Apparel Industry in Sri Lanka – Moving up the Supply Value Chain

The apparel industry in Sri Lanka is a significant contributor to the economy of the country and has generated a substantial amount of employment over the past two decades. The Sri Lankan apparel industry has been a largest export revenue earner for the past 30 years and accounts for more than half of the total exports made by the country. The textile industry in Sri Lanka has been expanding rapidly around the Colombo Port and Airport region as exports constitute a vital part of the apparel industry market share. The history of textile industry in Sri Lanka can be traced back to the 1960s when it was primarily focused on providing textiles and clothing on a domestic scale. Although, the apparel industry in Sri Lanka started flourishing only after the liberalization of the economy in 1977.

The Sri Lankan apparel industry is mainly driven by factors such as proximity to major clothing and textile importing countries coupled with the availability of cheap labor. According to a publication by the World Bank, the annual exports made by the textile industry in Sri Lanka is estimated to be more than $4.8 billion and is regarded as one of the best clothing export destinations in the Asia Pacific region for its reliability, quality, and lead time. The Government of Sri Lanka has also taken several initiatives to augment the apparel industry market share in comparison to previous years and made large investments to enhance the innovation and sustainability. The clothing industry in Sri Lanka accounts for more than 30% of the total employment for all the manufacturing industries nationwide and constitutes over one-third of the industrial output for the country every year. The apparel industry in Sri Lanka comprises more than a thousand garment factories within the country and the numbers are likely to go higher in the next five years.

Global Market Share of Sri Lankan Apparel Industry

The apparel industry in Sri Lanka accounts for a market share of almost 1.2% of the global garment industry, which means it is still not among the top 10 garment manufacturing countries in the world. However, the Sri Lankan apparel industry has set a goal to of figuring in the list of top 10 garment manufacturing countries in the world by the year 2023. The textile industry in Sri Lanka annually exports garments worth almost $2.2 billion to the United States, $900 million to the United Kingdom, worth $350 million to Italy, and garments valued at around $200 million to Belgium. The apparel industry market share for exports to the United States constitute for almost 3% of the GDP of Sri Lanka and it is forecasted to increase at a CAGR of 6% over the next five years. The history of textile industry in Sri Lanka is more than 50 years old and it has evolved tremendously since the past three decades after the economy started growing rapidly as an effect of globalization. The clothing industry in Sri Lanka doubles as a warehousing hub for the United States for products like fabrics and yarns.

Many garment companies in Sri Lanka manufacture fabric for the best American designer brands and the top clothing brands in the US. Furthermore, the apparel industry in Sri Lanka has strong ties with India with rapidly growing bilateral trading terms between both the countries. The exports made by the Sri Lankan apparel industry to India has significantly increased to a value of almost $65 million by the end of 2017 and is expected to rise much more in the next few years. The working population for the textile industry in Sri Lanka is dominated by women, with almost 70% of them being a part of the industry.

Top 10 Garment Factories in Sri Lanka

Apparel Industry in Sri Lanka: Insights

The global industry for apparel manufacturers is currently dominated by China with almost a 40% apparel industry market share. However, the reduced demand owing to rising prices in China is likely to decrease the market share for apparel manufacturers in China. The global textile industry is projected to cross a value of $1,200 billion by the end of 2023 owing to growing levels of disposable income, rapid urbanization, and expanding population in developing economies India, China, and Mexico. Polyester fabric holds a market share of almost 29% globally and is forecasted to experience a moderate growth over the next five years owing to its qualities of being resistant to shrinkage and lightweight material. The apparel industry in the US is predicted to grow to a mammoth market size of almost $260 billion within the next five years as there is growing demand from consumers for functional and versatile garments. Also, the high level of technological innovation and rapidly evolving consumer behavior is likely to favor the growth of the leading apparel companies across the globe.

The South Asian countries, India, Pakistan, and Sri Lanka account for a 12% market share of total garment exports worldwide and the diversification of China towards other manufacturing sectors like electronics and FMCG is expected to give a growth opportunity to these three South Asian countries in the coming future.  Additionally, the Asia Pacific region is the leader for the volume of textile machinery installed with almost a four-fifths share of the global installed capacity. The rising demand for apparel imports from the European Union, Japan, and the US is predicted to boost the revenue of the leading garment manufacturing countries in Asia for the next five years. Furthermore, emerging apparel markets like Australia and Brazil are also expected to consolidate their apparel industry market share as the global apparel trade is going to keep growing over the period of the next five years.

Future of Apparel Industry in Sri Lanka

The Sri Lankan apparel industry is also a substantial importer of textiles, especially from countries like India and China. The Government of Sri Lanka invested around $70 million in 2017 for R&D to promote the growth of the apparel industry in Sri Lanka. Also, the textile industry in Sri Lanka aims to make 15 zones with a focus on export of apparels. The textile industry in Sri Lanka practices a fair standard of wage policy compared to countries like Bangladesh which pays under $50 per month to workers while labors in Sri Lanka are paid almost $120 every month. When one looks back at the history of textile industry in Sri Lanka, it is revealed that many international apparel brands have started outsourcing their manufacturing from the country which has resulted in the emergence of larger scale garment factories over the past ten years. Also, the clothing industry in Sri Lanka is dependent on import of woven fabrics and yarns which makes the weaving and spinning segment the least lucrative for the garment companies in the country.

The apparel industry in Sri Lanka has also launched a few clothing brands in the India market and is gradually making its presence felt the South Asian market. The growth of the Sri Lankan apparel industry looks poised towards a speedy rise owing to factors such as the emergence of e-commerce in the retailing industry coupled with high demand for various clothing segments like sportswear and kids apparel. The relaxation of FDI policies is also going to boost the growth of the textile industry in Sri Lanka and make the market attractive for large international investors from across the globe. The apparel industry in Sri Lanka has high hopes of emerging as one of the top 10 garment manufacturing countries in the world and with the factors being in favor, they are expected to reach their goal within the next five years.

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