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The Annual General Meeting of the Sri Lanka Apparel Exporters Association was held on the 24th of November 2015, under the patronage of Hon. Malik Samarawickrama, Minister of Development Strategies and International Trade. Below is the speech delivered by Mr Saifuddin Jafferjee, Chairman of the Association.

Our chief guest Hon. Malik Samarawickrama – Minister of Development Strategies and International Trade, Guest of Honour, His Excellency David Daly, Ambassador and Head of Delegation of the European Union to Sri Lanka and Maldives. Members of the head table, distinguished invitees, members, ladies and gentleman.

It gives me great pleasure to welcome you all to the 33rd Annual General Meeting of the Association.

This year was heralded by a new unity government lead by President Maithripala Sirisena and Prime Minister Ranil Wickramasinghe, elected primarily on a mandate for democracy, rule of law and good governance.

Taking an example from the Unity government, I am also pleased to report that two premier apparel associations in the country have also decided to unite due to alignment of our objectives this year. Sri Lanka Apparel Exporters Association (SLAEA) has now merged with 200 Garment Factory Program Association (200 GFP) and strengthen the voice of all our members.

We are also pleased with the 19th amendment to the constitution, and establishment of independent commissions, which are clear signs that Sri Lanka is stepping in the right direction and working towards creating prosperity in a fair and just society. The constructive engagement with International organizations to address human right issues through a domestic mechanism, is another positive step to improve our International relations. The US Ambassador to the UN Samantha Powers’ statement during her recent visit said “Sri Lanka is grabbing world attention”, referring to the changes taken by the new leadership to dilute powers, restore democracy and good governance, is clearly an endorsement of the on going process.

The Prime Minister in his recent Economic Policy statement said ‘reconstruction mechanisms” will empower Lankans to deliver globally competitive products to the International market. He further stated that “… value is added to a product at global level. The global value chain manages the different raw material and competencies of different countries successfully.” This is clear evidence of commitment of government to align the country to a Global Trading system which is indeed a positive development for the industry.

Our concern for several years has been growing number of multi-lateral, regional and bilateral trading arrangements. The preliminary conclusion of transpacific partnership agreement (TPP) among 12 nations, covering 45% of the world GDP, will be a serious challenge for the industry. We as the largest exporter in the country fully endorse the Prime Ministers policy direction that we urgently require an International trade policy framework to bridge such threats. India, China, USA, Korea, Singapore are already on the road map of the government for such negotiations. Our membership also believes that Japan, Brazil and Turkey too should be added to for preferential trade negotiations.

In addition we are pleased that the government is taking positive measures to regain GSP+. The steps taken towards creating good governance and rule of law would have surely answered some of serious issues that were raised in relation to withdrawal of GSP+. Meanwhile, the Apparel Industry of Sri Lanka is proud that for several years we have promoted ethical and compliant manufacturing and recognized globally for this commitment. Therefore, the remarkable and substantial progress Sri Lanka has already made has raised our expectation that this facility will be reinstated by the mid-2016. We appeal to both the Hon. Minister and your Excellency the Ambassador, who are with us today, to give your priority attention to meet these aspirations.

I also wish to touch on the budget of 2016 by the finance minister which has outlined the road map for the government’s policy implementation. We through our apex body the JAAF had consultation and made several macro level budget proposals and happy to note that Honourable Finance Minister has considered our macro proposals which will help the industry:

  • Revisiting of exchange management system to provide for local businesses to become regional and global players.
  • Liberalization of shipping related business and other service areas to fully exploit the potential in logistics and knowledge based exports.
  • The fast tracking of the implementation of electronic documentation for imports and exports in order to reduce transaction cost and time.
  • The revision of land lease tax as it was deterrent in attracting FDI and expansion of existing investors.

In addition to this we are glad to note that our sectoral proposals have received favourable consideration:

  • Firstly, proposals for capacity expansion for identified lagging regions.
  • Secondly, the proposal by SLABA, to set up whole sale and retail market place to show case the made in Sri Lanka labels at a cost Rs 2,500 mn in public private partnership.

