Earn More, Spend Less

The entire global textiles-apparel-fashion industry was hit hard by the COVID-19 pandemic. Now, with the current debt/financial crisis in Sri Lanka aggravated by the forex squeeze, the role of the apparel industry has become all the more crucial.

So, in what way can the Sri Lankan industry boost exports over and above the present numbers?

Yohan Lawrence, Secretary-General of the Joint Apparel Association Forum (JAAF), the country’s apex industry organisation, explains: “In pre-pandemic 2019, apparel exports amounted to US$5.3 billion, accounting for almost 48% of all merchandise exports (making it a crucial contributor to trade, foreign exchange and external finances). Yes, in 2020, the pandemic's spread led to a steep decline in trade and export earnings.

“The pandemic had a massive impact on supply chains; and country-wide lockdowns impacted the transport of our products and also led to significant labour shortages. Our garment exports declined sharply in 2020 to $4.1 billion, but we have since managed to recover rapidly, and at the end of 2021, met our target of $5.1 billion.

“Apparel will continue to be a significant contributor to Sri Lanka’s export earnings for the foreseeable future. If we are to achieve our target of $8 billion in export earnings in 2025, we have to strengthen backward vertical integration through initiatives like the setting up of the Eravur Fabric Park, which will increase value addition by a considerable amount.”

Meanwhile, there have been reports of less imports of raw materials by Sri Lanka. Indian exports of cotton to Sri Lanka (the biggest importer after Bangladesh) was reported to have slumped.

The JAAF currently has the finalised figures for only 2019 and 2020. Lawrence points out, “As per those figures, Sri Lanka’s imports of fabrics did come down by 20% overall, but the drop for fabrics from India was 14%. India is Sri Lanka’s second largest supplier of fabrics after China—this covers both local consumption and fabrics used for reprocessing to garments for exports. We don’t see the drop in imports from India to be anything of concern. The industry—both domestic and export—is rebounding and we are confident that exports of fabrics from India will be back to previous level soonest. We will pass on the 2021 data as soon as it is received.”

But, how are the current forex regulations affecting the garment industry on the ground?
Says Lawrence: “Sri Lanka is going through some instability in its external economic environment, part of which was driven by the Covid-19 pandemic and a resulting foreign exchange crisis; the former hampered all transport that hit export and import sectors. The government is working out some fiscal policy reform measures. The apparel industry is engaged in dialogue with authorities on foreign-exchange related issues and regulations that can ensure sustainable growth.”

The industry as a whole has its target of US$8 billion set for 2025. The means quite a job at hand for individual companies.

Aroon Hirdaramani, Director of the Hirdaramni Group, contends: “As an industry, we are a few associations (SLAEA, JAAF, etc). Forex and exports are more important to Sri Lanka now. The government and we had worked on a target of $5.1 billion in exports for 2021. We achieved that. Our long-term plan as industry is to achieve $8 billion in exports by 2025. We are working with the relevant government associations on how we can achieve that. This involves a few things, including making sure that we can operate safely. The good thing is that we have high vaccination rates throughout our factory base. We have had a lot of support from the government on that.

“The raw materials and supply chains are still a challenge. In the short term, we are working with freight forwarders and vessel providers to make sure that we get a reliable supply. In the long term, we are working to increase more raw materials being available locally here. Third, we need free trade agreements as well. We had the GSP+, etc. We need to actively work on more FTAs with other countries so that we can achieve the growth target that we have.”

[At the moment, 40%+ of the raw materials are imported—mainly fabrics. The larger portion of our industry is knit, and that's the fastest growing segment. There is a drive to increase the number of knit fabric mills in Sri Lanka and also to increase the capacity of the existing mills.]

At MAS Holdings, says a company representative, “MAS along with the rest of the apparel exporters from Sri Lanka play a pivotal role in bringing foreign exchange into Sri Lanka, significantly contributing to steadying the economy. Companies like MAS continue to enhance our relationship with customers, building our businesses by improving our value proposition through innovation and new product development, thereby increasing the flow of foreign exchange to the nation.”

MAS continues to follow the government's “directives and where possible provides short-term tactical support to various agencies, such as the local Health Authorities.  MAS recognises the need for sustainable long-term solutions to economic challenges and hopes that our recommendations are given due consideration.”

Hiruni Bolonne, then at the University of Sri Jayewardenepura in Colombo, was among the first to study the impact of the COVID-19 pandemic on the country’s apparel sector through a paper published in October 2020. Bolonne had documented the measures being taken by companies and had even listed them out in her paper.

Bolonne feels the sector will need to really work on this. She has a few ideas of her own: “It is not easy to compete with China, Vietnam, India and Bangladesh due to the cheap labour in manufacturing there. But then, it is essential to try a new model to manufacture and optimise the input usage. Not only that, it (the sector) needs to focus on raw material manufacturing where Sri Lanka can occupy the total benefits of apparel exports rather than acting as an assembly partner where you are involved with turning raw material to sewn garments.” She too believes the country needs to minimize its dependence on raw materials from outside.