The loss of Sri Lanka’s GSP+ facility to the European Union may have cost the country’s garment industry as much as US$ 1 billion, according to former Secretary General of the Joint Apparel Association Forum, Rohan Masakorala.
“Speaking from practical experience and what I’ve been told by people in the industry, the loss of GSP+ may have cost the apparel sector approximately US$ 1 billion. Worse still, we aren’t even re-applying for GSP+ the facility, even though it is needed. When we request GSP+, we are not asking for concessions but instead we seek a level playing field in one of our most important markets,” Masakorala pointed out.
“The industry didn’t feel it as much last year because of issues in China and Bangladesh, but that is now no longer the case today,” he added
Speaking during the technical sessions of the Sri Lanka Economic Association’s Annual Sessions 2012, Masakorala went on to state the increased cost of doing business had led one manufacturer to actually shift operations from Sri Lanka to Vietnam.“This manufacturer had to put up with an additional cost of 25 million Euros to be able to export to the European Union due to the loss of the GSP+ facility. Instead of paying such a steep price, this manufacturer decided to pay that cost to set up their business in Vietnam where they could export more freely,” he said.Despite increased competition for European markets, Masakorala maintained that Sri Lanka could still retain market share in the region through an improved focus on supply chain efficiency.
“We are constantly told to look for new markets and while that’s very easy to say, practically speaking India and China are very difficult markets to get into and maintain a presence in. Sri Lanka can still sustain this industry by supplying goods on demand since we are still capable of producing at a faster rate than Bangladesh but we need GSP+ and we have to focus on improving labour productivity,” Masakorala said.
Sri Lanka lost its GSP+ entry to the European markets in August 2010. It resulted in the closure of a number of garment factories islndwide though the government maintained that the loss of the trade concession may not be a big impact on the 30 year old apparel industry, Sri Lanka’s Central Bank Governor Ajith Nivard Cabraal in an interview called GSP+ an ‘old hat’ that would become a non event very soon.He went on to level criticism at dismal labour productivity in the public sector whilst advocating the implementation of incentive-based productivity targets.“Unfortunately, in Sri Lanka, politics has taken precedence over economics. Labour laws are not conducive to improving productivity and there are far too many labour holidays.
We talk about how Sri Lanka is going to be a hub but when you look at some government offices it appears to be quite a pathetic situation. They don’t even work 8 hours and they don’t work to time and this virus is spreading to the private sector as well.
“Productivity must be made a priority if we are to maintain competitiveness. Output targets must be specified and perhaps even the kind of incentivebased schemes that have been implemented for crane operators in the port should be considered for other areas of the public sector as well. “