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Sri Lankan garment exports lose market share

Sri Lanka’s garment industry is losing market share in its key export destinations, the US and the EU, to its competitors from India, Bangladesh, Pakistan, Vietnam and Cambodia, according to a report by the Colombo-based Institute of Policy Studies.

"Despite considerable increases in absolute export earnings to both and US and EU markets, it is of concern to note that Sri Lanka’s relative market share in garment exports has been losing ground. The increase in export earnings over the years has been due largely to a shift in Sri Lankan garment exports from the US to EU," the IPS said in its report, ‘Sri Lanka: State of the Economy 2012’.

"Sri Lanka has been seeing a steady decline in its market share in the US from 2.3 percent in 2005 to 1.8 percent in 2011. Sri Lanka has been losing out to countries such as Pakistan, Vietnam, Bangladesh, Indonesia and Cambodia. Pakistan’s share in the US apparel market was significantly below that of Sri Lanka in 2005 at 1.8 percent, but is now ahead at 2.1 percent. Diversification of its product range, marketing and large investments in value-added sectors including sewing machines, stitching, knitting, finishing and knitting processing have contributed towards Pakistan’s progress,"

"While Sri Lanka has been successful in penetrating the EU market, 2010 and 2011 have seen a marginal decline in the share compared to 2009. Moreover, Sri Lanka is bound to lose its foothold further as the EU GSP Plus concessions eroded. Sri Lanka garment exports will face higher tariffs under the new reforms that would come into effect from 2014. Whereas China and Turkey still account for over half of the garment export share in the EU, Sri Lanka has been losing its market share to competitor countries such as Bangladesh, India, Vietnam, Pakistan and Cambodia. Bangladesh has been particularly successful in penetrating the EU market, with an increase of 6.2 percent in 2009 to 11.2 percent in 2011.”

Industry sources said the country was losing around US$ 1 billion each year due to the withdrawal of GSP Plus, said The Island.

"Bangladesh is already a beneficiary of GSP Plus concessions, and Pakistan will also become eligible under the new reforms. Additionally, India is scheduled to sign a free trade agreement with the EU in 2014 which would guarantee benefits to Indian garment imports through tariff preferences." the report further said.

"With competitor countries gaining from such tariff concessions, securing market share in the EU would be a challenging task for Sri Lanka in 2014 and beyond. Therefore, it is imperative that market diversification takes place in Sri Lankan garment exports. In this respect, Sri Lanka has made rapid inroads in to new markets such as Turkey and the United Arab Emirates," the IPS said.

Speaking at the annual session of the Sri Lanka Economic Association last October, Shippers’ Council Secretary General Rohan Masakorala said that a considerable amount of foreign exchange was being lost due to EU’s withdrawal of the concessions.

"After losing GSP Plus we are losing a considerable amount of foreign exchange in terms of opportunity cost. A leading apparel exporter, who I will not name, found that he would have to incur an additional cost of euro 25 million to export to the EU. What did he do? He invested US$ 25 million on a production facility in Vietnam," he said.

"We could probably export to China but they would soon copy our products and produce it themselves. India is also a difficult option because of the very difficult bureaucratic environment. These two markets are very different cultures altogether. This is why it is important to enhance our trade with the US and EU," Masakorala added.

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