EDB impetus for product, tech upgrade for the export sector

Daily News

10/01/2017

The export sector of Sri Lanka which contributes nearly 20% to the country’s GDP, plays a vital role in achieving the development objectives of the government in terms of, employment generation poverty alleviation and enhancing foreign exchange earnings.

The Government is pursuing an outward looking economic policy and is taking measures to integrate with the rest of the world to connect and compete to reach wider market access through deepening the existing FTAs with India and Pakistan, working on new trade agreements with Asian economies like China and Singapore and possible preferential trade agreements with Thailand, Malaysia and Turkey. All the above and the restoration of GSP+ in the year 2017 and initiatives to boost trade with USA will open up new opportunities for the export sector.

All these measures will create opportunities for high tech products to be exported to the world. Moving into high tech products will provide considerable thrust in achieving product and market diversification simultaneously and thus reduce the vulnerabilities associated with dependency on a few products and markets.

Sri Lanka’s exports are basically composed of primary goods with relatively low technological sophistication compared to those of most emerging market economies which have successfully achieved high economic growth through the adoption of technology oriented policies.

Majority of exporters, especially the SME category pays less attention to improve and upgrade the quality of their products on a regular basis. Limited awareness, constraints in accessing technology, high financial cost involved in effectively adopting of new technology, lack of trained human resources at enterprises level and lack of motivation to adopt new technology have weakened the technological capabilities of most exporters.

The net effect of these factors is lack of innovativeness and hence low productivity and low competitiveness in the international market.

Therefore, upgrading production processes and capacity building of export enterprises is vital at this juncture to place Sri Lanka’s exports on a more technology driven path if the country is to enhance competitiveness in the global market and achieve export targets, through enhanced market access.

The EDB has initiated a number of programmes to encourage manufacturers/producers of value added products to upgrade product quality, technology and sustainability of productive processes in this regard.

Some such initiatives are:

System Development Programme for the Rubber and Plastic Industry to obtain-ISO 14001 and ISO 50001

The Rubber Products Industry is a key industry contributing 7.6 % to exports in 2015. Sri Lanka produces a wide variety of rubber products and the major markets are USA, Germany, Belgium, Italy, Canada, UK, and Brazil.

Sri Lanka supplies to major international brands such as Continental, Solideal, Wonder Grip, Mapa, Safety work etc. Companies in the rubber industry use state of the art technologies for manufacturing the above international brands. Plastic industry although not a major export sector at present has the potential to grow in the future.

Currently, companies have access to overseas markets for polythene bags including door knob bags, shirt bags, and food wrap bags. In addition, many plastic processors supply packaging accessories such as hangers, buttons for garments, and packaging for tea, spices, processed foods and perishables.

The energy consumption in the manufacturing process is high in both industries compared to other industries and also having significant environmental issues in the manufacturing process. Considering the global requirement for sustainable and environmental friendly production and also to be competitive in the international market obtaining ISO 14001 and ISO 50001 is considered vital and important.

In order to address the above, EDB has commenced the implementation of a System Development Programme for a selected group of companies of the rubber and plastic sectors by obtaining services of a professional organization. The programme will include awareness seminars, preliminary audits, capacity building programmes to train consultants, consultancy on systems development, energy reviews with complete evaluation of energy flow, internal auditor training and mock auditing etc. to enable companies to obtain ISO 14001/ISO 50001.

The main objective of implementing this programme is to introduce and establish manufacturing excellence practices in order to improve sustainability and the resource efficiency resulting in substantial cost reduction to enhance the competitiveness of their products in the international market.

Product Development Programme on Shoe Engineering for Manufacturers and Exporters of Footwear - To Develop a Technically Specified and Improved Product Line to Suit the International Market.

The footwear and leather sector has been identified as a potential sector by way of creating employment opportunities and earning and saving foreign exchange earnings.

Since the local market is limited, exports are essential for the sustainability of the industry. This industry clearly has a significant potential for being a key contributor to the economy of the country, if empowered by appropriate support and guidance.

Inferior quality of shoes is one of the major barriers to promote Sri Lankan products in the international market. The main reason for this is the lack of knowledge of the Sri Lankan manufacturers on shoe engineering and shoe designing mainly due to the non availability of a proper mechanism and or institutions to provide appropriate knowledge to local manufacturers. Therefore, strategies have to be developed to provide this knowledge to the industry, which is vital in improving the quality of the product to international standards.

Taking into consideration the above the EDB has embarked on a product development programme to enhance the product quality of a selected group of footwear manufacturers /exporters by providing experts knowledge on shoe technology, targeting the international market, especially EU, UK and USA.

