ECONOMYNEXT – Sri Lanka’s apparel industry has the capacity to expand into offshore supply chain management for their customers but the existing tax regime is making competing services hubs like Singapore and Hong Kong more attractive, an official said.
“Such offshore actives will play a major role in creating new businesses where Sri Lanka could manage large orders and utilize both local and external capacities by engaging in order management, supply management and quality management both within Sri Lanka and outside,” Rehan Lakhany, Chairman of Sri Lanka Apparel Exporters Association told members at the annual general meeting on February 12.
“Offshore management of global supply solutions in collaboration with regional producers and partnering with international subcontracting mechanisms could create an additional flow of 300 million US dollars in export earnings.”
“We earnestly request that this relatively new model of business be encouraged by the government by revisiting the prevailing tax provisions which were introduced about three years ago based on IMF tax templates.”
“The result that we lost a major portion of the business to a more developed service centre such as Singapore and Hong Kong.”
He said tax incentives help businesses to bring those activities to Sri Lanka. Lower taxes will also help bring in export proceeds, he said.
Some foreign companies that had shifted operations to Sri Lanka to engage in related activities such as design had also moved out, Lakhany told EconomyNext.
Lower taxes will also encourage all export proceeds to be brought back to the country.
Sri Lanka’s Joint Apparel Association Forum (JAAF) has already given a proposal to the government and is expecting a response he said.
The apparel industry in collaboration with the Board of Investment is also setting up a fabric manufacturing park in Eravur in the East of Sri Lanka to benefit from GSP+ concessions which require domestic value addition.
“The industry is of the view that if the completion of the project could be done in one year we could guarantee that a minimum of three projects to be established (in fabric manufacturing park in Eravur),” said Lakhany.
Exporters were also having difficulties documentation with customs and digital processing.
Treasury Secretary Sajith Attygalle said he will ensure the implementation of digital document processing. (Colombo/Feb13/2020-SB)