High manufacturing costs hurt apparel Industry

High manufacturing costs hurt apparel Industry
Posted by Chea Sophal
Wednesday, February 25, 2009
Daily Mirror, Financial Times

By Cheranka Mendis
The greatest dilemma in the apparel industry is the high manufacturing cost, said Chairman of Apparel Exporters Association, Channa Palansuriya at their Annual General Meeting of Apparel Exporters Association held last Friday.

"The garment industry is currently facing challenges such as high manufacturing cost in Sri Lanka, the slow down in the US economy and the market situation in European Union (along with the renewal of GSP benefits and GSP+ by EU)," said Mr. Palansuriya. However the industry was said to be performing plausibly well with the foremost growth being from the European Union sector while the U.S sector having a slight decline.

"Total exports on apparel showed a 3.5% marginal increase in 2008 even though total exports decreased by 5.3% in December 2008 in comparison with December 2007," said Mr. Palansuriya. The overall exports to the United States recorded a negative growth of 5.5% but those to the EU remained positive at 10.7% over the same period. However he stated that if the Sri Lankan Rupee is devaluated by 15% and apparel exporters are given stimulus packages, the decrease in the total exporters can be somewhat subdued. But it cannot be done with the current situation prevailing in the economy, he added.

Commenting on the global recession and the meltdown of the United States economy, Sri Lankan apparel future seems to be in a gloom, as 50% of our exports are sent to the United States. However Sri Lanka is currently looking at other countries optimistically, especially China, alleged Mr. Palansuriya. "The major weaknesses of the textile industry are the absence of an indigenous fabric base, the lack of designing capabilities, low productivity and high concentration on few markets and finance cost," point out Mr. Palansuriya.

The strengths are the government policies of liberal business environment, educated and trainable labour, quality supplies, logistics, and speedy turn around time as well as adhering to compliances.

Mr. Dhammika Perera, Guest of Honour of the AGM expressing his view stated that the removal of fuel surcharges on electricity and waving ESC charges for 2009 via discussions with the Treasury prior to the budget and the reduction on port charges will hel the industry in the future. He also stated that with the 5% package introduced to the exporters, the future speculation will be positive if used wisely; "The 5% on value addition benefit given by the government without depreciating the Sri Lankan rupee can reduce government debt." He also acknowledged that even though the apparel industry boasts of bringing in the highest income to the country, after the value addition, only 1/3 will actually remain in the country. Minister of Public Administration and Home Affairs as well as the Deputy Finance Minister Sarath Amunugama said that the government is aware of the requirements of the apparel industry. "Government is extremely conscious about the requirements in the industry and we try to accommodate as many as possible as this benefits the country immensely," he said. Speaking on future development strategies, the Minister said, "In BOI aspects, North and East have been identified as special zones for growth and we hope to develop the apparel industry in these areas."

The main motive behind all these measures is to protect all medium scale garment factories without allowing them to shrink and to sustain them throughout the credit crunch and any negative socio aspects, said Mr. Palansuriya.