Garment Industry in Sri Lanka Challenges, Prospects and Strategies

Abstract

Garment industry has been the Sri Lanka's largest gross export earner since 1986 and accounted for more than 52 per cent of total export earnings of the country. It is also the country's largest net foreign exchange earner since 1992. Sri Lanka as a garment exporter has shown signs of improvement in many respects yet even at present, the quota system covers more than 52 per cent of the country's garment exports. However, Sri Lanka depends on quotas much less than other South Asian countries. Besides, dependence on the quota system, there are weaknesses in the domestic industrial and export structure, labour markets rigidities and strong competition in international markets. They need urgent attention for survival in a quota free market. Therefore, the future of the garment industry will depend on the competitive edge that Sri Lanka has over her competitors in Asia, Latin and Central America and emerging producers in Africa and Eastern Europe who benefit from favourable trading arrangements with major markets. This analysis shows that, phasing out of quotas will close down nearly fifty per cent of existing garment factories, as they loss that protection. However, some of the medium and large scale factories are expected to survive exploiting opportunities in the free market. Sri Lanka's garment industry is highly concentrated in large scale factories. That concentration will save a large part of export earnings while preserving job opportunities. However, in the short-run there will be an adverse impact on employment. (JEL F14, L11) DOI: http://dx.doi.org/10.4038/ss.v33i1.1246 Staff Studies Volume 33 Numbers 1& 2 2003 p.33-72