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Apparel
sector braces for quota-free era The industry
is often derided as being just a glorified tailor shop, but experts
feel it has the potential to thrive and that its future direction
appears to be in consolidation and in focusing on high fashion garments
for niche markets. "Many
think the year 2005 will be a watershed year with lots of factories
closing down and people losing jobs. I believe that we will overcome
this problem," said Mahesh Amalean, Chairman of MAS Holdings
group, one of the leaders in the industry. "People
should think of it as a great opportunity to boost the apparel industry
of Sri Lanka. Sri Lanka should become known as a country which provides
a full service manufacturing solution to leading retailers and brands.
We should reach out to the better end of the market. Let China handle
the discount stores." "Sri Lanka
will never be able to compete with China on price and its hope lies
in being the world's best apparel manufacturer for the better retailers
and brands", said Amalean. Although many
consider the quota system under the MFA, which is to be phased out
by 2005, as a trade barrier others believe it helped to uplift the
textile sector. "It has
done more good than harm. It might be a trade barrier for countries
like Hong Kong and to big companies in Sri Lanka which can find
markets for themselves by producing low cost, high quality goods,"
said Roy Jayasinghe, Additional Secretary, Ministry of Enterprise
Development, Industrial Policy and Investment Promotion and Chairman
of the Textile Quota Board (TQB). "But the
quota system gave countries like us a share of the global market." The garments
industry is a key foreign exchange earner and, with factories being
set up all over the country, provides employment for a large number
of people ensuring better income distribution. Today it provides
direct employment for nearly 28,000 while the total employed is
around one million. Saman Kelegama,
Director, Institute of Policy Studies (IPS) said that even with
the current low value addition, the industry accounts for about
half the island's export earnings. Jayasinghe
said he believes the Free Trade Agreement to be signed between Sri
Lanka and the USA will give a fillip to garment exports. Sri Lanka's
competitors have other advantages. Bangladesh gets concessions as
it is the poorest country in the region, Pakistan since it is one
of the Islamic countries which doesn't support the al-Qaeda, and
Vietnam, owing to the desire by the US to rebuild ties with its
former enemy. Furthermore, African countries have access under the
Growth and Opportunity Act for Africa, as do Caribbean countries
under the Caribbean Basin Trade Partnership Act. Chinese
threat Other countries
would simply be excluded from the US market. China's textile
exports have grown rapidly in recent years despite the US import
market being static. Chinese exports rose 47 percent in 2002 although
income increased only 14 percent indicating that China exported
large volumes of goods at low cost. It is considered
one of the biggest threats to other textile exporting countries.
"The USA and the European Union fear that China could be the
world's number one economy in the future," said Jayasinghe.
Therefore the EU introduced the Generalized System of Preferences
(GSP) under which special concessions will be granted if the material
and accessories are sourced within the South Asian region. Jayasinghe
said Sri Lanka is yet to fully explore the possibilities under the
GSP. "The differences within the countries in the region, such
as political issues, are keeping us away from exploring the benefits
of this system," he said. Nor has Sri
Lanka made full use of the Free Trade Agreement with India under
which a 50 percent fixed tariff concession is given for imports
of garments from Sri Lanka subject to a maximum annual quota of
eight million pieces. Out of this a minimum of six million pieces
should be made with Indian fabrics. Jayasinghe
said there were some barriers in this agreement. Although India
has 216 entry points Sri Lankan exports can only enter through three
of them. Exporters face difficulties even when clearing goods at
these few entry points. But getting
into the Indian market is important. "There is a large segment
of affluent people in India. If our apparel exports can make it
to them it would be a big boost to the sector," said Jayasinghe. Sri Lanka ranks
high in the South Asian region for conforming to ILO standards,
environmental regulations, and non-use of child labour. "We
adhere to these requirements very assiduously and the USA is pleased
with it," he said. A lobby group
has been engaged to pave the way for a free trade deal with the
US. Such a deal is expected to expand market opportunities for Sri
Lankan manufacturers and is also important for the survival of the
industry. The US government
is believed to be hesitating to sign a free trade deal due to strong
protests from the American Apparel Association, which wants to protect
the American textile sector. Kelegama was
of the view that the FTA shouldn't be hurried at the moment, although
it should be worked out before the next US election. This FTA should
come as a cushion before the MFA ceases otherwise it would be of
no value, he said. "We are confident that this will work out,"
Jayasinghe said. Wake up
call "The 'fly-by-night'
industrialists depending solely on government concessions and quotas
and only interested in quick profits will not be able to survive
after 2005," Kelegama said. Sri Lanka got
a 'wake up call' before any other country, an opportunity to understand
conditions in a post-quota era after the Katunayake airport attack
in July 2001. With foreign
insurers imposing war-risk surcharges that increased costs, some
of the complacent industrialists got an idea what the future will
be like. "The apparel
industry of Bangladesh is far bigger than that of Sri Lanka. It
has 3,000 factories compared to the mere 891 Sri Lanka has. Sri
Lanka is indeed fortunate to have got the call before them and that
social engineering began much earlier than any other country,"
Kelegama said. Looking at
the era beyond 2004, there is one redeeming factor that the garments
industry could be happy about. Out of the 891 factories, 20 percent
control 80 percent of the exports. They are not quota dependent.
