April 26, 2016 | By: Sri Jegarajah
and Huileng Tan
In today’s world of Instagram and fast fashion, Sri Lanka’s garment exporters have found a nice niche thanks to their design-to-deliver supply chain. But the industry could get caught out by challenges from a fast-changing global trade environment.
With the U.S.-led Trans-Pacific Partnership
(TPP) trade pact — of which Sri Lanka is not a signatory — on the horizon, competition from TPP signatories such as Vietnam could deal a blow to the South Asian nation’s apparel export industry, which currently employs half a million Sri Lankans and provides 44 percent of all manufactured goods exported by the country.
It wouldn’t be the first time Sri Lanka is up against trade practices that are not in its favor.
Since 2010, when the European Commission revoked Sri Lanka ‘s Generalized System of Preferences Plus (GSP+) status as a penalty for alleged human rights abuses committed at the end of the country’s civil war, the industry has suffered from the loss of preferential tax treatment.
Still, heavy investment in a value-added supply chain that enables prompt turnaround has kept the industry going in the face of unfriendly trade treatment.
“How many days would it take you from design to delivery? In this industry it used to be months. [Now] a chase order [for] something that’s selling in the U.S., we could produce it and ship it across to the stores in 14 days. How this is possible is that the supply chain is closer to needle point,” said Sharad Amalean, deputy chairman of the country’s Joint Apparel Association Forum.
A design-to-delivery solution means that the design, manufacture and logistics such as delivery are all carried out in Sri Lanka. The country exports about $5 billion worth of apparel a year.
Despite this innovation, growth in exports to the European Union — Sri Lanka’s biggest garment export market — fell from 13-14 percent from 2005-2010 to about 7 percent a year after the GSP+ status was revoked, according to a report by consultancy Oxford Business Group, citing numbers from a Joint Apparel Association Forum official.
But Ashroff Omar, group chief executive of Brandix, Sri Lanka’s largest apparel exporter, told CNBC he was hopeful of another about-turn. The exporter shipped $750 million worth of goods to its clients last year.
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