Open for Busi­ness

De­spite suf­fer­ing from a three-decade long civil war, Sri Lanka shows great prom­ise in its ap­parel ex­port busi­ness, promis­ing to re­vi­tal­ize the eco­nom­ics of this war-torn coun­try.

Southasia - - Business Textile - By Madiha Bi­lal Ka­pa­dia Madiha Bi­lal Ka­pa­dia holds an MBA in Mar­ket­ing from IoBM and free­lances for var­i­ous pub­li­ca­tions.

Sri Lanka’s ap­parel ex­port in­dus­try is the most sig­nif­i­cant and dy­namic con­trib­u­tor to the coun­try’s econ­omy. Over the last three decades, the sec­tor has shown ex­po­nen­tial growth and has be­come the num­ber one for­eign ex­change earner and the largest sin­gle em­ployer in the man­u­fac­tur­ing in­dus­try. The in­dus­try pro­vides di­rect em­ploy­ment to over 300,000 and in­di­rectly em­ploys close to 600,000 peo­ple, in­clud­ing a sub­stan­tial num­ber of women.

The Sri Lankan ready-made ex­port his­tory can be traced over 40 years back to the 1960s. In­ter­est­ingly, the first gar­ment ex­ports from Sri Lanka did not make their way into US or Euro­pean mar­kets but rather found a strong con­sumer base in Rus­sia. The tex­tile and gar­ment in­dus­try has been Sri Lanka’s largest gross earner since 1986 and ac­counted for 40% of to­tal ex­ports in 2012. An­other ma­jor ex­port is tea, which ac­counts for 17% of the to­tal ex­ports. Other prom­i­nent ex­port goods in­clude spices, gems, co­conut pow­der, rub­ber and fish with the main ex­port part­ners be­ing the United States, the United King­dom, Ger­many, Bel­gium and Italy.

Sri Lanka’s ap­parel sec­tor has pro­gressed from be­ing an ODM (Orig­i­nal

De­sign Man­u­fac­turer) to a global lead­ing in­ter­na­tional OEM (Orig­i­nal Equip­ment Man­u­fac­turer) sup­plier. This is mainly due to the en­cour­age­ment from the world’s third largest re­tailer, TESCO’s di­rect sourc­ing as well as re­cent back­ing from the Government of In­dia, which duly en­hanced mar­ket ac­cess for Sri Lanka’s ap­parel ex­ports.

To­day, the gar­ment in­dus­try oc­cu­pies a pre-em­i­nent po­si­tion in Sri Lanka, pro­duc­ing high qual­ity gar­ments for lead­ing in­ter­na­tional brands such as Vic­to­ria’s Se­cret, Tommy Hil­figer, Nike, Gap, Next and Marks & Spencer’s, etc.

Sri Lanka’s many com­pet­i­tive ad­van­tages prom­ise con­tin­u­ing growth. The coun­try boasts of a 92% lit­er­acy rate, an achieve­ment as­tound­ing for a South Asian coun­try that is only re­cent- ly emerg­ing from a three-decade long civil war. Ev­ery year, 38,000 stu­dents grad­u­ate from nine univer­si­ties with more than 50% spe­cial­iz­ing in tech­ni­cal and busi­ness dis­ci­plines, pro­vid­ing Sri Lanka with a lit­er­ate and train­able work­force. The Lloyd’s reg­is­ter ranks Colombo the num­ber one port in South Asia and 26th in the world. The na­tional air­line has been pri­va­tized with Emi­rates se­lected as its strate­gic part­ner. In­ter­na­tion­ally ex­pe­ri­enced cargo and courier op­er­a­tors such as DHL and Ev­er­green have set up op­er­a­tions through­out the coun­try. Over 20 for­eign banks have es­tab­lished branch of­fices in Sri Lanka. The success of the Sri Lankan tex­tile and ap­parel in­dus­try can be at­trib­uted partly to the government’s pol­icy of at­tract­ing for­eign in­vest­ment by of­fer­ing a num­ber of spe­cial in­cen­tives in­clud­ing spe­cial in­dus­trial zones, tax hol­i­days and im­port duty ex­emp­tions.

It is com­mend­able that Sri Lanka has been at par with devel­oped coun­tries in its adop­tion and com­pli­ance of the best la­bor, trade and en­vi­ron­men­tal laws and prac­tices in the re­gion. It does not sub­si­dize or pro­vide ex­port re­bate and there have been no com­plaints of anti dump­ing or coun­ter­vail­ing. It also has an ex­cel­lent rep­u­ta­tion for abid­ing by the reg­u­la­tions of the World Trade or­ga­ni­za­tion (WTO).

Sri Lanka’s tex­tile in­dus­try is fast be­com­ing a so­cially re­spon­si­ble and pre­ferred des­ti­na­tion for ap­parel sourc­ing. The coun­try pays fair wages to its work­ers while dis­cour­ag­ing sweat­shops and child la­bor in its busi­nesses, mak­ing the “Made in Sri Lanka” la­bel syn­ony­mous with qual­ity, re­li­a­bil­ity, so­cial and en­vi­ron­men­tal accountability. On en­vi­ron­men­tal is­sues, Sri Lanka sup­ports many ini­tia­tives fo­cused on min­i­miz­ing its im­pact on na­ture. Ef­forts to man­u­fac­ture with sus­tain­abil­ity is­sue stan­dards in view have buoyed Sri Lanka’s tex­tile and ap­parel ex­ports re­cently. Sus­tain­able pro­duc­tion is an in­dus­trial process that trans­forms nat­u­ral re­sources into prod­ucts in ways that min­imise re­sources and en­ergy. Brandix Group, Sri Lanka’s largest ap­parel man­u­fac­turer, has cut its car­bon foot­print by 30% since 2008 and plans to re­duce it by a fur­ther 20% be­tween 2013 and 2020. At the same time, their sales have in­creased sig­nif­i­cantly and the com­pany hopes to in­crease its turnover from US$600 mil­lion in 2011 to US$1 bil­lion in the next five years.

Sus­tain­able pro­duc­tion is seen by Sri Lankan tex­tile and ap­parel man­u­fac­tur­ers as an at­trac­tive sell­ing point when com­pet­ing for or­ders from West­ern buy­ers. Although com­pa­nies have not been able to charge sig­nif­i­cantly higher prices for sus­tain­able man­u­fac­tured goods, sus­tain­able pro­duc­tion has helped them to cut costs and main­tain prices at a much more sta­ble level over the past few years, de­spite sharp in­creases in pro­duc­tion costs. As a re­sult, it has helped them at­tract more or­ders.

In the Euro­pean mar­ket, the av­er­age price of cloth­ing im­ports from all sources in­creased by 24% over a pe­riod of four and a half years, whereas the av­er­age price of im­ports from Sri Lanka in­creased by just 13.8%. Il­lus­trat­ing the slow­est rise among ma­jor Asian sup­pli­ers, Sri Lanka com­pared fa­vor­ably with price in­creases (over the same pe­riod) of 186% in the case of im­ports from Viet­nam, 51.1% in Bangladesh, 36% in Pak­istan, 35.6% in In­dia and 28.1% in China.

In the fu­ture, Sri Lanka aims to com­pete with Bangladesh on prices by set­ting up ba­sic low-cost man­u­fac­tur­ing units in the ru­ral parts of the coun­try. La­bor costs in the north and east re­gions of Sri Lanka are amongst the low­est in the coun­try and th­ese ar­eas, in par­tic­u­lar, are tar­geted for in­vest­ment, fol­low­ing the end of the eth­nic con­flict be­tween the government and the Tamil Tigers.

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