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3139Industry lists e-commerce, SVAT and complete reform agenda as vital for future growth Treasury Secretary hails apparel industry for resilience and success by overcoming challenges of loss of quota; GSP+; difficult global markets and external and internal shocks

Sri Lanka’s star export manufacturing industry, apparel, recorded a historic level of $ 4.3 billion in 2013, posting a key recovery after shipments slumped by 5% to $ 3.99 billion in 2012 over 2011.

Riding high on successful public-private partnerships as well as conducive regulations by the Government, 2013 was a historical year for the apparel industry, Joint Apparel Association Forum (JAAF) Deputy Chairman Noel Piyathilaka said, adding that the challenge now was not only to sustain the momentum but also to grow to realise targets set by the President to achieve US$ 10 billion by 2016 and to be among the top 10 apparel export countries of the world by 2020.

Speaking at the 10th Annual General Meeting of the forum on Wednesday, Piyathilaka presiding over the evening’s event on behalf of JAAF Chairman Azeem Ismail noted that the time had now come to explore all possibilities. “I believe we can achieve this because of the visionary leadership given by stalwarts of our industry, coupled with the business friendly environment created by the Government.”
He acknowledged the Government’s support through the introduction of regulation on anti-competitive trade practices and direction for shipping service providers to issue a bill lading clearly indicating whether the consignment is freight collect or freight pre-paid, among others.

“In a futuristic and visionary move, the Government is proposing to establish a merchant shipping authority in keeping with the development of the maritime industry to harness the maritime hub potential,” he added.

The creation of a solid legal base for the establishment of free ports and free bonded areas which are sanitised from domestic tax and other distortions will elevate the traditional manufacturing and export methodologies to that of regional exporting business model as well, he expressed.

Due to the commitment of the State, multi-country consolidation is now offering even better opportunities to trade.

Drawing the attention of Chief Guest of the evening Treasury Secretary Dr. P.B. Jayasundera to a few remaining issues that require solutions, Piyathilaka asserted that by addressing the issues related to e-commerce, SVAT and international market penetration, the industry, along with many others, would benefit even more and hence would be able to deliver a higher contribution. When this is done, the total reform agenda would be complete, he said.

“e-commerce is an extremely high priority area in our trade facilitation agenda. The Department of Commerce and BOI though actively involved in the development of the system need a visionary leadership to make this happen.”

He requested Dr. Jayasundera to bring this under his personal purview so that it could be completed in a time-bound manner.
Piyathilaka stated that if not for the introduction of the suspended VAT scheme, the apparel industry could not have been able to perform due to complexities attributed to the VAT administration system, including refund mechanism and double digit rate.

What is needed for economic growth, therefore, is a transparent, single digit VAT system. “However, despite the presence of the SVAT system, further reforms are recommended in the larger interest of the economy,” he added.

The policy framework and reform agenda that is put in place will further strengthen the domestic environment to conduct the apparel export business.

In fact, JAAF believes that with the completed reform agenda supported by international market penetration activities, in particular the conclusion of China-Sri Lanka FTA and other targeted non-traditional markets, Sri Lanka will rank among the best sourcing countries in this part of the world. “I do believe apparel will continue to grow and be the topmost industrial export sector in our total economic agenda,” Piyathilaka said.

The apparel agenda has always included the subject of market diversification and made representation to the Government to explore the possibilities of obtaining preferential treatment from China, India, Japan, Russia and Brazil.

Piyathilaka also expressed hope that the China-Sri Lanka FTA would be completed by the end of the year.

“We are confident that with all these reforms and trade facilitation measures, we should be able to reap the target of US$6 billion in 2020, which you have predicted.”

In his remarks Chief Guest Treasury Secretary Dr. P.B. Jayasundera suggested it seems like everyone wants a piece of Sri Lanka. While one party claims Sri Lanka to be a tea nation and another a cinnamon nation.

However Dr. Jayasundera expressed that Sri Lanka was neither one nor the other, but an ‘apparel nation’.

Addressing the first post-business session held by JAAF at the conclusion of its 10th AGM, Dr. Jayasundera noted that the industry deserves this title not because it has surpassed the expectations of the Government, but because it successfully faced up to challenges and stood resilient in the face of adversity.

Quoting the President on the above comment, Jayasundera expressed that he never had any doubts about the strength of the industry even when external challenges were lining up by the minute.

“I knew they would adjust. When Americans withdrew the quota, while discussing and requesting the authorities for reconsideration, I told the Ambassador that they were helping Sri Lanka with the withdrawal. ‘Let them compete,’ I said.”

He noted that concessions must be a bonus for the industry and not just a tool for survival.

Last year the challenges were electricity tariff increases and oil price increase. These have been successfully trounced.

“You took the GSP challenge, American quota challenge, oil shocks and main markets collapsing in your stride and yet achieved the revenue you have achieved,” Jayasundera said.

This has been achieved through the creation of a green environment, enormous ancillary logistic infrastructure within the country, exporting ‘without’ e-commerce and without an optimised SVAT system. “With all this difficulty and madness going around, you have performed.”

He added that during the recent visit of World Bank President for South Asia Phillippe Le Houerou, Houerou spoke of Sri Lanka as a ‘tea nation,’ which Jayasundera was quick to correct as an ‘apparel nation’.

Commenting on Piyathilaka’s request for a decent tax regime, 12% is hardly a tax, the Treasury Secretary remarked.  The industry could however benefit from the tax reduction for R&D which has been budgeted. “In the 2014 Budget we have allowed to bring big brands here. Use that and bring big names here,” he added. “You guys are rich enough. This is the old apparel industry.”

“Your industry and entrepreneurs in the industry today are visionaries and have the capacity. As a citizen of this country, I am proud of the journey you have travelled. We are not competing at all with our regional partners. The competition is at another level.”


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Sri Lanka Garments

SLAEA Magazine Front Cover 2Journal & Directory of the Sri Lanka Apparel Exporters Association, containing valuable information with regard to the apparel industry.
Issue No. 90


Contact :
Sri Lanka Apparel Exporters Association,
50/1,Rosmead Place, Colombo 7
Tel: +9411 2675050, 2674528 
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