Weaving The Fabric Of Regional Weaving The Fabric Of Regional Co operation for A Competitive Co operation for A Competitive

Garment SectorGarment Sector

By Janaka BotejueSri Lanka Apparel Exporters Association

Quota Phase Out

Impact of Quotas Created trade barriers and disintegrated the supply chain.

Protected certain countries at the cost of more competitive countries.

Effects of quota phase out Country production shares redefined based on competitiveness

Shipment prices likely to go down further due to competition

Lead times further squeezed

“Operational Excellence” and “Meeting Buyer Needs” more important than ever

Necessity to offer more services to buyers (beyond just products)

Introduction to Sri Lankan Apparel SectorIntroduction to Sri Lankan Apparel SectorShare of Sri Lankan Exports by

Major Categories - 2004

Textile and garments 49% Machinery and equipments 7%Rubber products 5% Diamonds and jewellery 4%Food, beverages and tobacco 3% Leather products and footwear 1%

Petroleum products 2% Other industrial 7%Agriculture 21% Unclassified 1%

Source: Central Bank Annual Source: Central Bank Annual Report 2004Report 2004

Sri Lankan ExportsSri Lankan Exports

Major Export Markets - 2003

USA 61.69% EU 32.98% Canada 1.73%

Japan 0.64% Sw itzerland 0.12% S Korea 0.14%

Norw ay 0.12% Australia 0.36 Russia 0.11%

Others 2.11%

Source: Sri Lanka Source: Sri Lanka CustomsCustoms

Sri Lankan ExportsSri Lankan Exports

Export PerformanceJan. - Dec. 2002/2003/2004/2005

(in US $ Million)

0

50

100

150

200

250

300

350

2002 2003 2004 2005

Source: Sri Lanka Source: Sri Lanka CustomsCustoms

Strategic Objectives of Sri Lankan Apparel Strategic Objectives of Sri Lankan Apparel IndustryIndustry

1. Increase the Sri Lankan apparel industry turnover from its present level of US $ 2.30 billion to US $ 4.5 billion By 2007.

2. Transform the industry from a “ manufacturer” to a provider of a “ fully integrated service”.

3. Increase market penetration to the premium market segments of the global apparel industry.

4. Become internationally famous as a superior manufacturer of specific product categories.

5. Consolidate and strengthen the industry to meet the challenges of the free market.

SWOT AnalysisSWOT AnalysisStrengths Weaknesses Reputation of being a quality apparel manufacturer for the mass market. Compliance with International Labour regulations. Relatively disciplined and skilled labour and a trainable work force. Reputed International Customer base. On-time delivery of standard “all- season” products.

Isolation from trade partners and heavy dependence on local buying agencies. Lack of geographical diversification in terms of its overseas markets. In-sufficient international and bi-lateral trade agreements to support the industry. Increasing cost of labour compared with other countries in the south Asian region Inadequate focus on developing backward integration linkages to support the industry. Non-existence of product design and new product developments. Non- existence of a Sri Lankan brand identity. Low productivity of labour, inefficient use of machinery and manufacturing processes. The relatively high cost of utilities.

Opportunities Threats Sri Lanka to become a total service provider for the global apparel industry. Promote Sri Lanka as a socially responsible manufacturer of apparels. Transition to products that require a high labour content. The positive impact of the government’s peace initiative.

Rapidly changing trends in the retailing industry. The former socialist countries and the East European nations potential to become major suppliers for the EU Market. Global formation of bi-lateral and multi-lateral trade blocks. New entrants to the industry. Emergence of efficient international shipping hubs in the Asian region.

The way Forward

Regional Corporation / Cartel Regional Trade Blocs Regional Manufacturing Blocs

Much needs to be done However to create a manufacturing bloc, inter regional co-

operation is a must. Current inter-country trade is low Red tapeism and bureaucracy present an unfavorable picture to the

world Political situations and cross-border tensions Inter country Tariff structures need to be rationalized to establish

Free-trade among the members Even business travel is not smooth

Leaders of the industry must focus their attention in getting into partnerships with leaders in other parts of chain so as to offer “Virtually Vertical Supply Chain” to their customers.

Thank you !Thank you !