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Have our entrepreneurs failed to compete in the Indian market under the
India-Sri Lanka Free Trade Agreement?
May 18, 2016, 8:05 pm

Making the best use of a Free Trade Agreement (FTA) by penetrating another market needs skills and
foresight. Sri Laknan entrepreneurs with such endowments have made their mark in India. But
entrepreneurs who rely on a protectionist umbrella with state patronage may not be successful in
such market penetration. Being shielded from competition in the local market tends to make them
shy-away from taking risks in the foreign markets.

It is often said that the Indian market is very difficult to penetrate for items produced in Sri Lanka.
However, it is pertinent to point out that countries like Malaysia, Singapore and Thailand export
between US$ 5 and 8 billion worth of goods and services per year to India compared to our US$ 645
million in 2015. This highlights the potential for increasing our exports to India, which by common
consent is going to be the fastest growing large economy in the world. The Indian non-tariff barriers,
procedural delays, approvals and clearances are mentioned time and again as problems for doing
business in the Indian market. Despite these claims, there have been many Sri Lankan entrepreneurs
who have been successful in the Indian market. Unlike the instances where the Sri Lankan
entrepreneurs had difficulties in the Indian market, the voices of the entrepreneurs of their successes
are rarely heard . Therefore, it is timely to examine four selected cases of those companies that
succeeded in the Indian market, viz., Damro, MAS, Brandix, and Colombo Dockyard.

Success of DAMRO

DAMRO made use of the tariff concessions of the India-Sri Lanka FTA (ISLFTA) at the very beginning
of the agreement and opened the first furniture showroom and distribution complex in Chennai, India
in October 2000. Perhaps it was the first Sri Lankan venture established in India after the ISLFTA
came into operation.

Damro first studied the Indian market before moving in and this strategy paid dividends. A separate
production plant was also built to create new designs to suit foreign markets like India. Damro
Furniture Pvt Ltd., is a company incorporated in India and in line with Indian corporate laws. It
markets itself in India under the slogan "Largest Furniture Manufacturer in South Asia" and this has
gone a long way in giving a strong footing to the company in the Indian market. So much so, Damro
now has more than 60 branches in India spread over the states of Karnataka, Goa, Tamil Nadu,
Kerala, Andra Pradesh, Telagana, West Bengal, and Maharastra.

Damro has a strong dealer network in India and an Indian furniture importer said that "Every month
we get new furniture from Sri Lanka and we are able to sell because they are good quality".

The Damro Chairman and Managing Director did not shy away from competition and said
"Competition is a must for development of the industry. If there is no competition, we will keep
supplying the same product. But when there is competition, we have to be more active and conscious
of the market demand. Competition is a healthy sign of development". (31 March 2002, Sunday
Observer). This fearless attitude, among other reasons, was behind the success of Damro in the
Indian market, and Damro will soon spread their market network across the whole of India.

Amante

Making use of the tariff preferences and utilizing the apparel quota made available under the ISLFTA,
a MAS Holding product by the brand name "amante" made in-roads to the Indian market in 2007.
The ISLFTA facilitated lingerie and swimwear – the main ‘amante’ products – to overcome the normal
duties in the range of 9-12% for such products in the Indian market.

‘Amante,’ at present, has more than 250 large stores and 1000 multi-brand outlets while maintaining
strong online presence. Today, ‘Amante’ stands among the top 5 premium lingerie brands in India,
and is the preferred fashion forward lingerie brand amongst the Indian consumer. In 2010, ‘Amante’
was voted ‘product of the year’ by the Indian consumer in the largest independent survey carried out
in India.

‘Amante’s’ ability to win over the Indian female is attributed to the brand’s distinctly Indian flavour.
‘Amante’ products are made to suit and fit the Indian female. The designs and styles are originally
sourced from international fashion centres and made to international standards. But the colours,
shape, and designs are adjusted to suit Indian preferences. In other words, the international colour
plates were adjusted to suit the Indian women. The special Indian colour plate, with names like
Antique Rose, Grape, and Floral Romance won over Indian females who tend to be more conservative
than the Western women. ‘Amante’ is also priced to fit the Indian purse in the range of Indian Rs.
400 to 1000 which is seen as affordable and good value for money given the fact that it is positioned
in the market as a ‘value premium’ product.

MAS did not just walk into the Indian market but did their homework and studied the market very
carefully before moving in with their premium products. They provided the Indian female access to
international-standard apparel wear, customized to suit their unique contours and preferences of the
Indian female.

After ‘Amante’s’ stellar success in India, ‘Amante’ entered the Sri Lankan market in 2012 and the
Pakistani market in early 2016. The brand’s retail presence in South Asia will expand further in the
future. In India at least, its presence is now felt everywhere.

However, they are concerned about the limited quota available for apparel exports under the ISLFTA
and expressed the need for removal of quota restrictions which they believe would materialize under
the proposed Indo – Sri Lanka Economic and Technology Cooperation Agreement, thus providing
increased market access opportunities for their product in India.

Brandix

Brandix has been a fast-growing apparel exporting company in Sri Lanka. Around a decade ago when
apparel exporters were consolidating, Brandix too started to consolidate its operations but there was
limited potential for economies of scale in Sri Lanka.
In 2006, Brandix moved to India to reap economies of scale where cotton, spinning, and labour were
available in abundance. The result was the Brandix India Apparel City (BIAC) – a unique integrated
apparel supply chain city managed by Brandix Lanka Ltd. Up to 25% of Brandix’s production now
happens in India in this venture which is spread over 1000 acres in Visakhapatnam in Andra Pradesh.

BIAC highlights India’s phenomenal synergies in the world of textiles. To leverage India’s immense
potential for economies of scale and other robust business fundamentals in its fast growing economy,
Brandix brings 30 years of industrial expertise to produce a value chain and invites others to join it.
The dynamics of the apparel market demands speed to market, least cost, flexibility and assurance of
compliance and BIAC is built on this foundation.

The rationale for investment are procedural ease and an array of inviting financial and operational
incentives, as well as duty free imports. Greater efficiency in distribution and front end costs due to
single location of all value chain partners, a centralized logistical unit and a Just-in-Time process to
ensure optimum returns makes BIAC the most competitively priced apparel location in the region.

Brandix customers are now served from both India and Sri Lanka. It is a model that the Western and
East Asian firms have used for decades by locating their manufacturing overseas – the know-how
makes everything work from the on-set.

The Brandix success story in India also highlights the trade and investment nexus and the potential
for making Sri Lanka the Apparel Hub for South Asia taking advantage of its geographical location
and the hub regulation in place; Textile and Apparel sector liberalization by India under the proposed
ETCA would open vast opportunities for both countries which will be a ‘win-win’ situation.

- Ministry of Development Strategies and International Trade