So they could sub-contract and help other exporters. According to the statistics provided by the IPS nearly 40 percent of the total employed will be displaced, as the industry is highly labour dependent. Company
strategies
Amalean said that MAS Holdings obtained market access and technical
know how from its joint venture partners. Most Sri Lankan companies
welcome joint ventures, but some are wary owing to the fear of losing
control. "Mergers and consolidations are happening, some companies
are marketing their factory capacity together, and sharing their
financial and infrastructure resources. But not at the rate it needs
to happen," Amalean said.
The technology needs to be upgraded too. Only ten factories have
CAD/CAM (computer aided design/computer aided manufacture) machines.
Amalean believes that the question of how much technology is needed
is dependant on the client. If the customer is willing to pay a
high price, then the company can afford to invest in high technology
machines.
Russel de Rosayro, Managing Director of Golden Needle Apparel, believes
that government support to small and medium enterprises is essential
as they have already pledged their factories and other assets as
security to the banks. They need support to upgrade factories and
machinery.
He said they have begun to focus more on high technical garments
and waterproof garments as there is a lot of competition for other
types. The company is targeting niche markets for these garments
which fetch higher prices. De Rosayro is seeking BOI status and
is putting up a new factory in Boralesgamuwa. He said it was very
important now to conform to labour laws and maintain proper conditions
in the factory, as buyers were particular about these issues. G.D. Senaweera, Managing Director of Mirigama Clothing, said that he is anxious about the prices quoted by China and other countries because the cost of production is higher in Sri Lanka. He also voiced concern over the stringent labour laws of the country and the actions of politicized trade unions. From
contract manufacturer to service provider
At present Sri Lanka supplies garments to high fashion designer
labels such as Victoria's Secret, Jones New York, Next, Gap, Triumph,
and Marks and Spencer.
Under the five-year plan target distribution of apparel exports
in 2007, the bulk will be sent to department stores and the rest
to specialty stores and brands and to discount stores. The four
items that Sri Lanka is focusing on is active wear and sports wear,
casual wear, children's wear and intimate wear.
The objectives of the five-year plan are to increase turnover from
its present level of $2.3 billion to $4.5 billion by 2007, transform
the industry from a "contract manufacturer" to a provider
of a "fully integrated service", penetrate the premium
market segments, become internationally recognized in specific product
categories, and support small and medium enterprises and consolidate
and strengthen the industry.
Marketing is still a weak area. The apparel industry together with
the Chartered Institute of Marketing, U.K. has formulated a specially
designed marketing course to train and develop 250 apparel marketers
by 2005. In an effort to strengthen the artistic ability and creativity of designers in the industry, the Moratuwa University has tied up with the London College of Fashion. NLP
trainers in Colombo Inger Marie
Haut, who has her Master's in Nutrition, is a licensed NLP Trainer
and a member of The Society of Neuro-Linguistic Programming, was
confident that the programme they have to offer will be beneficial
to the people of Sri Lanka, especially the young professionals. The other trainer
Pernille Knudtzon, MD, is also a licensed NLP Trainer and a member
of The Society of Neuro-linguistic Programming in addition to being
a freelance General Practitioner and acupuncturist. She works on
changes of lifestyle and stress-control. "We are very hopeful
and optimistic about the NLP training in Sri Lanka especially because
of the new concept of personal coaching and private consultations.
