Financial Times

Apparel sector plans one-stop-shop
By Dilshani Samaraweera
Sri Lanka’s apparel industry is planning to set up a one-stop-shop facility to draw international buyers. “We are looking at setting up a product development centre that will act as a one-stop-shop for buyers,” said Suresh John, former chairman of the Sri Lanka Buying Offices Association.

The facility will allow Sri Lankan manufacturers to design and produce samples in double-quick time, to show international buyers. As it is garment orders are increasingly dependent on speed. The time to discuss designs and turn out samples is running out for Sri Lankan garment producers because countries like China and India can do all of this much quicker thanks to domestic resource bases.

The product development centre is aimed at ensuring garment orders keep coming in to sustain Sri Lanka’s largest export industry. The biggest worry is that buyers will over the next few years shift business to destinations that offer better value for money.

“We’ve failed to attract major buyers to set Sri Lanka up as a South Asia hub. Instead, they are going to India, although the apparel industry in here is more mature,” said Romesh Fernando, deputy chairman of the same association.
International garment buyers, for European and American clothing brands, previously located their buying centres in countries like Singapore and Hong Kong.

These companies are now moving their buying hubs to Southeast Asian countries to keep pace with the shift in manufacturing. A buying hub is the central point from which international buyers coordinate their regional purchasing.

“A buying hub attracts business for that country. If Sri Lanka becomes a hub, the tendency would be for a large share of the business to come here. You also have the first choice of refusal and can pick and choose what to produce,” said Mr. Fernando. But buyers say this is another opportunity that could bypass the island unless some strong marketing is done.

The proposed product development centre for the garment industry is expected to help keep Sri Lanka on the buyer’s map, by offering value-added services. The industry has not yet worked out the cost of the facility but is looking for government support to set it up.

Made in Sri Lanka
The apparel industry is also pushing for investments in textiles, to improve competitiveness and to make use of trade concessions. Most of Sri Lanka’s textile needs for garment exports are imported, adding to production costs. Because buyers are increasing demanding faster deliveries, the extra time spent sourcing and importing fabric, also makes it harder to compete with countries that make raw materials at home.

“Buyers want prices in 24 hours. They want samples within two to three days. Before long the period between placing, ordering and manufacturing will fall to 45 days from 60,” Mr John said.

Domestic production of textiles is expected to reduce overall time taken to meet orders. For instance, if a fabric needs to be developed from scratch, this alone could take from 45 to 90 days. But if the material is produced locally, the time can be cut down to two weeks. Exporters say a domestic fabric base will also enable duty free exports to the European Union (EU).

“To make use of the EU’s GSP+ scheme, the textile must originate here. Then we can qualify for duty free exports into the EU,” noted the chairman of the Sri Lanka Apparel Exporters Association, A Sukumaran.

Sri Lanka qualified for the EU’s GSP+ scheme from July 2005. The concessionary trade scheme allows duty free entry into the EU for 7,200 items, including apparel. But to qualify, the exports must also show over 50 percent domestic value addition. As a result – since most fabric for ready made garments is imported – Sri Lankan garment exporters can’t use the duty free facility.

Garment exporters point out that if Sri Lanka can meet the EU’s domestic value addition criteria by using home made fabric, Sri Lankan garments will have a price advantage over competition.

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