Garment exports into the EU to rise

Sri Lankan apparel exports to the EU are expected to increase due to the DogiEFA warp knit facility in the MAS Fabric Park in Thulhiriya. DogiEFA officials say the availability of warp knitted fabric in Sri Lanka will help increase exports to the EU, by allowing more local garment exporters to make use of the GSP+ scheme.

The GSP+ trade concession scheme gives duty free access to Sri Lankan ready made garments into the EU. The trade scheme was operational since July 2005. However, many local apparel exporters could not use the scheme to export duty free into the EU because domestic value addition was too low.

To qualify for GSP+ benefits, local garments have to show over 50% domestic value addition and domestic double transformation. This was not possible due to the high percentage of imported inputs. Although garment exports are worth US$ 3 billion annually the industry imports around US$ 1.6 billion worth of fabric and accessories as inputs.

Previously the entire domestic demand for warp knitted fabric for instance, was imported. But now the fabric will be made in Sri Lanka. This, say DogiEFA officials, would allow more Sri Lankan garment manufacturers to qualify for GSP+ benefits and would also increase European buyer demand for Sri Lankan garments.

“The GSP+ gives zero duty access into the EU, if we use fabric that is made in Sri Lanka. This will make it much more competitive for European buyers to source from Sri Lanka. So we expect European orders to increase,” said CEO of DogiEFA Sri Lanka, Dhananjaya Rajapaksha.“Current demand for warp knitted fabric is between 8-10 million metres per year. We expect demand to increase to about 15 million metres per year by 2010, because more people will be placing orders in Sri Lanka to make use of the GSP+,” he said.