APPAREL INDUSTRY
Compiled by Yamini Sequeira
NAVIGATING THE DOWNTURN
Surein de S. Wijeyeratne surveys the apparel landscape amid uncertainty
Q: There’s been a downward trend in apparel exports recently. How is this impacting the industry?
A: Over the past four years, apparel exports have dropped substantially – declining from US$ 5.3 billion in 2019 to 4.1 billion dollars in 2020. By the following year, export earnings bounced back to the 2019 baseline and the industry wrapped up 2022 with exports rising to US$ 5.6 billion.
Due to the economic downturn in key markets such as the US and EU, many apparel producing nations in Asia are facing a marked decline in order volumes. While some countries such as Bangladesh have fared better than others, the detrimental impact of the prevailing economic climate has been widespread; it is not unique to Sri Lanka.
We’ve witnessed a decline in orders since August 2022 and this trend has continued through this year, with the downward trend varying between 15 and 20 percent, depending on the customer and market.
The Export Development Board (EDB) reported that export earnings from apparel and textiles decreased by 22.3 percent year on year to 427.5 million dollars in July compared to the same period last year.
As for the impact, many companies have had to restructure or consolidate their manufacturing operations as a strategic measure to cater to the shift in demand.
We also see a renewed drive to explore new opportunities in emerging markets to reduce dependence on conventional export markets. And industry players have been compelled to strengthen their value propositions through innovation and sustainable product offerings with a focus on cost rationalisation to remain cost competitive.
Q: What are the main challenges facing the apparel industry today?
A: Global economic conditions continue to be the main challenge for the apparel industry.
The reduction in demand has had a ripple effect, leading to factory consolidation and closures with the highest number of job losses recorded in the SME sector. This impact is likely to continue over the next six to 12 months.
While we’re hopeful of some degree of recovery in 2024, it’s important to take strategic action now to mitigate the impact as much as possible.
The pandemic and economic crisis have shown how critical the apparel industry is to Sri Lanka’s economic resilience. Given its significance, we as a country need to focus on maintaining the morale and confidence of employees and stakeholders.
While we’ve witnessed a brain drain impacting businesses across industries, talent retention within the executive cadre continues to be an area that the apparel industry focusses its efforts on.
Q: And what factors will determine whether Sri Lanka remains a preferred apparel hub?
A: Sri Lanka’s recognition as a preferred hub depends on our unique value addition to existing and potential customers.
We differentiate ourselves from peers based on factors such as sustainability, innovation and product creation, as well as through our geographic advantage and access to trade routes.
Over the past several years, Sri Lankan apparel has been able to distinguish itself as a valued co-creation partner for many global brands, evolving from being a mass manufacturer.
As an industry, we are sought-after for design, innovation and product development.
We’ve also been able to position ourselves as a destination for sustainable apparel manufacturing with many key local apparel manufacturers aligning themselves with global sustainability standards and practices, and setting ambitious commitments in the sphere of product, people and planet.
In addition, the apparel industry has managed to maintain customer trust and confidence, by completing and delivering orders even at the height of the pandemic and economic crisis. This bears testimony to the industry’s agility and resilience.
These are important steps to ensure that customers see the value that the apparel industry can add to their brands as a stable, ethical and sustainable manufacturing region.
Q: In your view, what is the way forward for small-scale apparel businesses that do not have backward and forward integration capabilities?
A: In the absence of forward or backward integration, any company that can create strategic, mutually beneficial partnerships with its key stakeholders will naturally enhance its ability to compete.
This was the same for companies that survived the change in the quota system in 2005 or the financial crisis in 2007/08 – events that impacted the apparel industry.
At the time, it was the companies that restructured and reinvented themselves that continued to grow in the years ahead.
Q: And what’s your wish list for the apparel industry?
A: While global economic conditions are beyond the control of industry players and the government, expediting a number of policy priorities can certainly help as short and long-term interventions.
These include aggressively pursuing free trade agreements (FTAs) such as the Indo-Sri Lanka FTA, focussing on sustainability and renewable energy to offset the high energy costs, and spurring local innovation as an impetus to remain competitive in the global market during periods of high operating costs.
