The Sri Lanka Apparel Exportersâ€™ Association (SLAEA) had set a target of achieving US $ 8.5 billion exports by 2020 but due to the delays in regaining the duty free access via GSP Plus to the European Union (EU) and the economic and political uncertainties in key Sri Lankan export markets, the apparel industry has set its sights lower for the medium term with a US $ 8 billion annual export target to be reached by 2022.
The EU absorbed over 40 percent of Sri Lankan garment and textile exports and the loss of the GSP Plus facility had stricken a hard blow to the local apparel industry.
SLAEA Chairman Felix Fernando said that there had been some delay in applying for re-entry into GSP Plus. The government had faced domestic unrest and criticism over recommitting to implement human rights conventions that Sri Lanka had signed in the past, to become eligible for the facility. However, they were expecting regain GSP Plus soon and they revise the target based on the changes in economic conditions.
Fernando said that with regaining GSP Plus, the industry would surpass the US $ 5 billion mark for the first time in 2017.
The unilateral duty waiver from the EU was reinstated this May after losing the trade benefits in 2010 over allegations of human rights abuses during the latter stages of the civil war.
Economists have pointed out that there would be challenges for Sri Lanka to regain the lost businesses due to the competitors with GSP Plus and other preferential benefits stepping in over the past six years.
Also, weighing on is the uncertainty of retaining the GSP Plus facility, as during a recent visit to Sri Lanka to observe the progress of the reforms, an EU delegation noted that progress was slow and Sri Lanka cannot afford to sit back and relax after regaining GSP Plus.
Nevertheless, the effect of the UK leaving the EU by 2019 will have a negative impact on Sri Lankan exports, according to Fernando, if Sri Lanka and the UK could not enter a trade pact.
Of the exports to the EU, 43 percent goes to the UK. With the uncertainties around Brexit, the Sri Lankan authorities need to talk to the UK counterparts and we are not certain if both the countries will continue to offer the same trade facilities. Due to these uncertainties, it is imperative that they consider the other EU countries and especially Germany, where their presence is limited, Fernando said.
The government in the past had indicated its interest in pursuing a trade agreement with the UK, although there has been no further indication of progress. However, Fernando added that the silver lining is in the fact that all competitors will lose preferential access to the UK at the same time, ensuring a level playing field for Sri Lanka to compete.
Fernando said that the industry has to expand its presence in non-traditional markets as well and that the Sri Lanka-China free trade agreement may help in this regard to enter into the Chinese market. He noted that despite the export target falling, the industry will be attempting to exceed these expectations.
According to the Central Bank, Sri Lankaâ€™s apparel export earnings stood at US $ 3.7 billion for the first nine months of the year. However, over the first eight months of this year, apparel exports had fallen by 2 percent to US $ 3.1 billion and as per the Joint Apparel Association Forum (JAAF) data. Exports to the EU too had fallen by one percent to US $ 1.3 billion, although there was a double-digit growth in exports in July and August, due to the GSP Plus benefits.
Sri Lankaâ€™s apparel exports grew from US $ 2.5 billion in 2001 to US $ 4.2 billion in 2011 but from then till 2016, during the period of having no preferential access to the EU, apparel exports grew at a slow pace, reaching just US $ 4.9 billion.
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