“We need the GSP+”

Former Sri Lanka Apparel Exporters Association Chairman Ajita de Costa, was one of the key players in the 200 Garment Factory Programme, initiated by late President Premadasa, which was a turning point for the garment industry, in Sri Lanka. He was also a founder member of the Sri Lanka Apparel Exporters Association, which was formed during a time, when the playing field was not level and the BOI sector had distinct advantages.

Comparing the environment for industries then and now, De Costa, who is the Managing Director of Maxim Limited, pointed out that, the battle was now at the international market place, and in trying to meet the ever increasing cost of production. The biggest challenge, he opined, was to bring down the cost of production, of which a major component was energy.

“The situation is very fluid. By design or otherwise, the small exporter has vanished. Only the big survive. Quality and delivering on time, is just not enough, these days. There has to be a design element and several other components, under the term “service.” It is such a strong buyers market, that some say it is just not only service, it is also being servile,” he revealed.

Speaking about the GSP+ issue, de Costa said, “Let us be very clear, we need this.” Elaborating further, he said, “In the event we don’t get it, we would have to give a discount of 10% to 12% on the related exports.” However, he pointed out that “how and from where we are going to find this 12%”, was the question, in the backdrop of rising costs.

• Biggest challenge is bringing down production costs
• Industry must go green
• Battle is now at the international market place

Q: You were a founding member of the Sri Lanka Apparel Exporters Association. Can you recall some of the key challenges during your tenure, as Chairman of the Apparel Exporters Association?

A: The biggest challenge was, how to manage the 200 Garment Factory Programme. The other problems were to do with quota, because there was no transparent system for quota allocation and management; and the interest rates were also very high for the non-BOI sector. We had a very complicated duty rebate system and a cumbersome procedure, for import/export. Basically, the playing field was not level at all, as the BOI sector had distinct advantages.

Q: What new initiatives did you implement during your tenure as Chairman?

A: We sought to improve the relationship with the administration at all levels, so that, we could dismantle the so-called road blocks, but then the 200 Garment Factory Programme came and all our attention went to that. We achieved most of what we needed, through that.

Q: When you were Chairman, the 200 Garment Factory Programme initiated by late President Premadasa was just getting off the ground. Looking back, could you tell us, what it did for the industry and how it changed the landscape of Sri Lanka’s industrial sector?

A: When the 200 Garment Factory Programme was proposed by the late President Premadasa, it was in a background, where most companies located outside the Free Trade Zones (FTZs) spent most of their time, not on export promotion, but dealing with banks, sorting out duty rebates and the other cumbersome procedures, that were in place.

The 200 Garment Factory Programme proposal came as a bombshell, to most and the membership was at first in shock, but I had a superb committee and extremely innovative office bearers. There were those like the late Michael Mack, late D.N. Thurairajah, Sohli Captain, Janak Hirdramani, Ashroff Omar, Mahesh Amalean and Malik Samarawickrema, who met almost everyday, to help formulate a win-win strategy.

Before the 200 Garment Factory Programme, Sri Lanka’s exports were far below 1% of world trade. Late Lalith Athulathmudali, when he was Minister of Trade targeted 3%. He felt achieving the 1% threshold was going to be difficult, but after that, getting to 3% would be no problem. Late President Premadasa’s plan was to cross the 1% threshold, with a 50% increase in exports.

He needed also to provide employment, through sustainable exports at village level, to stop a Southern insurgency and violence. He explained this to us, and he even explained that, the next step would be to bring investors from the 200 Garment Factory Programme into agriculture, through purchase, collection and transport. He had a vision and when our membership understood it, he got the support and we got, what we wanted.

It was a good deal. We got BOI status, duty free imports, access to borrowing in US dollars, a transparent Textile Quota Board and adequate representation, where even the rules were drafted by us. Import/export procedures were immediately simplified and there were monthly meetings, either with the President and/or the Secretary Treasury.

There was a joint venture attitude from the private sector and the public administrative sector, bringing a very close relationship between the two. So much so, that the Electricity Board and the Telecommunication Department, used to phone managers of companies, that invested in the 200 Garment Factory Programme every morning, to inform them that, the telephones were working and that, there would be no interruptions to electricity. Roads were improved to the factories and there was enormous activity.

