Sri Lanka’s apparel sector aims for $ 8 billion export revenue by 2025.
The Morning: With the apparel industry aiming towards $ 8 billion in export revenue by 2025, Sri Lanka Apparel Exporters Association (SLAEA) Chairman Indika Liyanahewage highlighted five key policy reforms that are imperative for the industry to move forward.
Speaking at the recently concluded SLAEA Annual General Meeting, he highlighted the revision of the corporate income tax of 30%, expansion to strategic markets by securing more free trade agreements (FTAs), mandatory dollar conversions to be increased to two months, labour reforms, and revision of the cost structure of freight and shipping charges, saying: “These five areas are crucial to the industry sustaining its commendable performance.”
Central Bank of Sri Lanka (CBSL) Governor Dr. Nandalal Weerasinghe, the event’s Chief Guest, noted that while the CBSL is solely in charge of monetary policy, the CBSL stepping into fiscal policy reform would directly breach the mandate of the Treasury and Parliament.
Deputy Chief of Mission of the US Embassy Douglas E. Sonnek commended the support the industry has given to the people of Sri Lanka during the pandemic, leading to and during the economic crisis.
“During the worst of Covid, the apparel industry led efforts to equip Sri Lanka’s medical professionals to protect thousands,” he said, applauding the industry’s consistent efforts to uplift and ensure worker welfare.
“This year, apparel manufacturers around the country provided for the welfare of their employees whether through pay increases, subsidised lunches or transportation. They looked after the industry and the people, ensuring that families are provided for as the country grapples with record inflation and economic turmoil.”
Recognising the indispensable role the industry plays in Sri Lanka’s economic growth, Sonnek assured of the US’ steadfast support via stronger bilateral trade relations.
The SLAEA also endorsed the position taken by the Joint Apparel Association Forum (JAAF) that the proposed amendments to the corporate taxation structure, which moves away from the previous policy of having a dual rate structure with an incentive for exporters, contradicts the intention for Sri Lanka to increase its export base.
Moreover, the proposed rate of 30% will place Sri Lanka at a disadvantage over other countries vying for FDIs in the region, which have rates less than 30%.
“This will have permeating negative impacts on Sri Lanka’s competitiveness,” said Liyanahewage. “On the other hand, we need to improve access to our key markets with strategic FTAs, which will ensure an increase in our order books and improved integration with global trade. We do welcome the labour reforms proposed in the 2023 Budget and anticipate a revision of the new cost structure in freight and shipping charges.”
Sri Lanka’s manufacturing and exports sectors have shown a steady growth despite challenging economic conditions in the country. These two sectors have become key revenue generators in the country with the apparel industry recording the highest export revenue. Local authorities have also taken many steps to further uplift and develop the apparel industry. The growth and profits recorded by apparel companies are a further indication of the growth and business potential of the industry. The many trade agreements as well as trade concessions enjoyed by the country have also helped boost Sri Lanka’s overall export industry, especially apparel exports. Given the growth potential in the apparel industry, the government has launched several projects including the setting up of a dedicated fabric manufacturing zone to address the growing demand of the local apparel industry. With the growth potential in the apparel industry, foreign businesses/investors could explore the expanding opportunities in Sri Lanka’s apparel industry.