Sri Lanka Could Boost Apparel Manufacturing to Increase Employment and Growth

April 26, 2016

Sri Lanka should position itself as regional hub and take advantage of emerging markets

COLOMBO, April 26, 2016 – While Sri Lanka has been successful in establishing and growing its apparel manufacturing industry, more can be done to realize its potential as a regional hub and to continue to boost opportunities, especially for women and the poor, according to a new World Bank report.

The report, Stitches to Riches?: Apparel Employment, Trade and Economic Developmentlaunched in Colombo today is aimed at demystifying the global, South Asian, and Sri Lankan apparel markets, estimating the potential gains in exports and jobs (including for women), and identifying policies that can unleash Sri Lanka’s export and jobs potential compared with those of their closest competitors in the Southeast Asia including Vietnam, Cambodia, and Indonesia.

“Apparel manufacturing not only has a huge potential for creating jobs, particularly for the poor but also has a unique ability to attract female workers. Employed women are more likely to create positive social impacts as they tend to dedicate their income to the health and education of children,” said Françoise Clottes, Country Director, World Bank Sri Lanka and the Maldives, “The report has significant messages for Sri Lanka and highlights broad opportunities that the industry provides in terms of sound jobs for women, as well as recommendations that could help the industry increase competitiveness and make Sri Lanka a regional hub and example for other South Asian countries.”

Clothing manufacturing has a lower barrier of entry than many industries and creates jobs that often pay better than alternatives such as agriculture. In Sri Lanka, the average apparel worker earns more than $120 per month, on average, compared to $80 per month for those working in agriculture. Over 70% of apparel workers are women compared to less than 30% in other industries.

Accounting for $4.4 billion of its exports, Sri Lanka’s apparel sector outperforms other South Asian countries in terms of quality, lead time, reliability, along with social compliance and sustainability. As China gradually scales back its apparel manufacturingSri Lanka stands to gain market share, but currently not as quickly as some Southeast Asian countries. Comparisons reveal that its apparel prices are higher than competitors, but Sri Lanka produces more sophisticated products, though there is room for improvement on lead times and product range and availability.

Competition is increasing in the global apparels market with buyers moving towards greater consolidation in sourcing decisions and the impending approval of the Trans-Pacific Partnership,” said Gladys Lopez-Acevedo, report co-author and a Lead Economist for the World Bank. “Sri Lanka should seize this opportunity and implement policies to become a regional leader in creating good jobs, bringing more women into the work force and diversifying its products and end markets to increase skills and value.”

In order to maximize its competitiveness, the report recommends that Sri Lanka should:  

•       Enter into more trade agreements to help diversify export destinations for existing products, such as active wear and intimate apparel

•       Expand into new products such as formal wear and high-end outerwear that require higher skills, and position as regional apparel and textile trade hub taking advantage of its infrastructure advantage

•       Attract foreign investment through adopting clear investment policies, which currently remains at only 2 percent of GDP

•       Increase integration with South Asia and reduce tariffs for the import of manmade fibers, which accounts for 50% of Sri Lanka’s industry inputs, while encouraging domestic growth

•       Promote industrial relocation and attract more female workers to relieve its labor shortages

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