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The dress industry in Sri Lanka quickly developed in the mid 80 ‘s after the execution of the unfastened economic policy. Industrialization was given first penchant in order to travel the economic construction from an agricultural base to an industrialised and service oriented construction by the authorities. As a consequence of this policy the dress industry was given particular penchant and stairss were taken to advance this industry amongst local and foreign industrialists.

The beginning of industrial development zones and export zones straight benefited investors and enabled them to easy put up their substructure needs. Apart from this, certain trade policies and understandings such as the multi-fiber policy, Indo – Sri Lanka Free Trade Agreement, the 200 Garment Factories Program and the late offered GSP+ Concession etc. besides straight influenced the encouragement in this sector.

Today as consequence of the above steps there are over 850 registered garment endeavors in Sri Lanka and there are over 1000 SME degree garment enterprises that contribute towards the development of the local economic system.

The contemporary income generated from this industry exceeds over 42 % ( approx: $ 3 Billion ) of the state ‘s export net incomes ( Refer appendix – 03. Export construction Breakdown ) and, on norm, contributes over 45 % of industrial production and around 6 % of the GDP, thereby change overing itself to go the highest foreign income earner for Sri Lanka. It soon employs over 350,000 workers who account for around 15 % of the state ‘s full work force. Majority of these workers are females and therefore the industry plays a major function in adult females empowerment in Sri Lanka.

The Threat – Withdrawal of the GSP+ Scheme

Since early 2005 the local dress industry has been confronting assorted troubles such as the backdown of the Multi Fiber Agreement in the twelvemonth 2005, increased competition from low cost participants such as China, Bangladesh, and India who are now more preferable as fabrication finishs and the recognition crunch which resulted in from the Global Economic Recession in the twelvemonth 2008.

The GSP+ is a responsibility free export grant awarded to states which fulfill the demands set by the EU on good administration, conformity to international human rights conventions and labour criterions.

On the 15th February 2010, the European Union ( EU ) decided to temporarily hold the GSP + grant which was extended to Sri Lanka due to misdemeanors of the EU understanding and doing farther troubles for the local industry.

Necessity for Value Chain Improvements

The impact caused due to the backdown of the GSP+ grant towards the sustainability of the industry is high as it has led to an direct addition in the purchase monetary value ( due to the enforcement of responsibility and extra revenue enhancement payments made upon exporting ) and therefore has made local garment exports much more expensive than other exporters to EU states.

This state of affairs has led towards the contraction of the industry and has besides threatened the infant houses ( SME ) as they are unable to obtain orders from the EU market due to the uncompetitive monetary values offered as a consequence of the import responsibility imposed.

Due to the above issue, industrialists today are sing to retreat from this sector as it is losing its attraction in footings of profitableness, return on investing and due to assorted other macro factors such as deficiency of authorities support, tight economic conditions with high adoption costs etc.

Therefore it is clip that all relevant parties looked into this affair in order to deliver the industry by supplying assorted installations required and suited for an industry vision for the hereafter which is focused upon value concatenation betterments in footings of quality, thin costs, reduced lead clip in production and sustainability.

Furthermore organisational restructuring in footings of engineering, techniques and substructure will besides hold to be incorporated into the vision of the industry in order to stomp a presence in the planetary market.

Potential Publications

A instance based on the above issue faced by the local dress industry has been produced and would wish to seek publication in the undermentioned industrial diaries or magazines.

Sri Lanka Garments –

A Journal Published by the Sri Lanka Apparel Export Association ( SLEA ) on an one-year footing and has a reader base of over 4000 dress industrialists and investors. The diary chiefly features valuable penetrations of the dress industry covering countries of the export market, industry issues, future developments and tendencies. The column policy of this diary chiefly stresses on the fact that articles refering to the industry would merely be published capable to a anterior confirmation on the credibleness of beginnings and facts used by the writer.

LMD – Published by Media Service Pvt Ltd.

Lanka Monthly Digest, a local concern magazine published on a monthly footing and presently has a reader base of over 20000 corporate and single clients within the island. This magazine chiefly consists of articles which relate to the local concern organisations, Colombo Stock market public presentations and besides features particular articles based on a peculiar subject.