Hon Minister, now it is up to us take these policies forward and request for continuing dialog and consultative process with all relevant authorities to translate these to action.

Issues:
However, there were few matters we wish to point out that are of concern from the budget and seek further discussion:

Firstly, the revision of PAL from 5.0% to 7.5%, and NBT from 2% to 4% will have serious impact on our capital investment program. The industry continues to invest in high value automation and technology and upfront tax on capital formation is dis-incentive to future grow of the industry.

Secondly, revision on duty on sale of garments to Rs. 200/- per pc which an increase of 800% from the existing rate structure! The industry manufactures a wide product portfolio from socks to jackets which have range of economic values. Therefore under this revised rate structure a major part of our product portfolio in industry will no longer be economically viable in the domestic market and loss to the consumers in this country. We wish to impress upon the authorities about these realities hope that this could be resolved in a sensible manner.

Thirdly, the income tax rate has been revised from 12% to 15% for value added exports. In addition under the reform measures the domestic market and export income is unified into one standard rate of 15%. We do understand the reasons for the revision of the tax rate in the interest of revenue collection and fiscal consolidation. However, we do see this increase in export income tax as a negative sentiment to exporters.

Hon Minister we also have some operational issues with BOI and customs regulation should be revisited to make them more business friendly and in-line with requirements that help align value chain across the industrial players with minimum bureaucracy. In addition the sale of used machinery older than ten years in the domestic market is another issue. We will seek your assistance to resolve these matters.

Finally, we would urge that government intervention in the wage process be limited only to tri-partite arrangements of the wages board mechanism for the establishing of minimum wages for the industry. Ad hoc state intervention in the wage mechanism disrupts the basis on which wages are negotiated and takes away the element of performance based pay that we all adopt in our businesses.

Way Forward

Ladies and gentlemen.

Today we are largest industrial exporter in the country exporting USD 4.9 billion in 2014 with a value addition of 60 %. We experienced several months of negative growth especially in the European Union region due to currency weakness in those home markets. However, we remain optimistic that exports this year will be on par with last year. On the advent of GSP+ we expect to increase our growth rate substantially in the future.

We remain the most visible industry in the rural areas providing employment for over 400,000 people directly and further 800,000 indirectly. Our lagging region expansion plan will only expand our footprint bringing development to these regions.

The industries credentials as a green, ethical, high quality, reliable manufacturing destination are globally recognized. We will continue to strengthen the competitive position with investment in technology, automation, lean management systems and upskilling our associates.

We have also begun our product innovation & design journey to get high value addition in the front end. Our local brands are making waves and we expect more to fill the retail malls of regional markets in the future.

Furthermore, Sri Lanka Apparel also believes that Asian region will continue to play the pivotal role of manufacturing apparel to the world due to not only the large production base but growing consumer market as well. Therefore, the industry will continue to explore opportunities to expand regionally while providing knowledge and skill based value addition in the country. It is our expectation that the new Exchange Management Bill will give impetus for such globalizing efforts.

There are also exciting new developments that we need to be aware of as they are can change our entire business model. Companies are already 3D printing tee shirts. Meanwhile, researchers at Georgia Institute of Technology are perfecting robots that can sew which surely are game-changers. In addition developments in nanotechnology fibres and wearable’s technologies are gathering pace and will continue to revolutionize the apparel as we know it. Therefore, the industry needs to expand its efforts to creating an ecosystem for such innovation and research to accelerate our growth trajectory.

Finally, we are encouraged that even today, seven advanced economies are occupying spots among the 10 largest exporters of apparel in the world, which only strengthen our conviction that we can continue to grow and play the role for many years. In this background we have set our own a target of USD 10 billion by 2025 and continue to be a strong player not only in rural Sri Lanka but regionally and globally as well.

Thank you and good evening!

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JAAF 

Sri Lanka Garments

sri lanka garments 2016Journal & Directory of the Sri Lanka Apparel Exporters Association, containing valuable information with regard to the apparel industry.
Issue No. 89

 

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Sri Lanka Apparel Exporters Association,
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Tel: +9411 2675050, 2674528 
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