I will give you a little story, how the late President Premadasa worked. Shortly after opening our factory and Malik’s factory in Kandy, he called me one Monday morning at about 4:30 a.m. He was very apologetic, but wanted me to go and take a look at a Government Farm not so far from our Kandy factory. I told him that, I don’t know anything about agriculture, to which he replied, “You make very good shirts – this will be no problem” and he rang off.

At 8:30 in the morning, I had a call from Mr. Paskaralingam who wanted to know, why I was still in Colombo. I told him that, I couldn’t find Malik and the President wanted both factories to be involved with the farm. Mr. Paskaralingam told me that, he would find Malik and for me to go to the farm. I arrived at the farm around 1:30 p.m. and shortly after Malik arrived. He had been at Kantalai looking at a new site, when the Police arrived and told him to go to Katugastota immediately.

At 7.30 the same day in the evening, Mr. Paskaralingam calls again and informs me that, my name is number two on the agenda of the Cabinet Sub Committee for Economic Affairs meeting on Tuesday, which was the next day at 9:30 a.m. He asked me to bring a proposal for the farm. This was hurriedly done and at 11 o’clock, I walked out of Temple Trees in a bit of daze. Secretary Agriculture Dixon Nilaweera, was given instructions to hand over the farm to us within 48 hours, on a lease arrangement and that is how, we got into the production of vegetable seeds. He was quite, quite extraordinary.

Q: What was your single most important contribution to the industry as Chairman of the Apparel Exporters Association?

A: Helping in establishing the 200 Garment Factory Programme, as a model joint venture between the private sector and the public sector. It was a team effort. The committee worked hard and long hours daily. I was just the Chairman.

Q: How would you compare the environment for industries then and now?

A: Things in the industry have changed just as much as everything else. That is the dynamics of life. The battle is now at the international market place and trying to meet the ever increasing cost of production.

Q: What are your views on the GSP+ issue?

A: First of all, let us be very clear, we need this. Of course, as Ashroff Omar says, if we don’t get it, we will have to give a discount of 10% to 12% on the related exports. How and from where we are going to find this 12%, is the question, because costs are going up daily. But you think about this, this little country has for so many long years signed many, many protocols and conventions with good intentions and the international community has appreciated this before.

Obtaining the GSP+ status in the EU, was during peace time. Perhaps, there may be delays in completing our task. There is a war on terror; there is a war on cost of living; etc. Of course, this cannot be made an excuse, but it is reality. The EU itself has member states, that contravene their own laws, say in environment and protection, they have been given time to fall in line. We are in an exceptional period and under exceptional circumstances.

If I was the EU, I would try to understand that, by withdrawing GSP, there would be large job losses. That is not going to help democracy and human rights. It will be the reverse. They should recognise that, the industry is compliant and they should use the industry, as a leverage to lobby for compliance from the non private sector. Perhaps offer GSP+ for not just Sri Lankan and Indian piece goods, but Asian-based piece goods as well, if the objective is to be achieved by say mid-2009. It is easy to say that, the review is technical. If it is so rigid, then you and I both know that, we are technically dead as far as GSP+ is concerned.

Q: How do you view the current status of the apparel industry?

A: The situation is very fluid. By design or otherwise, the small exporter has vanished. Only the big survive. The medium size exporters’ only way to survive, is to group with others of the same size, to provide a complete range of products and try to achieve a total solution concept. Quality and delivering on time is just not enough these days. There has to be a design element and several other components under the term “service.” It is such a strong buyers market, that some say, it is just not only service it is also being servile.

Q: What are the new/future challenges for the apparel industry in the country and what is the way forward for the apparel industry?

A: The biggest challenge is to bring down the cost of production and a major component of this is energy. Brandix, MAS and Hidramani have shown the way. You need to go green. The industry needs help to be in the game till Chinese exports lose their competitive edge and we are told, it will be quite soon.

Q: What suggestions do you have in terms of the private sector’s role in politics and national issues such as peace, educational reforms, poverty alleviation and social responsibility?

A: Personally I would say keep out of politics and stick to social responsibility. Through social responsibility, you could engage with the state to alleviate poverty, environmental education, and so on. During the 200 Garment Factory Programme, the members of our Association collectively cooperated with Janasaviya, to help set up training centres and also took pattern making, etc., to the village using the National Youth Services Council. The trainees bought cut pieces from the factories, located in each district and garments were manufactured or made at home, for sale at the village fairs.