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.

* Global economic recession hits garment industry in Sri Lanka

* Global economic recession hits garment industry in Sri Lanka
Saturday, January 17, 2009, 14:34 GMT, ColomboPage News Desk, Sri Lanka.

Jan 17, Colombo: Sri Lanka's textile sector trade unions say that the global economic recession has begun to hit the local industry.

Sinotex, one of the largest garment manufacturing factories in Katunayake Free Trade Zone that started production in 1982 and employed around 2000 workers closed recently due to shortage of orders. The factory made garments mainly for the US.

Trade union sources say that in Katunayake Free Trade Zone alone, jobs of around 20,000 workers are at risk as several factories are about to close since they are in short of orders.

With the sharp decline of orders from the US and European Union, a number of factories in Katunayake, Biyagama and Koggala Free Trade Zones are about to close, trade union sources say.

Sri Lankan Garment-Float SL Rupee

Float SL rupee, says exporters

Sri Lanka's National Newspaper since 1918

Thursday December 30, 2008

Sri Lanka Garment Buying Offices Association (SLGBOA) and the Sri Lanka Chamber of Garment Exporters (SLCGE) have appealed to the Monetary Authorities to allow the Sri Lankan rupee to a realistic level so that garment exports and imports in general could remain competitive.

Sri Lanka’s competitors India, Bangladesh and China have floated their currencies to realistic levels posing a threat to our garment exports, they point out.

A statement issued jointly by the two organisations said: “With the advent of the post quota regime the Industry faced fierce competition from Bangladesh, China and India. Due to the dialogue of the Government of the day the commitment of the garment industry in marketing the ethical practices and the high compliance the EU accordingly granted the importation of Sri Lanka ready made garments Duty Free access under certain stipulated conditions which is commonly known as GSP Plus scheme.

“This gave the Sri Lankan exporter much fillip which helped the Industry to increase the exports to the EU since the scheme came into operation. Under the GSP Plus scheme the apparel industry is the main beneficiary but it also gave great opportunities or both the traditional and non-traditional exports.

“Due to very fierce competition since the post quota period many factories could not survive the highly inflationary environment in Sri Lanka when ad hoc wage increases, increase in factor cost and a very strong Sri Lankan rupee added to the woes of the Industry especially the small and medium (SME) sector.

“In addition to these factors the Banks who up to this time made good profits from the trade started to look at the very Industry they supported and thrived on a negative outlook.

“The Banks follow a policy of giving the customer the umbrella when the “sun was shining has taken it away when its raining” The garment industry which had about 800 factories until 2005/06 has now shrunk to less than 290 factories. The SME sector being the main casualty.

“The large Groups have survived (only a few had shut down) and the surviving have spread their risk by moving their operations to India, Bangladesh who will benefit at the expense of Sri Lanka. Hence there will be foreign exchange gain to these countries which will be a loss to Sri Lanka and unlikely to regain.

“Sri Lanka’s inflation which reached a record of almost 30% and currently stands at year on year inflation of 20.20% which is still high by any standard. Strangely and for inexplicable reason the Sri Lankan rupee has emerged as the strongest currency in the world today. In comparison, the currencies in our competing countries devalued realistically thereby making their exports remain competitive and Sri Lanka Apparel Exports made to struggle further.

“We urge the Monetary Authorities to be proactive like our competitors and allow the Sri Lankan Rupee to float to a realistic level so that our apparel exports in particular and exports in general can remain competitive and survive this crucial and critical period.”