Sri Lanka has slashed the value added tax on fabric imports to five per cent from 15 per cent. This is aimed at helping the apparel industry, particularly small exporters. An interest subsidized loan scheme helps medium and small-scale manufacturing industrialists obtain fabric as raw material at a low cost. The US is the biggest buyer of Sri Lankan apparel, growing 3.8 per cent. Exports to the EU are a close second, growing 7.8 per cent.

The trade dispute between the US and China is helping Sri Lankan apparel exports to the US. However there’s a concern on European markets due to the weather conditions. Because of the long winter in Europe, the retail sector has slowed down as the long winters cause people to spend lesser time in shopping.

Some manufacturers in Sri Lanka are still engaged in manufacturing basic apparel despite the country’s gaining the GSP Plus concession last year. What the industry is also doing is upgrading itself to the next level by focusing on high tech and designer apparel. India and Sri Lanka are widening the scope of FTA they already have by including services and investments. The free trade agreement was arrived at in 2000.