Challenges to the Apparel Industry in Sri Lanka

Challenges to the Apparel Industry in Sri Lanka Apparel Industry of Sri Lanka â€Å"Garments Without Guilt† 1.0 Objectives of the Assignment Study and analyze a Sri Lankan export oriented apparel industry in order to Identify the nature and the challenges faced by the apparel industry. Identify the domestic and international policies in relation to the apparel industry Make recommendations based on the future trends for the sustenance of the industry. 2.0 The Apparel Industry of Sri Lanka at a Glance Figure 1: Fashion Garments from Srilanka Source: Next Annual Report, 2010The textile and the garment industry of Sri Lanka, established in the 1950s as an import substitution industry initially catered to the domestic consumption. With the introduction of the open economy and liberalization policies in year 1977 paved the way for the textile and the garment industry to enter the world market. The supportive measures adopted by the government by granting concessions, duty rebates, free import of raw material and machinery, lowe r taxes and tax holidays as well as the establishment of Free Trade Zones in the areas of Katunayake, Biyagama and Koggala contributed to the expansion of export apparel industry of Sri Lanka. C:UsersuserDesktopnext-clothing.jpg Being one of the leading exporting industries in Sri Lanka, the industry itself at present contributes to US $3.2 billion to the net foreign earnings in 2009. The GDP contribution from the industry in year 2009 is 10%. At the present context 350 – 400 factories are existent, providing direct employment opportunities to 330,000 which amount to 5% of the total workforce of the county. 3.0 Challenges Faced by the Apparel Industry of Sri Lanka Besides the withdrawal of the quota system & trade policies, inflexible labour markets, high competition from the other foreign countries, the apparel industry of Sri Lanka should survive and sustain its position in the world market. We have identified the below mentioned to be challenges faced by the apparel indust ry. 3.1 Over Dependence on Few Export Markets The apparel industry of Sri Lanka is only focusing on few export markets which consists of countries such as USA (64%) and European Union (30%). The other export markets accounts for 4% of the total apparel exports to Canada, Australia, China, Japan, Switzerland and Israel. Though, over 94% of supply is to USA and EU, Sri Lanka’s garment exports account only for 2.3% and 0.9% of USA and EU apparel import volumes respectively. With the prevailing global economic recession, faced by the main two above countries, the demand for apparel export has severely declined in the recent past, and a drastic reduction in the volumes consumed has been noted. 3.2 Insufficient Product Diversification Unavailability of diversified range of products in the apparel sector is identified as another major issue at present. The garments exports accounts for more than 90% of the total exports of the industry and has been identified to be a similar figure for the past two decades. Source: Brandix Annual Report, 2009 Figure 2: Production Section Sri Lanka yet focuses on four major types of items in the product coverage, which can be identified as shirts, blouses, trousers and jackets. Though 50 new items were introduced to the product coverage in year 2000, still the industry is highly concentrated on a few product categories. The quota restrictions imposed by major importers now limit the export of these popular items further.C:UsersuserDesktopimages.jpg