Financial Times

Challenging period ahead for Sri Lanka's apparel industry
By Feizal Samath
The Textile Quota Board (TQB), responsible for doling out quotas to garment industrialists over a near 30 year period under the existence of the Multi Fibre Arrangement (MFA) - will continue its work till June 30 next year and even after that - in a slightly different role.

"While the TQB will handle quotas allocations till mid-2005, we have requested the government to retain the TQB as its collection of data and statistics is very useful to the industry," according to Ashroff Omar, chairman of the Joint Apparel Association Forum (JAAF).

Omar says the industry shouldn't consider the end to textile quotas - just 26 days away on December 31, 2004 - as all gloom and doom to the industry but a "challenging period" ahead. "Some factories may be closing but new ones are opening. We are opening one on Thursday and also taking a 10-acre site for logistics. We are positive on the future for garments," he told The Sunday Times Business Club at its monthly meeting on Tuesday at the Trans Asia, the host hotel. The co-sponsor of the event was Lion Brewery (Ceylon) Ltd.

Taking Business Club members through an interesting presentation on the MFA and its origins from the late 1970's to the end of an era in textile quotas, Omar - also CEO of Brandix - spoke of how the Sri Lankan industry grew on textile quotas and now faces its biggest test when all quotas (MFA) end on December 31, 2004.

"I don't think it is all that gloomy. For example when five quota items were phased out by 2002, we retained our markets (and even expanded) in two items while losing three. Either we get together to meet this challenge and use it as an opportunity to take us to the next level or we would sink."

Responding to questions, he was unable to say how many factories have closed or expected to close and the level of job losses. But Omar said currently there are some 25,000 job vacancies in the industry. Another bit of encouraging news in an uncertain scenario is that the GAP label, one of the biggest US buyers of Sri Lankan apparels, has selected 19 countries that it would do business with after 2005 from a pre-quota supply base of 44 countries. "Sri Lanka is among the 19 and that's good for us."

Omar hopes the global impact of the scrapping of the MFA would be like the Y2K (the start of the new 2000 millennium and the impact on the IT industry and data), which led to a lot of preparations over an expected major fall-out while "ultimately nothing happened." Some of the strengths in the Sri Lanka industry are having a prestigious international customer base and good human resources. Sri Lankan managers for example are much sought after in factories in Bangladesh and Pakistan. Omar said the peace process was a positive development to the apparel industry. "Earlier we had to travel to Singapore to meet European buyers because of their reluctance to travel to Colombo due to the conflict. That has changed and buyers now come here," he said.

Looking to the future, JAAF - an umbrella organisation representing groups and associations representing various segments of the apparel industry - has a five year strategy to raise turnover from a current $2.3 billion to $4.5 billion in 2007 and raise the standards and quality of the industry, particularly amongst the small and medium-level producers.

10th anniversary party cum Christmas bash
The Sunday Times Business Club celebrates its 10th anniversary cum year end party at the Trans Asia Hotel on December 16. Members should contact the executive committee for details. Interested in learning about club activities or joining this prestigious group launched in 1994? Then log on to the club website www.businessclub.lk for more information.

MFA origins
The Multi Fibre Arrangement (MFA) was introduced as a short-term measure mainly to give industrialized countries "breathing space" to adjust to competition from imports from developing nations. However the MFA failed to prevent a massive shift in production of textiles and garments to developing countries with Asia becoming the world's foremost exporter of apparel.

The removal of the MFA - with the Uruguay Round on new trade rules where it was decided to remove all quotas - was seen as a victory by developing nations. It was decided to phase out MFA in 10 years with the process being implemented in four stages.

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