Harsha urges Govt. to stop exports dip

Saturday, 28 July 2012 00:48 -     - {{hitsCtrl.values.hits}}

UNP MP Dr. Harsha De Silva yesterday called upon the Government to take urgent steps to reverse the decline in apparel exports.

He said that the Central Bank had announced that apparel exports fell every month this year in spite of the depreciation of the currency in February. Monthly exports amounting to US$ 367 million in January had dropped to just US$ 278 million by May.

“While noting with disappointment that this Government has not been able to expand the apparel industry or for that matter begin any other new export industry, the challenge now is to safeguard whatever is left,” the UNP MP said.

“Notwithstanding the denials by the authorities, it has now been established that Sri Lanka’s exports that used to be around 33% of GDP 10 years ago has fallen to around 17% at last count. Unless this declining trend is arrested, the negative impact of falling export-revenue and employment on the economy would be significant,” Dr. De Silva said in a statement.

He also said what is emerging is that exports to the European Union are becoming the most affected.

Industry sources reveal that this is much more than the slowdown in EU and lower cotton prices. The feeling is that the real impact of Sri Lanka losing GSP+ is now becoming clear with apparel orders moving out to countries that are able to compete using the duty concessions given for good governance in the face of falling European demand.

The surge in demand early last year that led to an overbooked situation with formerly Chinese orders coming our way that overshadowed the GSP+ withdrawal have now completely disappeared; and with it the government position that GSP+ withdrawal has had no impact on Sri Lanka. Compounding this scenario is the rising cost of production particularly caused by the massive hikes in fuel and electricity due to erroneous macroeconomic management and a pending wage increase; itself fuelled by the sharp increase in cost of living due to delays in exchange rate and interest rate adjustments.

It now seems very likely that business-as-usual is longer going to be the case especially for the large number of medium scale manufacturers.

“The Government must urgently consider the developing scenario in the apparel sector and begin thinking on how significant changes to the production processes can be made to take the industry forward. The answer is not to provide some ad-hoc subsidy to a few or reschedule loans to a few more. There needs to be a concerted effort to ensure the ground situation is made conducive for heavy investments in to more capital intensive manufacturing in the future. Perhaps rethinking the position on GSP+ may also be wise. Unless the Government meets this challenge urgently and comprehensively, the future for Sri Lanka’s already shrinking export sector would be even more depressing,” Dr. De Silva said.