Financial Times

This is a Daily Business newspaper which is published by the Wijeya Newspaper Ltd and presently has a mass reader base covering over 28,000 families island-wide. This intelligence paper chiefly contains a comprehensive coverage of local and international concern intelligence.

Request for Publication

I personally believe that this article sing the loss of the GSP+ Concession which I have forwarded for printing would be a great value add-on to your diary ( Sri Lanka Garments ) as this article explores a major issue which affects and threatens the industry. This article provides an surrogate scheme on how the industry could retrieve from its current place as the state can non afford to lose the gross generated from this industry at a clip when the economic system is in a recession.

The undermentioned article features a important issue which has emerged in our local dress industry chiefly due to political factors, and as a diary which analyses assorted issues sing the dress industry and the local market public presentation, this article would assist market analysts to measure assorted issues refering to employment, trade status, future demand and supply conditions etc in a more realistic mode which would enable them to research the industry farther.

Therefore, as a diary which is good known for its credibleness, sound column policy and composing of a broad assortment of articles refering to assorted apparel industry issues, I believe that my article merits publication as it addresses a important menace associating to the industry in nature and demands to be communicated to all relevant stakeholders in the industry ( Investors, Buyers, Government etc ) .

Word Count: 1067 words

The GSP Trade Concession

The GSP, besides know as the Generalized Preference System is a particular trade agreement granted by the European Union ( EU ) where they are involved in supplying particular entree to the EU market in signifiers of decreased duties and revenue enhancements.

The Generalized Preference System ( GSP ) is chiefly provided to 176 developing states for a period of three old ages and is an inducement that is granted with the aim of cut downing poorness, supplying sustainable development and to advance good administration. The entire value of imports under the GSP sums to around a‚¬58.6 Billion and the nominal responsibility loss is estimated at over a‚¬2.5 Billion as of twelvemonth 2008.

Apparel and fabrics, machinery points, minerals and treasures, plastic and gum elastic points, footwear are the taking sections of imports which use the GSP strategy. ( Refer appendix – 04. GSP discriminatory imports composing – 2007 )

The GSP is provided to states in three chief signifiers,

Standard GSP: a general system which covers 6,244 merchandises and provides a standard preferential intervention which is given in signifier of decreased responsibility duties that is provided to all 176 states.

GSP+ : this trade penchant is provided to vulnerable states which ratify and implement international conventions associating to human rights, labour criterions, sustainable development and good administration. This penchant is presently provided to 16 states ( mention appendix – 01. Countries covered under the GSP+ Scheme ) including Sri Lanka and provides grants to around 6,336 merchandises in footings of responsibility free coverage and decreased duties in specified revenue enhancements.

Everything But Arms ( EBA ) : is a particular quota and responsibility free grant provided to 7140 merchandises except for weaponries and related points for the 48 least-developed states.

Situation of Sri Lanka

Sri Lanka ( SL ) is amongst those 176 states which receive the criterion GSP. However, in the twelvemonth 2005, the EU decided to see SL as a “ vulnerable province ” based on its standard and awarded the GSP+ strategy ( refer Appendix – 02.Vulnerable states ) as SL ‘s export portfolio was limited in footings of variegation ( mention appendix – 03. Export construction dislocation ) and due to increasing degrees of poorness which was further aggravated by the 2004 Tsunami and the 30 twelvemonth long civil war. This trade grant farther expanded concern chances available, particularly in the dress sector within the EU part. SL managed to hold on them utilizing the GSP+ strategy and thereby turn into one of the top 5 donees of the GSP+ strategy.

