SRI LANKA’S STRATEGY

Byline: Scott Malone

NEW YORK — It’s not just U.S. garment and textile manufacturers who are trying to position themselves to deal with the expected surge in Chinese apparel exports in 2005.
Apparel makers in Sri Lanka are also preparing for that development, according to 30 firms from the island nation that came to Manhattan last week to promote their industry.
Apparel manufacturing is a mainstay of the Sri Lankan economy. Its 800 apparel factories are the largest employment sector in the nation and account for 55 percent of all economic activity, according to Manel Pandittesekera Rodrigo, a director general at the Sri Lanka Export Development Board. Last year, that nation of 19.4 million people was the U.S.’s 16th largest source of apparel and textiles, shipping $1.7 billion worth of goods.
She added that a January settlement with Tamil rebels appears to have brought an end to the country’s 20 years of civil unrest. While she said most of the fighting had been away from concentrations of apparel factories, she suggested the peace could increase Western executives comfort level with doing business in Sri Lanka.
Like most of the world’s apparel industry, Sri Lankan manufacturers have seen a falloff in demand and a rise in price pressure during the current slowdown of the U.S. economy, executives said.
“Business is a bit slack at the moment, volume-wise, as well as price-wise,” said A Nihal Seneviratne, managing director of Nilano Garments, a factory with 180 workers in the city of Ratmalana.
With volume down, Seneviratne said he’s finding many of his customers looking for price breaks, something that he’s resisted so far.
“We just don’t take in orders for the sake of taking them in,” he said. “We stick to our prices.”
Lyn Fernando, chairman and managing director of Creations (Private) Ltd., a maker of woven garments with 1,350 workers in Gangodawila, said the current pressures are just a buildup to what’s coming in 2005, when World Trade Organization members, including Sri Lanka, will drop quotas on textiles and apparel.
“I don’t think one needs to wait till 2005,” to see the effect on the apparel business, he said. “One can see the pressure on prices now.”
Sri Lanka’s apparel industry has been around for about 25 years. Over that time, it’s become one of the better-paying employers in that nation, said Kumar Mirchandani, managing director of Favourite Group, a company with 2,000 workers based in the capital city of Colombo. While Sri Lanka’s minimum wage ranges from $40 to $50, he said, the average worker at his company is paid $80 to $90 a month, in a country where a small house can be rented for $20 to $25 a month.
With labor costs higher than in some developing nations, Sri Lankan businesses have invested heavily in technology to improve productivity.
“We’re transitioning from an entrepreneurial, family-run company to a more professional organization,” said Mirchandani. “Everybody can sew today and make decent quality, but there’s a lot more to the apparel business. You have to be able to serve the customer.”
While cutting costs and improving technology is a familiar strategy to U.S. apparel executives, Sri Lanka’s makers are taking the approach of carrying a large inventory of raw materials, allowing them to offer full-package service.
With only a minimal textile industry on the island, located off the southern tip of India, keeping warehouses of fabric is a necessity, said Creations’ Fernando.
“To overcome the problem of turnaround time, we are stocking a lot of fabric in Sri Lanka,” he said. “We also have a lot of gray fabric in inventory, so that we can dye and finish it quickly.”
It takes about 24 days to ship goods by boat to the West Coast of the U.S. In addition to improving speed, Sri Lankan apparel manufacturers are trying to develop their design skills in the private-label arena.
Union Apparels, a Maharagama maker of women’s knits and casualwear with 3,500 workers, is one company choosing that route, according to managing director Akith Wijeyesekera, offering its retail customers fresh styles each season.
“We source the latest fabrics and create new styles,” Wijeyesekera said. “The reception is quite good.”
Several executives said improving efficiency was an appealing strategy, but some admitted worries as to how effective it could be in an industry relentlessly focused on cutting prices.
“We’re trying to cut costs and increase efficiency. But that’s easier said than done,” said Prashant M. Amalean, managing director of Paradigm Clothing, a 20-year-old Dehiwela-based company with 2,500 workers.
As that country’s economy has developed, makers there are following the route Western firms, and, as Amalean said, “we are looking at producing in cheaper countries.”
He mentioned Kenya, Madagascar and Vietnam as nations he was eyeing for production.

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