Apparel industry in a fix, EU exports drop 10-15%
The apparel industry is bracing for hard times with exports dipping by about 10-15% to the European Union (EU) alone and tightening competition as the withdrawal of GSP+ concessions takes effect. As the largest foreign exchange earner and the largest employer in the country, the industry is now looking at opportunities through bilateral ties with high importing countries like Brazil and Turkey, Sri Lanka Apparel Exporters Association Chairman Rohan Abaykoon told the Business Times.
But, discussions with the Export Development Board (EDB) on this matter had not generated any support yet, it was pointed out. Industry heads meeting with the government have pushed for a number of changes. Requests were made to consider obtaining the GSP+ concessions for Sri Lanka; removing the tax on capital goods that amounts to 7-8 per cent of total costs; and establish bilateral ties with countries like Brazil and Turkey in a bid to find new export markets. “I think the effects of the loss of the GSP + concessions is now catching up on us,” he said adding that overall the industry has faced a 5 per cent drop up to May compared to last year both in value and volume.
It was pointed out that a larger drop was witnessed in April and May amounting to about 12-13 per cent. Initially the industry expected an overall drop for the year of about 5 per cent however, with the dip in exports the figures would have to be re-looked, Mr. Abaykoon said. Previously, industry analysts observed that the withdrawal of the GSP concessions was unlikely to affect them but this is now attributed to buyers’ inability to pull out at once at that stage. With the withdrawal impacting on the industry the apparel business is faced with tough competition from Pakistan and India in addition to Bangladesh, Vietnam and Cambodia that have now gained GSP plus concessions from the EU, the industry spokesman explained. Moreover, costs have mounted by about 20 per cent compared to last year; Mr. Abaykoon complained adding that trade unions were right now agitating for a salary hike of 30 per cent as approved by the Wages Board.
He lamented that due to the spiralling costs they could only support for a 20 per cent wage hike effective next year January. Wages cost 15 per cent of overall costs of the industry. More closures and shifting of operations could be expected within the next two to three years should the industry be unable to obtain some concessions from the government, Mr. Abaykoon asserted.
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