The module on 'Balancing career with personal life' for ladies only
is in great demand in the north and should prove useful for the
Asian career woman too," she said. NLP is the
art and philosophy of the excellence of the human being, dealing
with the unique personality and style of human beings, which cannot
be fully covered by mere words or techniques. The training is useful for managers and entrepreneurs to create a cooperative and problem-solving environment built around managing staff and customers. A statement from the two trainers said that they would be conducting free, informative sessions at the Queens Hotel in Kandy on May 20 at 5 pm and the Colombo Swimming Club on May 22 evening. It
takes only one to spoil it all The good news
is that more action is envisaged in the product (hotels and resorts)
development front. There is talk now of more support from the government
to enhance the product. This is an area where the private sector
always led the way. The government's responsibility of building
infrastructure, setting standards and regulating the industry is
as wanting as it has always been. In this area, what needs to improve
we believe, is the quality of the people who are charged with delivering
quality. In tourism,
like in most other areas, first and last impressions count. The
road from the airport, facilities at the airport, service standards
of officials and staff, servers at the resorts, roads in general,
power and energy all need to improve first, for a quality product
to take shape. Our competition is with the 'Sawadee' culture of
the Thai's, 'Salamat' of the Malaysians and the Indonesians, 'Om
Shanthi' of the Balinese, 'Bola Bola' of the Fijians, 'Namasthe'
of the Nepalese and the 'Arigatho' of the Japanese. If we believe,
that we have arrived in service and quality, then that would be
the end of it all. We have a long way to go and realising that may
be a step in the right direction. 'Delivering
on the Promise' is a time tested marketing dictum. Holding regional
tourism events such as 'Destination Sri Lanka' before getting our
'house in order' may be a bit of 'jumping the gun' or 'putting the
cart before the horse'. Let us at the least hope, that there will
be no more promotions, based on the premise that 'Sri Lanka's tourism
can benefit from SARS' as was quoted in the media recently attributed
to a very powerful personality in tourism. While benefiting from
the woes of others, may be a favourite pastime of ours in Sri Lanka,
it is a 'no, no' in the good governance seeking world of business.
Never forget that you will need those now affected to give you a
hand, when you are in need. Talking of
SARS it is encouraging to see a campaign from the Ministry of Health
on Rupavahini advising citizens to take precautions to keep the
deadly SARS virus away from our shores. Good crisis management calls
for "Preparing for the worst, delivering with the best".
We are glad that 'some' action is being taken even after health
authorities declared a few weeks ago that there is no way, we in
Sri Lanka, can get the disease. To think we are immune from SARS
would be disastrous. We must remember that it will take only one
case of SARS to get us the negative global media publicity. That then can
be a big blow to tourism. Rather than be benefiting from the crumbs
we supposedly get from cancellations in the SARS affected countries,
let our tourism and civil aviation authorities work together to
ensure that we have good screening and precautionary measures to
ensure that no one will be affected by this deadly virus. We must keep in mind that like in most things, it takes only one, to spoil it all. Letter But, before
thinking of paying through our noses to get the Sri Lankans overseas
to return, why don't we make a list of Sri Lankans who are already
here and in business or in the private sector who can fill this
reservoir of Sri Lankan talent? There are many with skills here. The statement,
made at a public forum with those whose eyes are mostly turned to
foreign countries, seems to assume that all skilled and intelligent
people migrate and work abroad; that efficiency, effectiveness and
intellectual capacity is only found among those working overseas. This definition
fails to recognise those of us who are here because we are determined
to serve our motherland for the free education she has given us.
We are, perhaps naively, ignoring the recovery of the millions of
hard earned money we spent to obtain foreign qualifications. We
are perhaps considered ineffective and impractical because being
here and settling our debts for receiving free education matters
more to us than money. For many of
us who are not in the public sector, the reason is not necessarily
financial. I can say that I am here because I am proud to be serving
my country rather than merely fattening my own purse. If I didn't
consider the public sector as an option, that is because I believed
frustration would set in. We need to
make our public sector effective. To do this we must instill a work
ethic conducive to achieving effectiveness. Professional management
needs to be introduced into it; not simply new blood. We can already
see the results of professional management in the public sector.
We do not necessarily need to "import" professional managers.
Just pay them accordingly, treat them as professionals and judge
them on performance. That should do quite well to solve part of
the problem. Still, we cannot
afford to send home everyone that is not efficient to be replaced
with Sri Lankans overseas. We need to cut the deadwood and change
the attitudes of the rest. Political will is essential here and
vision to see the need for change beyond getting votes at the next
elections. I attended
the recent national e-government conference and saw the potential
for change among the public sector officials. Among the large numbers
who attended the conference over two days, the will to change was
definitely there. They know it must be done. How to do it seems
to be the dilemma. It is the greatest challenge of this government
or of any government to change the bureaucracy. But, change
we must. So, rather than ask for help from those who are simply
serving their own purposes overseas, shall we ascertain how those
who are already here can help the public sector transform itself? We are all
fond of talking. What we need to do is to roll up our sleeves and
get down to work; and be ready to face a mess if needed. There are thousands
of us who can contribute. Why not call us? We are near enough to
hear the call of Mother Lanka because we have made it a point to
be here. |
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