Reduction in apparel exports to US to hit Lankan economy
Daily News - Tuesday, November 25 2003
by Shirajiv Sirimane

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Apparel exports from Sri Lanka to the United States have reduced by great volumes and with the quota system ending in 2005 this would be a major problem.

Chairman, Summit Corporation, Hiran Jayasinghe who is based in USA said that according to 'Trade data on US imports and exports of textiles and apparel major shippers report' dated August 2003, China shows a improvement of 40.36% and India 13.23%. "Sri Lanka's loss for this year was 4.95%."

The value of Apparel exports was 839 million dollars last year. This year it is only US $ 457 million.

He said that this is mainly due to lack of promotions from Sri Lanka. "China is doing major promotions in the garment trade and even poorer countries such as Bangladesh too are participating in major trade shows."

In contrast over 30 exhibitors each from Bangladesh, India and Pakistan have been attending this event regularly. He said that at the last exhibition in Las Vegas a Bangladesh buyer was able to secure a trade deal to the value of US 30 million dollars. "This is only one instance."

He said that in contrast Sri Lanka is very lethargic in this area and have never taken part in the world's largest Apparel exhibition MAGIC in USA since its inception 71 years ago. He said that MAGIC is the only Apparel Trade show accepted by US Department of Commerce and has over 85,000 buyers with buying power of US$ 85 Billion and 79% of them leave Purchase Orders.

He said that in 2002 China had taken nine stalls and for the last exhibition in August this number has increased to 230. "For the next February Trade show there will be 600 stalls to be taken by China."

He said any company could take part in this exhibition and they are sure to find buyers since 80% of the buyers in USA are top decision-makers of their companies.

"We have over 3,250 exhibitors who produce over 5,500 well-known brands name apparel products. The MAGIC Marketplace is an international apparel community and attracts over 850,000 industry professional twice a year creating this phenomenal marketplace. We fill the two largest convention centres in Las Vegas. Our show in general is over 850,000 square feet; we have over 3,200 exhibitors. Our buying community has grown to over 85,000 from 80 countries. They come to Las Vegas for the MAGIC Show," he said.

He said that they could be contacted on their e-mail

The MAGIC Show is the largest and most comprehensive apparel market in the world, attracting an average of 80,000 attendees, more than 2,800 exhibitors and 21,000 product lines. The Show includes products for men, women and children, as well as a line highlighting the cutting edge of fashion trends. All fees are waived for international attendees who arrive with a delegation. Free educational seminars are offered on business topics including retailing, forecasting and marketing, trends, colour and visual merchandising and technology.

USA is Sri Lanka's largest export market which absorbed US$ 1.9 Billion worth of exports that accounted for 41% Sri Lanka's total exports in 2001. Sri Lanka's key exports to USA in 2001 were garments (81% of exports to USA amounting to US$ 1.5 billion), leather articles/bags nearly 5% of exports amounting to US $ 105 million and rubber 3% exports amounting to US $69 million.

For garments, USA is the key market accounting for 64% of Sri Lanka garments exported in 2001. Sri Lanka is the 16th largest garment supplier to USA accounting for 2.7% of US garments imports from the world. Currently, the USA is the 5th largest import source for Sri Lanka accounting for 4.9% of overall imports to the country. Key import items from the US are Wheat, Mesline and Tobacco.

Given the fact that the garment sector is the largest net foreign exchange earner to the nation and recruits nearly 280,000 in approximately 5,000 industries. In neighbouring countries, its future in the post - 2005 period (with the abolition of Multi Fibre Agreement) is of particular concern to the government and industry.

Time has come to diversify business into other areas such as gems and jewellery, ceramics, IT industry and tourism. Sri Lanka is not just the world's 8th largest source of natural rubber; it also produces the world's best crepe rubber.

Sri Lanka for over two decades has followed free market policies and has evolved into a business-friendly environment favourable for investment and economic growth. Over the years, successive governments have continued to liberalise many areas of the economy to pave the way for international investment.

As a result, Sri Lanka remains one of the most attractive investment destinations in the Asia-Pacific region. Total foreign ownership is permitted across virtually all areas of the economy. There is no repatriation of earnings, fees and capital and on foreign exchange transactions relating to current account payments. The safety of foreign investment is guaranteed by the Constitution. Generous tax incentives and a sophisticated legal and regulatory framework exists, covering for example, intellectual property, settlement of disputes through arbitration, company laws etc.

American investment in Sri Lanka dates back to the 1960s when US companies sought access to new markets, such as pharmaceuticals, chemicals and batteries. Foreign investment from America has steadily increased over the past few years.

At present, there are around 100 US based companies (including Fortune 500 companies) operating in Sri Lanka with an investment of over US $ 500 million. These companies are involved in diverse projects ranging from manufacturing activities (food/agro-processing, animal feed mills, pharmaceuticals, ceramic tiles, garment accessories, integrated textile plants, lingerie, essential oils, computer parts, garments, telecommunication systems, electronics and electrical power systems, chemical products and batteries) to service-oriented activities (financial services, power generation, the blending and marketing of lubricants, pay phones and telecommunication services, training institutes and computer software development.

Sri Lanka's well trained skilled, literate and inexpensive workforce in labour, technical and professional grades, existing training programs, competitive wage structures and business friendly labour practices are a major premia for investors.

US can also fulfil its regional goals of economic development and stability in South Asia. The USA can reach some parts of the large 1.3 Billion mass market of South Asia Via Sri Lanka. US products after fulfilling the required Rules of Origin can gain duty free access to the Indo-Sri Lanka bilateral Free Trade Agreement and preferential access the Pakistani market via the proposed Pakistani-Sri Lanka Free Trade Agreement.

Already, South Asia is a large market for USA with US $ 4.6 billion exports. This amount could be increased to East Asia's level of US $ 104 billion (figure for the year 2000) in the future with ready market access to South Asia for which Sri Lanka provides that conduit.


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