Whilst the new administration of Obama is grappling to conceptualize the way forward to ride the financial tsunami, the shock waves have begun to hit Sri Lanka with total exports declining in September by 9.4% to 652 million dollars and Garments exports to the U.S. declining by a staggering 21% to 112 million dollars. This stacks on to the export hit Tea sector in Sri Lanka that has resulted in almost nineteen small holder factories closing down in the last three weeks, and the corporate sector in the red financially in November. Anyway, I remember during the time I was working for a American multinational one of my bosses once telling me that the best surfers emerge in difficult waters and I guess its time that Sri Lanka watch for the true leaders that will emerge not only from the world of business but in all disciplines of the world.

If we focus to the performance of the Textile and Garments sector that accounts for almost fifty percent of the Sri Lanka exports as at end September ’08 the export revenue has declined by a staggering 21% to 112 million dollars that can give an idea of the impact that we can expect in 2009. Latest data reveal that over 2 million people have lost their jobs in the US and in the month of November alone accounting for 533,000 job cuts which is why consumer purchasing has declined drastically. This justifies the drop garment exports into the US from Sri Lanka which is fuelled by the declining purchasing power.

Survey reports coming in from the Garments manufacturers in Sri Lanka reveal that orders for the 2nd quarters and beyond has dwindled down to almost zero, which means that a hard look is required if Sri Lanka is to protect the livelihood of its people. May be it will also be an eye opener to the EU, on the decision that needs to be given on the continuity of the GSP+ export incentive. After all, human rights conventions and livelihood opportunities center around a human being and the greatest of them being the right to work and earn a living that will be deprived if GSP+ is also withdrawn in the latter part of 2009.

May be the state needs to reassure the Garments Industry that may be half the 18 percent duty increase will absorbed by the state if GSP+ incentive is removed by the EU by way of a bail out package. Sri Lanka has to develop a model for bail out packages if not there can be serious social consequences.

Garments- niche marketing

Whilst looking towards the state for help the sector must also innovate. If we analyse the product mix of apparels into the United States, Sri Lanka can identify certain niche markets which are growing which are opportunities that can be exploited by Sri Lankan garments manufacturers. The segments which are growing into the Unites States are HS Code 620342 -Boys/Men trousers,overalls, breaches of cotton, HS code 611610 –Gloves, impregnanted,coated and covered plastics and rubber material, HS code 611120 -Babies garments and accessories to name a few. May be we need to secure orders of military clothes for the army’s of the world with the help of the government so that unutilized manufacturing capacity can be filled. The other opportunity that Sri Lanka has is that the exports to the EU has increased by 14.3% to 1156 million dollars. We need to strengthen this link and evaluate the options of increasing the businesses to other areas of apparel manufacturing which is called product line stretching in marketing terminology.

I feel its about time that different ministries work together for the benefit of the country. In this light UK becomes a priority market for Sri Lanka. The exports to the UK has increased by 7.4% to 795 million dollars as at end September 2008. This market has also maintained its position as the No 2 export market for Sri Lanka whilst at the recently concluded tourism action plan workshop of the Tourism Ministry, UK has been identified as a core market for the 2009 promotional plan. Given these two strategic reasons a strong Public-Private partnered Nation Branding campaign must be unleashed. This requires a synergy effect of a coordinated approach of getting in a single minded message via Politicians, Sports personalities, Exporters and the promotional arms of BOI, EDB and Tourism Ministry so that may be we can get the support of the Diaspora for the development of the households in the liberated North and East of Sri Lanka where most of the relatives of the diaspora live. The challenge is how the rhetoric can be moved to action.

I have personally attended over 6 Indo-Sri Lanka trade summits in 2008 and its sad to see how exports continues to decline. As at end September exports have crashed to 346 million dollars at a decline of 13% over last year. This means that for the 3rd year running the Exports of Sri Lanka declining to the much talked about economic power house India.

Even though at each of the country strategies of the two top multilateral organizations the World Bank and the ADB identifying that one of the key opportunities that Sri Lanka has is the neighbouring country generating a seven percent plus GDP the fact remains that exports out of Sri Lanka to India continues to decline. As I questioned at the each of the country presentation what WB and ADB can do to drive stronger trade integration in the region the reality is that unless the two parties agree to make things happen there is nothing much that the facilitators can do. The exports of the top two strategic sectors of Sri Lanka -Tea and Garments remains at a non existence level of export proceeds into India. Even though there was much media hype recently on the deeper trade cuts on garments into India where from a 3 million pieces of garments it has been increased to 6 million pieces once again the reality is that nothing appears in the export statistic data which is very worrisome.

As I continue with the recommendation that lets forget the negatives of yesterday, lets focus on the future and drive towards developing 10 categories of products in the next six months into India so that we can give the confidence to the business sector that CEPA is a viable business opportunity for Sri Lanka to pursue. The sectors must include Tea, Garments and the award winning brands Munchee and Damro. However, we have to see if even this goal can become a reality. If this happens at the ground end, then we can silence the critiques of the Indo Lanka FTA. If not we only fuel the discussions for CEPA not to take place in Sri Lanka in the next decade.

Whilst the war between India and Pakistan is at the extreme most the 26/11 of India, Pakistan has emerged as a key trading partner for Sri Lanka with exports growing by a whopping 32%. Even the value of the export proceeds are around fifty million dollars and the fact remains that it easier to work with the Pakistani’s as the word given during trade remains at implementation without any secret agenda’s that come into play. It is a fact but we do not see this same transparency when dealing with the Indians. The key opportunity areas for Sri Lanka exporters are Sheet rubber, Copra, Pepper, Tea in bulk, Coconut fresh nuts, Beetle leaves, crepe rubber. May be Sri Lanka needs set up more buyer seller meetings and trade exhibitions so that the opportunity to drive business into Pakistan increase.

Tea – tough decisions

There is so much written on this area by industry experts and people outside the industry but the reality is that tea purchased by the state at a cost of 290 millions remains at the go downs in Colombo choking the system. Apart from this reality almost all estates in the corporate sector have suffered losses in the month of November with actual numbers as high as 40 million rupees. The next step will be 15 day working months and non application of fertilizer that is going to take this industry to the wire. Almost twenty small time factories have shut down and the ramifications socially will emerge in the near future. I strongly recommend that Sri Lanka get the assistance of organizations like ADB and develop a clear game plan which will include the development of a bailout package that can be in the form of working capital loans, rescheduled loans, concessionary loans and grants and not just handouts by the government. Its absolutely important given that week after week the auction prices keep declining not only on Tea but rubber in the open maket.