JAAF welcomes Cabinet decision to establish Fabric Processing Park in Eravur

The Joint Apparel Association Forum (JAAF), the apex body of the apparel industry in Sri Lanka, welcomes the recent decision by the Cabinet to establish a Fabric Processing Park in Eravur as a strategic development project, under the Ministry of Industries. The 275-acre plot located in the Batticaloa district will be a dedicated fabric processing zone. 

Particularly in the post COVID-19 era this additional string to the bow of the apparel sector will be a welcome relief to apparel manufacturers looking to source more fabric locally thereby increasing both speed and value addition to the operating model for the industry. In the year 2019, Sri Lanka imported 255,437MT of fabric both for the export-oriented apparel manufacturers and for consumption in the local market. The import bill for this fabric came to $ 2.2 billion. The establishment of the Eravur Fabric Processing Park will help reduce the imports of fabric as apparel manufacturers would be able to replace a part of their imported fabrics with fabric sourced locally. 

Backward integration has been a key feature of Sri Lanka Apparel and to date there are over 20,000 employees in companies manufacturing fabric and apparel accessories in the country. There are currently seven textile mills manufacturing fabric for the export-oriented sector and these mills are capable of producing the finest quality of fabrics. Daily output of these mills is around 175MT and this is vital part component in the building the industry value addition to over 52% even after accounting for the yarn imports of the local mills. Sales from these seven fabric mills to the BOI registered apparel exporting companies amounted $ 499 million in 2019. 

Sri Lanka continues to qualify for GSP+ both to the EU and to the Post Brexit UK market. Unfortunately, in apparel, whilst the utilisation of GSP+ has been on the increase, the 2019 figure remains relatively low at under 53%. The Eravur Textile Park will help the industry to improve this percentage as apparel manufactured from Sri Lankan fabric will qualify for GSP+. Duty free market access puts Sri Lanka on a par with our competitor countries like Bangladesh who have duty free access without any restrictions on the origins of fabric. With the recently signed EU Vietnam FTA, qualifying apparel from Vietnam is also duty free to the EU.

As of date there are five companies who have expressed an interest in setting up textile plants in the new zone, and these are all new companies whose output will then supplement the production of fabric through the existing mills. 

The infrastructure cost to set up the zone is in the region of Rs. 5 billion, and is a reflection of the Government’s confidence in the industry, that this project is being implemented at this critical time for the industry. 

COVID-19 has dealt the industry a harsh blow wiping close to $ 1 billion in turnover from the industry this year between both the first and second waves of COVID. The industry markets remain closed as the world continues to battle with the impact of the virus. That said, resilience has always been a cornerstone for the apparel industry and Sri Lanka Apparel stands firm even in the current climate that it is our intention to continue to be a strong player in the global apparel sourcing world. The establishment of Eravur will greatly strengthen the industry’s ability to do just that.

Establishment of a fabric park is a complex process and JAAF is hugely appreciative of the initiative of the Government in proceeding with this project on a priority basis. Sri Lanka Apparel is deeply grateful to both the BOI and the Ministry of Industries for their untiring efforts in driving this project. 

It is proposed that construction in the new zone would commence early next year and that by early 2022, the first production from the new mills will commence.