From 2014 onwards, it might become difficult for Sri Lanka to export its apparels to the European Union, as it may lose its market share to other competitor countries like Bangladesh, Cambodia, India, Pakistan and Vietnam, according to a recently released study by the Institute of Policy Studies (IPS).
In 2010 and 2011, Sri Lankan share in EU garment market witnessed a marginal decline compared to 2009, and it is expected to decline further, as the EU GSP Plus concessions have eroded, says ‘Sri Lanka: State of the Economy 2012’, released by the IPS.
Sri Lankan garments would have to pay higher tariffs to enter the EU once the new reforms come into effect in 2014, the study says.
On the other hand, Bangladesh already enjoys GSP Plus concessions, while Pakistan is also likely to become eligible soon for such concessions. Moreover, India is likely to soon sign a free trade agreement (FTA) with the EU, which would provide tariff preferences to Indian apparels in EU from 2014.
Hence, in view of competitor countries gaining tariff concessions, it would be a challenge for Sri Lanka to secure its market share in the EU after 2014, according to the report.
Sri Lankan apparels have also steadily lost their market share in the US from about 2.3 percent in 2005 to just 1.8 percent in 2011, the study adds.
The report suggests that the Sri Lankan garment sector should diversify its export market and commends the rapid inroads made in to new markets like Turkey and the UAE in recent years.