APPAREL INDUSTRY
REALITY CHECK
Compiled by Yamini Sequeira
WEAVING A COMPETITIVE EDGE
Murad Rajudin calls for solutions to ensure trade success under the new US tariffs
The apparel industry generates much needed export revenue, accounts for hundreds of thousands of jobs and anchors Sri Lanka’s presence on global trading platforms. Yet, the industry finds itself at a crossroads as the international apparel supply chain undergoes seismic shifts.
Despite facing multiple risks, it also has access to considerable opportunities that could define its trajectory over the coming years – particularly within the tariff environment created during the US trade tensions under the Trump administration.
As Murad Rajudin notes, “Sri Lanka currently faces an additional 20 percent tariff in the US market, which is comparable to competing countries such as Vietnam and Bangladesh. This rate is lower than India’s tariffs and only marginally (by a mere 1%) higher than Cambodia and Indonesia.”
“This parity places Sri Lanka on a competitive footing with key apparel exporting nations, mitigating concerns of tariff related disadvantages,” he adds.
NEW REALITIES In this context, he emphasises that local apparel manufacturers must sharpen their focus on enhancing competitiveness.
Rajudin explains: “This will require driving increased efficiency and productivity, fast tracking impactful digitisation and automation, and innovating with a future oriented mindset that anticipates consumer needs of today and tomorrow.”
He continues: “It is equally vital to maintain the highest standards of ethical manufacturing while raising the sustainability bar for the entire industry.”
There is no doubt that productivity challenges persist, requiring all stakeholders – from industrialists and supply chain participants, to government bodies, labour unions and financial institutions – to collaborate actively and purposefully.
Rajudin maintains that “Sri Lanka can strengthen its global competitiveness only through collective efforts. While external factors such as protectionism in export markets lie beyond our control, as an industry we wield influence over market focus and dependency levels.”
“As a result, diversifying export destinations and nurturing long-term relationships in emerging markets is essential, as this may provide a strategic hedge against sudden and unpredictable changes affecting any single region,” he asserts.
However, Rajudin concedes that reducing over-reliance on traditional markets such as the US and EU is easier said than done.
“It demands years of strategic effort involving the identification of suitable brands and retailers with a notable presence in new markets. Manufacturers must tailor their design, development, production and supply chain capabilities to meet the specific expectations of these new markets, and consistently deliver on their commitments,” Rajudin explains.
For instance, Far Eastern markets pose complexities with higher quality standards while rapidly growing markets such as India remain highly price sensitive. As a result, the skills and capabilities required to succeed in these diverse environments vary widely.
FORGING TIES Rajudin elaborates: “In this regard, regional trade agreements and partnerships play a critical role in sustaining export growth.”
“With global volatility intensifying annually, such agreements provide much needed certainty that enables businesses to plan and invest over the long term. Trade agreements influence strategic business decisions and investment flows, forming a cornerstone of industry stability,” he remarks.
Trade agreements also serve as essential mechanisms for creating preferential conditions that manufacturers can leverage to maintain competitiveness. In his opinion however, “even as countries differentiate through sustainability or innovation, the persistent price sensitivity of consumers must be factored into strategies over time.”
Meanwhile, global supply chain dynamics are shifting towards nearshoring and reshoring, impacting Sri Lanka’s positioning as a sourcing hub.
“This trend is largely driven by escalating freight costs, and increasing demand for manufacturing agility and faster turnaround times – qualities associated with ‘close to market’ sourcing decisions. Consequently, competing on cost alone is no longer sufficient or even feasible for countries that are geographically distant from consumer markets,” he adds.
Rajudin counsels: “To remain attractive to buyers rethinking long-distance sourcing models, Sri Lankan manufacturers must now compete on multiple fronts – i.e. speed, flexibility, research and development, innovation, and pioneering sustainability solutions.”
Moreover, Sri Lanka’s geographic proximity offers supply chain advantages by mitigating risks linked to geopolitical tensions and logistical disruptions. A robust domestic supply chain therefore, represents a noteworthy competitive edge.
REMAINING AGILE In his opinion, long-term resilience amid geopolitical and trade related disruptions will depend on several factors.
“In addition to product innovation, sustainability and supply chain robustness, building a skilled talent pool that is capable of harnessing advanced technologies such as AI and advanced analytics will be essential. We cannot avoid disruption; we must become better at managing the outcomes and finding solutions that enable a business to navigate those disruptions,” he emphasises.
These tools enable supply chains to respond to unforeseen challenges, which are expected to increase in frequency. While disruption cannot be avoided, businesses must increase their capacity to manage outcomes, and devise solutions that ensure continuity and success.
Innovation and value added production have shifted from being differentiators to becoming core competencies required for survival.
Manufacturers who remain entrenched in traditional contract models without integrating innovation and value addition may already be struggling to secure orders. This is especially true for exporters targeting US and European markets where value driven propositions are increasingly demanded.
Industry advocacy remains strong with the Joint Apparel Associations Forum (JAAF) championing the need for stable and consistent policy frameworks.
The industry body has repeatedly highlighted how abrupt policy changes such as the abolition of the simplified value added tax (SVAT) without adequate alternatives have undermined competitiveness and investor confidence.
Rajudin says: “The industry welcomed the 25 percent reduction in industrial electricity tariffs and continues to advocate for transparent tariff forecasting, a transition to least cost power generation, competitive bidding processes and accelerated deployment of renewable energy with a target of 70 percent renewables by 2030.”
With the US accounting for roughly 40 percent of Sri Lanka’s apparel exports, JAAF is urging the government to secure tariff parity in ongoing trade negotiations, emphasising that Sri Lanka should not bear higher levies than competing nations.
And he reveals that the industry also underscores the importance of pursuing FTAs with key economies such as India, China, Japan, Australia, Canada and South Korea as part of a broader export expansion strategy.
With tariffs being presently aligned with key competitors, and market conditions presenting both risks and opportunities, the question is whether Sri Lanka’s apparel industry can leverage its strengths in sustainability, talent and brand credibility to turn parity into a lasting competitive edge.
