Unexpected decline hits Sri Lankan textile and clothing industry

    
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In spite of some frustrations expressed by the country leaders and some apparel experts due to the slowdown in the apparel industry growth of Sri Lanka, there is no doubt in recognizing the importance of this industry on Sri Lankan economy. Sri Lanka’s apparel industry, which began to grow significantly as an alternative to India’s garment manufacturers in the 1980s, is facing some problems but it still alone accounts for over 46% of Sri Lanka’s total exports and generates the highest industrial employment opportunities to over 300,000 directly and 600,000 indirectly which includes a significant number of women.

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Present scenario of Sri Lankan textile industry

Figure 1: A brief overview of Sri Lankan textile and clothing industry
Figure 1: A brief overview of Sri Lankan textile and clothing industry

Since the textile and apparel industry of Sri Lanka came out as mainstream export industry, the country has strategically developed research, innovation and design as the industry can attain a qualitative manufacturer position. The sector also maintains high ethical standards and remains highly praised for its compliance and labor rights practicing than any other competitive countries. However, it lost GSP plus facility in 2010, which affects the sector largely. On 15 August 2010, the EU suspended Sri Lanka’s GSP+ status. The sector itself and the government are very keen to regain this status.

The Sri Lankan government set a vision to position Sri Lanka among the top 10 high quality apparel-manufacturing countries in the world by 2020 and earn US $8.5 billion in revenue. The country is now dealing with many leading international brands such as Victoria’s Secret, Gap, Liz Claiborne, Next Jones New York, Nike, Ann Taylor, Tommy Hilfiger, Marks and Spencer. However, Sri Lanka’s textile and clothing industry is currently grappling with a ‘strange development’, according to several industry experts, as the apparel export earnings of the first two months of running year recording declines despite the full order books of large-scale manufacturers. According to provisional data, Sri Lanka’s exports in February 2017 declined by 2.7 percent Year-on-Year (YoY) to US $ 868 million after falling 1.1 percent in January 2017, extending the year-to-date decline to 3.2 percent YoY to US $ 1.73 billion, recording the worst performance of Sri Lanka’s export since 2015. On the other hand, according to Sri Lanka Apparel Export Association, total apparel export has decreased 102.1 million dollar in 2017 January-February over the same time of previous year (Table 1).

Table 1: Total Apparel Exports in January- February (USD million)
                              2012 2015 2016 2017
Chapter 61 338.6 409.6 497.8 420.0
Chapter 62 335.6 373.6 380.6 356.0
Chapter 63 9.0 10.6 11.7 12.0
Total 683.2 793.7 890.1 788.0
Source:   Sri Lanka Apparel Exports Association  

Figure 2: Showing Apparel export performance
Figure 2: Showing Apparel export performance

However, if we take a look overall growth of Sri Lankan apparel export to the world in 2016 over the previous year then we observe a slow growth rate, which is not enough for positioning the country in top ten by 2020.

Market analysis

Sri Lankan textile and apparel products are exported in many countries in the world, but United States is the major market for them (Figure 3). Sri Lankan Apparel Manufacturers & Suppliers are reputed in worldwide for producing top quality ethical fashion apparel. Apparel categories could be divided as sportswear, lingerie, loungewear, bridalwear, workwear, swimwear and childrenswear. According to UN Comtrade, Sri Lanka is the second largest brassieres supplier to both the EU and the US, accounting for about 10% of the supply in each of these markets. In addition, it is also the third largest swimwear supplier to the US, with 8% market share, trailing only China and Indonesia.

Figure 3: Showing four major market (in USD Million)
Figure 3: Showing four major market (in USD Million)

European Union is the largest market for Sri Lankan Apparel goods and the country has been a beneficiary of the EU’s standard GSP since the scheme’s inception, and it began to benefit from GSP+ on 15 July 2005. After suspension of GSP plus status in 2010, its exports to the EU have continued to grow but the rate of growth has declined (Table 2).

Table 2: Export of Apparel to the EU February 2017 (USD million)
  2015 2016 2017
Chapter 61 96.8 119.6 87.0
Chapter 62 81.7 79.8 65.0
Chapter 63 2.5 3.4 3.0
Total 181.1 202.8 155.0
Source:   Sri Lanka Apparel Exports Association  

Apparel export to the US has declined also in February 2017 over the same time of previous year (Table 3).  So experts are suggesting for creating new market.  Sri Lanka Apparel Exporters Association (SLAEA) Chairman Yohan Lawrence said that as an industry, its apparel industry stakeholders should look at markets other than United States and the European Union, without losing the foothold on them.

Table 3: Export of Apparel to the US February 2017 (USD million)
  2015 2016 2017
Chapter 61 83.9 105.1 95.0
Chapter 62 86.2 79.9 73.0
Chapter 63 1.4 1.5 2.0
Total 171.6 186.4 170.0
Source:   Sri Lanka Apparel Exports Association  

 

Textile import

The lack of a local textile industry has given opportunity to import of textiles from all over the world free of any duty or levies. According to Euromonitor, the country’s industrial production of textiles amounted to only US$0.85 billion, while it imported more than US$2.2 billion of such items in 2014. UN Comtrade data shows that the China and India are the Sri Lanka’s major sources of textiles, accounting for 35.1% and 28.5% respectively.

There are many foreign and local textile and garment companies in Sri Lanka operating in different sections of the apparel value chain, including fabrics mills, washing and finishing plants, and clothing accessories factories. While the bulk of the materials needed for garment manufacturing in Sri Lanka are imported, local sourcing is also rising but it is not enough for positioning the sector top ten by 2020.

Finally, it has no doubt that Sri Lankan apparel industry is facing several difficulties in spite of keenness of government and industrialist to develop the sector. Most of the raw materials are to import for apparel production, which should be reduced gradually by enhancing and encouraging foreign investments for the raw material and accessory producers locally. Labor shortage problem could be removed by bringing more women into the workforce. And to expand exports, it needs diversifying its products and look for new markets.

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