COLOMBO: Sri Lankan government offered incentives to the key garment industry in the Budget 2005, close to the end of a preferential trade agreement with the U.S.
"We welcome the moves. Most of our proposals to the government have been accepted," Tuli Cooray told reporters.
Cooray heads a committee made up of private sector representatives and government officials responsible for mapping out a long-term survival plan for the country's garments industry when the Multi-Fiber Agreement with the U.S. expires next month.
He said the government has taken "a correct position to safeguard the garments industry amid increased competition."
In its budget, the government exempted a value added tax on the import of textiles and ancillary inputs for garment manufacturers.
The VAT on garment buying offices, which facilitate overseas buyers to place their orders with Sri Lankan manufacturers, was also removed.
"When quotas are removed they (buying offices) would become trade representatives who could support sourcing from Sri Lanka," Finance Minister Sarath Amunugama said in his budget speech Thursday.
The government has pledged financial assistance for garment manufacturing companies to modernize operations.
It has also pledged LKR150 million to fund productivity improvement measures in the apparel industry and international-image building campaigns.
The budget also proposed the setting up of an industrial park to facilitate fabric manufacturing for the apparel industry.
Currently most garment manufacturers import their fabrics.
Under the multi-fiber agreement, which came into effect in 1974, the U.S. is obliged to buy a set quota of garments and textiles from Sri Lanka and several other emerging-market countries.
Garment manufacturers have said there are signs that most U.S. buyers of Sri Lankan garments are eyeing cheaper manufacturers like China, Mexico and other South Asian nations.
According to Cooray, despite some immediate adjustments, the industry will stay afloat helped by a long-term strategic plan.
The U.S. is the largest buyer of garments and textiles from Sri Lanka, accounting for over 60% of the country's total garment exports.
Textiles and garments are Sri Lanka's largest export earner and make up 50% of its total export earnings - generating an annual average of $2.5 billion.