Sri Lanka set to miss apparel export target by US $ 500mn

By Nishel Fernando 
Sri Lanka’s apparel industry has revised this year’s export target to US $ 5 billion from the earlier target of US $ 5.5 billion, amid the October apparel export earnings declining by marginal one percent year-on-year (YoY) to US $ 403 million.

According to the Sri Lanka Apparel Exporters’ Association (SLEA), apparel exports during the January- October period have grown 4.4 percent YoY to US $ 4.1 billion with exports to the US market growing 4.5 percent YoY to US $ 1.8 billion and exports to the European Union (EU) growing 4.2 percent YoY to US $ 1.7 billion.  

In October, exports to the US slowed down 6.5 percent YoY to US $ 188 million, which was somewhat offset by the recovering apparel exports to the EU, which recorded a growth of 3.1 percent YoY to US $ 167 million. 

“We can’t be happy with the overall 4.4 percent growth rate. We hope that we will be able to pass the US $ 5 billion magical figure by end of this year. The apparel exports in the November and December period usually climb up,” SLEA Chairman Felix Fernando told Mirror Business. 

He noted that Sri Lanka’s apparel export earnings would average around US $ 450 million in November and December, enabling the industry to cross the US $ 5 billion mark. 

Fernando blamed the sluggish retail markets in the EU and US as well fierce competition among global suppliers for adversely impacting Sri Lanka’s apparel exports. According to him, there’s 4 percent oversupply in the global apparel market. 

He said apart from Bangladesh and Vietnam, some African nations such as Ethiopia are also emerging as major apparel exporters to the US and EU, as they have the capacity to manufacture garments at a lower cost while meeting the necessary sustainability standards demanded by the US and EU retailers.  

He noted that Sri Lanka was not able to fully capitalise on the US-China trade war, as Sri Lankan manufactures didn’t have the capacity to cater to large export orders that China was losing.  

However, he stressed that GSP Plus was crucial in achieving the current growth level of 4.4 percent this year.

“We certainly got the benefits of GSP Plus. Had not been for GSP Plus, our sales would have further gone down,” he said.

Moving forward, Fernando asserted that a lot remains to be done to reach the US $ 8 billion apparel export earnings target set for 2020, which includes diversifying Sri Lanka’s export markets and plugging into sophisticated value chains. 

Commenting on Sri Lanka’s apparel export markets, he pointed out that the industry should attempt to increase its exports to emerging markets such as China, India and Russia as well as unexplored markets such as Japan. 

“The per capita apparel consumption in India and China are growing at double digits. Though there’s growth in per capita consumption of apparel in the US and EU, the growth is minimal,” he said.

However, he suggested that duty-free access would be crucial to increase Sri Lanka’s apparel export share to these markets by plugging into value chains in these countries. 

“If you want to get into some of these Indian and Chinese markets, probably it’s good to partner with local parties. For example, we can get down Chinese fabrics here and process and export back to China. 

Unfortunately, we don’t have duty free access to any of these countries and that’s why our manufactures are not so keen. For example, Bangladesh has duty-free access to the Indian market. But Sri Lanka doesn’t have the same access to India,” he elaborated.