In the beginning of the twelvemonth 2008, the strength of the civil war began to increase and the state geared itself up with an purpose to convey this struggle to an terminal. This move made by the authorities caused important tumult within the international community and many allegations were leveled at the SL authorities impeaching them on misdemeanors of the undermentioned pacts listed under the confirmation list of the GSP+ strategy. ( Refer Appendix – 02.Vulnerable states )

International Covenant on Civil and Political Rights ( ICCPR )

Conventions Against Torture ( CAT )

Convention on the Rights of the Child ( CRC )

These issues prompted the EU to name a particular commission in October 2008 to look into the degree of conformity and confirmation of human rights as it is a cardinal duty which needs to be fulfilled in order to have the GSP+ grant. Harmonizing to the commission ‘s study, three major misdemeanors of human rights was identified in footings of civil and political rights, anguish and kid protection.

Even though the SL authorities blatantly denies these allegations based on the reported findings, the EU Regulation council decided on the19th October 2009 to temporarily retreat the GSP+ grant for a period of 6 months in order to rectify these issues.

The suspension of GSP+ Preference has straight caused a dent in political ties and international dealingss particularly between United Kingdom and the other EU states and the impact of this issue has extended itself into bilateral trade relationships between these states and SL. As a consequence, the dress section, the footwear exports industry and agricultural exports have straight been affected.

The Loss of GSP+ : Impact on the Apparel Sector

Industry nature

The dress sector in SL constitutes around 1850 big, little and average endeavors ( SME ) and presently employees over 350,000 people straight and over 250,000 indirect workers in footings of support services. The industry in SL has positioned itself as a nucleus maker and in-between adult male in footings of value add-on because the industry has specialized itself in transporting out fabrication of the garment, whereas the purchaser has to acquire the designs, cloth and all other input individually done. At present around 85 % of the industry are in the export market concern and the US, EU, Australia and Canada are some of the chief clients of the industry.

The dress industry attraction at the minute is on a worsening stage due to increased competition, increased costs of natural stuffs, decreased authorities endorsing etc ( mention – Appendix 6. Industry Analysis ) . This state of affairs has been farther aggravated by the remotion of the GSP+ penchant strategy due to assorted external factors explained above.

Impact

Presently around 50 % of the dress export is purchased straight by the EU and SL at present holds about 1.6 % of market portion of the entire EU market. China dominates the market with over 46 % of portion and is followed by Bangladesh which holds around 13 % of the EU market ( Refer – Appendix No 7.EU Market portion analysis ) . Therefore, due to the suspension of the GSP + penchant strategy, the local dress industry is straight faced with a menace of losing its market portion to other rivals in the EU market.

“ If GSP were to travel off, it is this first-class and compliant industry that will be hurt really severely. The effects would see the rural economic system confronting adversities and adult females employment and authorization would greatly be damaged ”

– Mr. Kumar Mirchandani. President – SL Apparel Exporters Association.

The re-imposition of the trade duties would straight do the SL makers apparels more expensive to the EU market and therefore would straight put the SL dresss at a competitory disadvantage. At present, SL is the highest priced EU dress exporter ( mention Appendix – 5.Average Monetary values of garment imports to the EU ) and due to this state of affairs apparel exports to EU within the first One-fourth of this twelvemonth has declined by 18 % and therefore paving the manner for planetary rivals such as China, Bangladesh, Vietnam who are good known for their lower priced dresss with an chance to straight profit through this state of affairs.

The limited diverseness of the SL dress exports in footings of markets have besides contributed adversely to this state of affairs. At present the gross generated from this industry is estimated around $ 3.4Bn and 90 % of this turnover is generated through the US ( 44 % ) and EU ( 46 % ) markets. Thus an addition in monetary values within the EU would be an utmost sensitive issue as it would straight lend towards a diminution in turnover degrees and therefore consequence in a loss of market portion.

Furthermore when sing the necessity to increase monetary values, SL makers pose small or no power in footings of dickering chiefly due to the market construction which dominated by strong competition. ( Refer – Appendix 6. Industry Analysis )

Therefore, the backdown of GSP+ alongside the other industry jobs such as increased labour costs and ordinances, energy costs, decreased authorities facilitation and increased funding costs have made this industry a hard one to run in with many uncertainnesss which need to be addressed quickly.

Value Chain Improvements

Since a monetary value addition would be damaging to this sector, most of the SL dress makers will hold to confront the GSP+ challenge through sing options on internalising the addition in duties with specific alterations to their value concatenation through cost and border betterments.

