New challenge to garment sector: Sri Lanka
Bangladesh's apparel sector is set to face yet another challenge as its close competitor Sri Lanka is lobbying for duty benefits from the European Union.
The two parties held a meeting in Colombo last week, where they discussed the possibility of revival of the 'Generalised System of Preferences Plus' status for Sri Lanka.
The island nation lost its GSP Plus status in 2010 after the United Nations Human Rights Council (UNHRC) alleged violations of human rights during the civil war.
However, given the political commitment by the new Sri Lankan government, the EU decided to consider the case under a special monitoring process.
The full application process takes about 10 months. If the status is granted, Sri Lankan exports to the EU will attract lower or no duty.
Currently, Sri Lanka is the seventh largest garment exporter in the $450 billion market, with a little more than 1 percent share, according to data from the World Trade Organisation.
Bangladesh is the second largest garment exporter after China with a 5 percent market share.
The EU is the largest export destination for the country's garment products, where it has been enjoying duty-free benefits since 1971.
In fiscal 2013-14, the country exported more than $14 billion worth of garment items to the EU, according to data from the Export Promotion Bureau.
Ahsan H Mansur, executive director of the Policy Research Institute of Bangladesh, said the country has to become more efficient to cope with the impending challenge from Sri Lanka.
“Obviously, we will lose competitiveness if Sri Lanka is also granted the GSP plus status to the EU, as both the countries will compete with the same garment products,” said Atiqul Islam, president of Bangladesh Garment Manufacturers and Exporters Association.
The country's upper hand in garment trade was already compromised last year when Pakistan was included in the GSP Plus scheme.
Bangladesh accounts for around 13 percent of the apparel items that enter the EU, meeting 25 percent of the region's demand for shirts, T-shirts, sweaters and trousers.
In 2014, Sri Lanka's apparel exports to the EU increased 10.5 percent year-on-year to $2.16 billion.
“Sri Lanka should capitalise on its advantage of a well-qualified labour force to move further up the value chain,” according to a study by the Standard Chartered Bank released in January.
“The continued provision of unique design services and products, further mechanisation, and effective branding could help it retain market share. Sri Lanka could also benefit by strengthening its position in non-traditional markets like the Middle East, India and China,” the study also said.