The programme will be implemented in two stages. During the stage I, the experts will work with the selected companies to provide knowhow on shoe engineering with suggestions to improve/upgrade Products and Production Process. The Stage II of the programme will be implemented after 3 months of the completion of stage I to provide further advice to develop a technically specified and improved product line to suit the international market and advise the participants in solving problems which they may encounter in implementing suggested modifications to meet the international standards in their products.

Technology Upgradation Programme for the SME Apparel Sector

The export oriented apparel industry plays a vital role as a key driver of the national economy and has grown to be the most significant contributor to the country’s economy over the decades. In order to maintain the sustainability of the industry it is vital that the SME companies are supported and be developed.

The EDB has taken steps to facilitate small & medium scale manufacturers/exporters in the apparel sector to obtain international compliance certification envisaging the GSP plus concession to be granted to Sri Lanka by early next year and thereby to be “export ready”.

The Sri Lankan exporters are required to adhere to various stringent requirements as specified by the buyers of these major international brands. Each buyer has established a set of standards to be fulfilled by each supplier which includes specifications appropriate to the industry and countries manufacturing the products.

Therefore, it is vital that the apparel factories obtain international certification such as SEDEX, BSCI, WRAP etc to be eligible to supply to these buyers.

Although large companies are able to invest in obtaining these certifications, this has become a difficult exercise for the SME exporters in view of the costs involved in upgrading the factories as required by compliance audits in obtaining international certifications. A compliance audit is a comprehensive review of an organization’s adherence to regulatory guidelines.

Many SMEs have failed to secure orders from international buyers due to their inability to obtain international certifications. Some SME companies have completed compliance audits but are unable to invest on the requirements stipulated by the compliance auditors in view of financial constraints.

Therefore, it is essential for the SME companies to upgrade their production facilities and obtain relevant international certifications to gain confidence and build long term business relationships with their buyers.

Against this background, EDB implemented a programme in the year 2016 to facilitate 7 - 8 SME apparel companies to upgrade their production facilitate and obtain relevant international certifications to gain confidence and build up long term business relationships with buyers.

Development and Promotion of Green Products - Technology Upgradation and Capacity Development for Companies Manufacturing Red Clay Roof Tile Products

The world at present is speedily growing more fond of environment friendly and people are health conscious. Therefore, the consumer preference has shifted to eco-friendly and healthy products. This increasing demand for eco friendly products and health consciousness of consumers have opened up new opportunities for the clay tile industry as other alternative products in the market are not in a position to meet these parameters.

Clay tile is eco-friendly and associated with an aesthetic value which improves appearance and add value to buildings especially residential and recreational. Also, because of absorption of heat, it provides a cooling effect naturally which is environmental friendly and lower the energy consumption. Heritage related reason is another factor for the increased demand for clay tiles. Houses are built on architectural structures depicting different eras where clay tiles plays a major role, mainly in European countries such as Belgium, UK, Poland, Netherlands and Italy. As usage of Asbestos is banned in many countries, there is a demand for clay roof tile. Therefore, it is timely for the roof tile industry to make use of the opportunities rising from the developments taking place both in domestic and international markets.

Sri Lanka’s Red Clay roof tile industry has been existing for many centuries with little change in technology. A thriving industry in mid-nineties, with more than 500 roof tile factories operating profitably. However, around 300 factories have been closed down and the factories that are presently in operation are facing problems due to competition from asbestos and metal roof sheets, use of traditional technology and lack of institutional support for the advancement of existing technology.

The main raw material (clay) is available in Sri Lanka.The only clay roof tile exporting company Samson Rajarata Tiles based in Anuradhapura uses silt of the reservoirs as their raw material to manufacture clay roof tile.

In order for the industry to be sustainable, it has to move into manufacturing of innovative products and adapt their products to suit the export market.

Although the sub sectors of the Ceramic industry i.e. ceramic tile, tableware and ornamental ware have developed to a high tech industry over a period of 25-30 years, the roof tile industry has remained with the traditional/ primitive technology. Using of this outdated inefficient technology has lead to low productivity, low quality and high cost of production.

Given the opportunities that exist in the international market, the EDB together with the Sri Lanka Ceramic and Glass Council and CENTEC is working closely with the Red Clay, Roof Tile industry to upgrade the production process especially, and the quality of the product to make the industry export ready.

As the initial step EDB will facilitate a few red clay roof tile manufacturers to upgrade their production process firing and drying in the year 2017 by way of assisting them to purchase High tech machinery.