Particular accent demands to be placed on the SME section because in an industry where SME represent the bulk, it is imperative to guarantee the sustainability of these houses as they are straight connected to the rural economic system of SL and are besides cardinal participants in authorising adult females. SMEs besides play a critical function in the industry by supplying assorted support services for big houses and therefore indirectly guaranting their sustainability.

However it is this section that faces most of the inauspicious effect since their ability to pull off alteration is limited.

In order to get the better of this state of affairs, all houses should concentrate more on their primary maps specially associating to fabrication and logistics sections which could be immensely improved utilizing technological inventions and substructure support. Investings in these countries would enable houses to increase their borders as they will be able to profit from economic systems of graduated table, increased efficiency and decreased operating expense costs.

Ex-husband: Adopting the use of a Computer Aided Design ( CAD ) system in the procedure of cutting cloth. Remove capacity constrictions by puting on latest machinery and equipment.

Bigger houses would see this option more executable due to their strong fiscal background where as the SME sector will confront troubles in get bying up with this move due to fiscal restraints.

Ex-husband:

MAS Intimates – the taking dress exporter in SL opened its first usage built ECO – Factory for Lingerie fabrication in the twelvemonth 2009.

Hirdarmani Group ( SL ) investing in province of the art garment technology engineering.

Additionally, houses should besides try to stream line their value concatenation by heightening value adding activities such as improved quality degrees, lead times etc. and besides by concentrating on taking and cut downing non value adding activities such as natural stuff wastage, idle labor and machine hours, culls and reworks etc.

The execution of basic 5 S principals, Continuous betterment techniques ( KAIZEN ) , standardisation and entire quality direction principals would straight enable houses to profit from addition output, productiveness and a thin cost constructions which would straight ease improved borders.

The 2nd option mentioned above would be more encouraging to the SME section because unlike the earlier option the fiscal resource demand is far more less and it is besides more convenient for SME proprietors to implement and supervise.

Furthermore, houses should put on employees by supplying them with equal preparation and development in order to heighten their accomplishments and larning instead than sing lay-offs. This would heighten employees public presentation and motive degrees and would besides enable houses to develop a strategic plus which would present long term sustainable border betterments.

Changes in Marketing Professional ‘s function

“ Sri Lanka is at the point of a great revival and the UK acknowledges that there is great possible in the part every bit good. This means that sellers have stronger challenges here than elsewhere in the universe. In order to capitalise on the chances that are emerging from other states in the part, sellers in SL have to develop themselves ”

Mrs. Janet Ford. Head – British High Commission Trade and Investment.

Selling at its basic degree is indispensable to driving gross, forcing the bottom line and fulfilling client demands and as selling professionals in the dress section, it is of import for us to travel out from our comfort zones and prosecute in this new paradigm of concern which is invariably facing alteration.

In order to guarantee this transmutation, the existent kernel of selling should be practiced at its highest degree in line with organisational aims and client demands therefore necessitating sellers to be more proactive in the industry.

Hence, sellers should take the enterprise and develop a difference by advancing their corporate individualities within the sections they operate in ( particularly in the export market ) because this would enable houses to develop equity in their organisations and would besides assist increase their bargaining power.

Sellers should besides carry and negociate specific trades which incorporate new ventures, partnerships that would enable the houses in the industry to prolong and reciprocally profit themselves in the long term ( Ex: MAS Intimates partnering with NIKE, Victoria ‘s Secret, Speedo and GAP ) . Strong communicating and dialogue accomplishment would be critical for a seller when converting spouses with a concern instance and negotiating trades.

Additionally, sellers should besides take the enterprise and act in the capacity of a alteration agent by presenting new tendencies, technological promotions and improved production techniques into the concern in order to develop a competitory advantage to successfully steer this map, a seller would necessitate strong leading and alteration direction accomplishments in order to convert and integrate these inventions.

