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, a World Bank report said Tuesday.
The report, “Stitches to Riches: Apparel Employment, Trade and Economic Development,” launched in the capital of Colombo, is aimed at “demystifying the global, South Asian and Sri Lankan apparel markets,” estimating the potential gains in exports and jobs, and identifying policies that can “unleash Sri Lanka’s export and jobs potential” compared with those of their closest competitors in 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, World Bank country director for 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.”
The report notes that apparel 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 a month on average, compared to $80 a month for those working in agriculture. Over 70 percent of apparel workers are women compared to less than 30 percent 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, the World Bank said. As China gradually scales back its apparel manufacturing, Sri 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, the report noted.
The U.S. imported $2.06 billion worth of apparel and textiles from Sri Lanka in the year through February, a 14 percent increase from a year earlier, according to the Commerce Department’s Office of Textiles & Apparel.
“Competition is increasing in the global apparel market with buyers moving toward greater consolidation in sourcing decisions and the impending approval of the Trans-Pacific Partnership,” said Gladys Lopez-Acevedo, report coauthor 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 activewear and intimate apparel. The country should also expand into new products such as formalwear and high-end outerwear that require higher skills, and position as regional apparel and textile trade hub taking advantage of its infrastructure advantage.
Attracting foreign investment through adopting clear investment policies, which currently remains at only 2 percent of gross domestic product — which grew to $232.5 billion in 2015, according to the CIA World Factbook — is also important, as is increased integration with South Asia and reduction of tariffs for the import of manmade fibers, which accounts for 50 percent of Sri Lanka’s industry inputs, while encouraging domestic growth. In addition, the report suggests that Sri Lanka promote industrial relocation and attract more female workers to relieve its labor shortages.