Sri Lankan suppliers shrug off GSP+ impact

Joe Ayling

Just-style, the apparel and textile industry’s leading online resource with an experienced editorial team and network of international analysts who are dedicated to provide a blend of up-to-the-minute information, insights and intelligence across the globe. Just-style visited the Sri Lanka Design Festival (SLDF) which concluded on November 16 with quite an impact on the local creative industries.

It is the second time the country has held the event, and puts a spotlight on the apparel industry as a leader in ethical design and fashion manufacturing practices.

This is what Just-style reported to the world on Sri Lanka Design Festival.

Two of Sri Lanka’s most prominent manufacturing groups say they have not yet felt the effect of losing the GSP+ (generalised system of preferences) status with the EU. Speaking to Just-style at the Sri Lanka Design Festival this week, two key executives both say removal of the status hasn’t impacted top line sales.

“Ultimately we didn’t see a sudden impact on business,” said Brandix Lanka Chief Executive Ashroff Omar, which makes jeans and intimate apparel for the likes of Gap and Marks & Spencer (M&S).

“I don’t know whether the impact will come gradually or whether the global rebound will help the country to absorb it and move on,” he said. MAS Holdings, CEO Nathan Sivagananathan which makes lingerie and active wear for M&S and Nike, also insists it is business as normal, although some production has been outsourced as a consequence. He told just-style: “Overall we haven’t seen a decline in orders and the majority of our customers have been flexible.” Sivagananathan said that MAS also has design, innovation and research operations to help offset the affects of losing GSP+. “Based on all of this I think we have been able to serve our customers. Where customers have said that we still need the GSP+ we have moved a little bit of our production to Bangladesh,” he said.

The EU withdrew GSP+ in August, blaming alleged human rights abuses during the final stages of Sri Lanka’s recently-ended 30 year civil war. The system had given the country’s apparel exports zero duty access to the EU since 2005, and meant many exports of many goods could face a duty of up to 9.6 percent.

But while apparel exports from Sri Lanka suffered last year, falling 5.6 percent due to slumping Western demand, the nation’s Export Development Board (EDB) reports a rebound in 2010.

A recovery in Western markets has sparked the improvement, leading retailers to place more orders. Sri Lanka’s investment in sustainability and ‘eco-factories’ is also attracting Western brands who are looking to clean up their supply chains. Therefore, the timing of the GSP+ loss has so far saved the industry from taking an immediate hit.

While Sri Lanka still benefits from GSP, buyers are not being pulled there for rock bottom prices anyway, with neighbouring Bangladesh and Cambodia ticking those boxes. Buyers are more likely to arrive looking for a longer-term green supply agreement they can show off to shareholders back home.

Indeed, the resilience of MAS, Brandix and Hirdaramani to losing GSP+ is thanks to such partnerships. Less developed factories in the country, meanwhile, will rely on smaller orders from niche eco labels. Therefore, to continue to be resistant to the removal of GSP+, Sri Lanka’s eco drive needs to resonate loudly with the West.