Furthermore in footings of accomplishments, a seller besides needs to possess sound finance, commercial and proficient cognition to enable him/her to develop a better judgement in determination devising and besides to warrant his/ her instance when interacting with client, cross functional squads and assorted other stakeholder questions.

It is besides of import that a selling professional in the SME sector guarantee that they change their organisational range from a traditional sales/product oriented organisation into a selling oriented organisation which would guarantee the development of a separate selling map that will enable the organisation to actively take part in advancing their merchandises and individualities.

Therefore, these behavioural alterations and betterments in accomplishments would enable sellers in this field to broaden their thought and enable them to confront and accommodate to any environmental challenges successfully.

The Way Forward

It must be noted that trade grants in nature are more focussed upon the short term development of the industry. Firms can non depend on them everlastingly and they need to strategically use them to construct up resources while they are available to develop and set up themselves in the market.

Therefore, alternatively of depending on trade grants such as GSP+ to conflict out competition the industry needs to concentrate on uninterrupted betterments in footings of production, quality, engineering etc. to outrun other participants obliging the sellers in the industry to take the lead function in actively take parting and presenting new tendencies, engineering and developing partnerships with taking trade names in order to guarantee the sustainability of the industry.

Word Count: 2200 Wordss

Appendix

1. Countries covered under the GSP+ Scheme

Armenia

Azerbajdzhan

Bolivia

Colombia

Costa Rica

Ecuador

El – Salvador

Empire state of the south

Guatemala

Honduras

Mongolia

Nicaragua

Paraguay

Peru

Sri Lanka

Venezuela.

The above states are covered for a period of three old ages ( 2009 -2011 ) .

Soon Sri Lanka and El – Salvador have been temporarily withdrawn from the GSP+ beneficiary list due on traveling probes refering to human rights misdemeanors.

2. Vulnerable States

In order to be classified as a vulnerable state the undermentioned standards demands to be satisfied.

Any state should non be classified as a “ high-income or developed state ” and where its 5 largest subdivision of its GSP covered imports are more than 75 % of its entire GSP covered imports, and

Where its GSP covered imports are less than 1 % of the entire GSP covered imports.

Ratification and effectual execution of

16 nucleus homo and labour rights and 11 environment and good administration conventions.

( Ex-husband: International compact on Civil and political rights, forced mandatory labour convention, Kyoto Protocol, Mexico Conventions against corruptness etc. )

Sri Lankan state of affairs based on this categorization

3. Export construction dislocation

4. GSP discriminatory imports composing – 2007

Note: It is clear that over a‚¬13Bn ( 22 % ) of dress imports to the EU in the 2007 is done under the GSP penchant Scheme.

5. Average Monetary values of garment imports to the EU

Note: Even before the backdown of the GSP+ Preference scheme the SL export monetary value per Kg of dress was the highest at a‚¬15.91 amidst other rivals.

6. Industry analysis

The attraction of dress industry can be analyzed as follows utilizing the 5 forces frame work which was developed by Michael Porter in the twelvemonth 1979.

Barriers to entry – Low

At present there is no important barrier to entry. Any investor willing to come in the market could make so. The Export zones and the industrial zones which are established around the county can be considered as added inducements for new entries into the market.

Competition – High

Competition degrees can be evaluated in two facets.

Local – competition within the industry is at a higher degree as there are huge figure of participants ( 1850 garments ) involved in this industry to provide towards the export market.

International – Competition degrees on a planetary graduated table is besides at a higher degree and is chiefly dominated by low cost fabrication states such as China, Bangladesh, India, Vietnam etc.

Dickering power of clients – High

Customers do hold the privilege of demanding a better deal out a trade due to the huge handiness of many other providers in the market.

Ex- If a SL maker proposes for a monetary value addition the client could easy decline it and put the order with another provider ( locally or internationally ) .

Dickering Power of providers – Medium

Most of the input within the industry is imported and in most occasions it is merely the labour constituent which is sourced from the local market.

7. EU Apparel Market portion Analysis

Sri Lanka at present holds about 1.6 % of the EU market which is clearly dominated by the Chinese and Bangladeshis who holds cumulative portion of 62 % .

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