percent to the US and 2.4 percent to the
EU, it appears that our manufacturers have again neglected the larger
population market even though it has been quota free and with Sri
Lanka having a very rapid sea transit time to the EU. On an examination
of our conscience, we all know that the EU was neglected for short
term monetary gains by adopting a policy of dealing with the US
only, again the easy rider policy. How many times have I been told
by manufacturers that they are not interested in dealing with EU
customers because they can make more money speedily by working with
US customers. Is it fair
then, to complain now of shrinking markets. Markets and customers
do not fall on one's lap, they must be astutely cultivated and serviced
over a period of time. Almost all
CEOs are knowledgeable in the art of crisis management and problem
solving, etc, so when the problem is not a crisis but one which
had been staring in our faces for the last five years, there appears
to have been a certain laxity on the part of our industry for not
having designed a cohesive action plan to cope with the situation.
Crying foul now seems hardly fair. Competitors So in terms
of per capita our garment exports are streets ahead of both these
countries. It is very much the same if you compare Bangladesh which
has a $ 4 billion industry. This clearly indicates the confidence
the customers have in our market. Production
technology After all in
terms of the total American market this would be an insignificant
increase but it could easily wipe out our 2002 deficit. Positive marketing
requires much travelling and direct interaction with the buyers.
The majority of our manufacturers do not even know where their customers
are located and have not visited them at all. How can you
successfully service your customer if you are not familiar with
the environment in which he retails? It would also encompass professional
product and design development. Here again
one cannot design in a vacuum, it is necessary for the product development
people to live and work in the retail environment so that they have
a feel for the fashion influences like the seasons, the weather,
the dressing habits, showbiz fashion influences, etc. All of these
would require much investment of funds, but in the long-term interest
of one's business these would be funds well spent. Sitting back
and waiting for the emergence of the FTA is futile as the odds are
stacked heavily against us since the trade deficit with the US is
very much in our favour. Short-term
measures As Sri Lanka
probably has the highest number of SUVs (sports utility vehicles),
like the Pajeros and Landcruisers, etc. per capita in South Asia
it might be prudent to import the versatile Jeep and the compact
Cadillacs as alternatives, so that the trade imbalance can be corrected
in the short term, or if only SriLankan Airlines can purchase a
few Boeings, I think the trade deficit would be a thing of the past. Lastly let
me also bring up the question of alternative markets. The land of
the rising sun and Kangaroo land are also worthwhile pursuing, as
are probably Korea and Taiwan and maybe neighbouring India. Due to the
untiring efforts of our youthful minister of commerce we have been
afforded favourable terms on the re-negotiated FTA with India. Hence this
market should also be pursued. In terms of Australia one might say
that this is a market of only 18 million and raise the question
as to whether it is worth following up but it may come as a surprise
to the uninitiated that the average Australian is the highest per
capita consumer of sports shoes and outdoor apparel in the world
and the single store with the second largest turnover in the whole
world is located in Melbourne and run by their premier retailer.
However, one
must realise that both Japan and Australia are difficult markets
and would require much inputs in terms of quality, sizing, fabrication,
etc. and would require much hard work to successfully penetrate.
As they say, no pain, no gain. After the recently
concluded World Cup match with South Korea the coach of the losing
Italian team said, we did not lose the game, we just ran out of
time. So let not the time run out on us, victory is ours, we only
have to go out and get it. (The writer was the founder vice chairman of Sri Lanka Buying Offices Association, a former member of the advisory board of marketing garments to the textiles ministry (1993-94) and has been CEO of a sourcing group responsible for Sri Lanka, Bangladesh and Pakistan for 23 years.) Correction The correct
version is as follows: "These
indisputable eventualities have profound policy implications to
the retirement system in this country, specifically: * Currently
for every 100 working age people there are 15 retirement age people,
by 2025 for every 100 working age people there will be 32 retirement
age people (not all working age people in the population are in
employment). Current pension
schemes The formal
pension systems in Sri Lanka have two variants; Public sector: All government
employees (0.9 million people) and teachers (0.8 million) are eligible
to the public sector pension scheme (PSPS). There are currently
370,000 people drawing pensions." |
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