State help sought to set up local textile industry to fully harness GSP Plus

• Apparel exporters point out need to develop dedicated textile industry to source required fabric base for apparel exports
• Sri Lanka and Bangladesh also exploring avenues to boost exports to EU with collaborative efforts 
• Despite GSP Plus apparel exports to EU only showed 3.9 percent YoY growth in 2018

By Nishel Fernando 

Sri Lanka’s apparel exporters seek government support to develop a dedicated textile industry in the country to source the required fabric base for apparel exports in order to enhance the utilisation of European Union’s (EU) GSP Plus facility.

In an interview with Mirror Business, Sri Lanka Apparel Exporters Association (SLAEA) Chairman, Rehan Lakhani said, “The absence of a strong fabric base in the country is minimising our ability to manufacture a large volume of garments for export to the EU using GSP Plus, due to our inability to meet the country of origin rules.” As Sri Lanka is exploring new markets to source the required fabrics by complying with the EU regulations, he noted that the ‘yarn-forward’ rule of origin in trade agreements demand heavy documentation requirements which offset the worth of their time and the duty saving benefits. Sri Lanka re-gained the European Union’s GSP Plus regime in mid 2017. However, the apparel exports to the EU only showed a year-on-year (YOY) growth of 3.90 percent in 2018 while the apparel exports to United States (US) grew at a faster rate of 5.78 percent in the same period.  Lakhani believes that the best way to maximize the utilisation of GSP Plus scheme is to develop a textile industry in the country for apparel exports with the full State support. 

“Sri Lanka will have to essentially develop a textile industry for which absolute support from the government by the way of identifying suitable lands with discharging facilities for treated water has to be provided. 

Only such a move can create the required fabric base to enhance the GSP Plus utilization by the sector.

“I am not sure whether the anticipated level of growth could be achieved, but certainly a positive level of growth could be achieved which could enhance if verticality guaranteed,” he elaborated. 

Sri Lanka has been attempting to source fabric from ASEAN countries under the provisions of Regional Cumulation provided for in the EU regulation.

“We selected Indonesia as the only country that could provide the same and the Sri Lanka government together with the Indonesian authorities submitted a joint application to the EU seeking their permission to use fabric from Indonesia to manufacturer goods in Sri Lanka for export to the EU using GSP Plus and the said application is pending,” he revealed. Further, the Department of Commerce is in the process of preparing an application in consultation with South Korea to source fabric from the country. 

Meanwhile, Lakhani said that Sri Lanka and Bangladesh have been exploring collaborative ways to penetrate jointly into the EU market by combining the strengths of both countries.
The Joint Apparel Association Forum (JAAF) of Sri Lanka has already formed a team to look into areas where Sri Lanka and Bangladesh could jointly penetrate into a market that would give wins to both sides.

“It was found that the strengths of Bangladesh namely scale, low cost of labour, labour availability, large capacity are not our strengths. But speed, connectivity, high-end value addition, logistics advantage are ours and are not available in Bangladesh.

“Therefore, there is a possibility to leverage the strengths of both parties and offer to the EU, for which discussions are currently ongoing,” Lakhani revealed. 
This initiative is the first phase of the long-term vision to make South Asia the foremost apparel producing region with collaborative efforts, surpassing South East Asia.