MANUFACTURING INDUSTRY
EXPORT DYNAMICS
Compiled by Yamini Sequeira
THE GLOVES ARE OFF!
Ramesh Nanayakkara notes that the race for Sri Lanka’s rubber and latex future has begun
Sri Lanka has long enjoyed a reputation as a global supplier of high-quality natural rubber and value added latex products, particularly in the glove segment. It is widely regarded as a ‘go to’ destination for premium production ranging from surgical, industrial and household gloves.
However, as the world market undergoes seismic shifts in materials, compliance requirements and tariff regimes, it’s time the industry reassessed its positioning and strategy.
PROTECTING STRENGTHS “Sri Lanka is home to some of the most respected glove manufacturing footprints in the world. International brands have relied on local operations for decades with some naming it as their largest single country contributor in terms of output. Yet, this leadership position is not without its challenges,” says Ramesh Nanayakkara.
“The country may not be the largest in terms of scale; but in terms of premium quality and global reputation, it stands on a par with the best. However, as a country we are still not operating to our optimal potential,” he asserts.
In Nanayakkara’s view, this untapped potential is deeply linked to the industry’s ability to evolve with changing global demands.
He explains: “One of the most pressing shifts in glove manufacturing is the shift from natural to synthetic latex. Synthetic materials are increasingly preferred due to their lower allergy risk and the ability to engineer specific performance characteristics. Unfortunately, Sri Lanka does not currently manufacture synthetic latex locally.”
Natural latex, once the country’s competitive edge, is losing ground. Shrinking plantations and dwindling domestic production have forced many glove manufacturers to rely on imports of both synthetic and natural latex.
“Even though Sri Lanka benefits from sourcing natural latex, it is no longer sufficient to meet the technical or scale demands of modern production. We have seen a clear decline in rubber plantation output over the years,” he adds.
In fact, synthetic latex has become the dominant material globally for gloves. “However, since Sri Lanka still doesn’t manufacture synthetic latex, it’s a missed opportunity,” he laments.
At the same time, international sourcing patterns are being redrawn: the imposition of new tariffs, particularly by the US, has upended cost structures and disrupted long established supply chains.
Initially, Sri Lankan gloves were to be subjected to a 44 percent tariff, though according to an announcement in July, this has been reduced to 30 percent.
“There is no doubt that tariffs are forcing brands to reconsider their sourcing strategies. Where labour costs and quality once defined supplier preferences, tariff exposure has become an equally critical component. Buyers are increasingly mapping their international supply chains around trade dynamics as much as on efficiency or brand fit,” Nanayakkara explains.
SUSTAINABILITY STANDARDS Compliance requirements in sustainability are also becoming non-negotiable.
He elaborates: “The European Union’s EU Deforestation Regulation (EUDR), a new due diligence regulation that will take full effect by year end, requires glove exporters to ensure that the natural latex used in their products is fully traceable and free of environmental or labour violations – including child labour.”
Nanayakkara commends local suppliers for collaborating closely in this process, adding that “for Europe, this benchmark is non-negotiable. That’s why the industry must be ready by the deadline or manufacturers risk being locked out of key markets.”
Sustainability concerns also extend to carbon footprints – another rising criterion in export markets.
“While Sri Lanka’s manufacturing industry is improving in transparency and reporting, energy costs remain a critical pain point. High electricity rates place local manufacturers at a disadvantage compared to their peers in India or Vietnam,” he charges.
According to Nanayakkara, “energy reforms, whether through pricing policies or increased use of renewables, are essential to sustain an edge. Currently, labour costs help mitigate this disadvantage due to the recent depreciation of the Sri Lankan Rupee in the post-economic crisis era, which complements export competitiveness. But the situation is far from ideal.”
The more acute labour shortages appear to be in the rubber plantations sector, where a declining workforce is exacerbating the raw material supply challenge.
He comments: “Automation offers a possible way forward but affordability remains a double-edged sword. With labour still
relatively inexpensive, many factories are unable to justify large-scale automation investments.”
However, Sri Lanka’s digital infrastructure is strong, and the shift towards robotics and artificial intelligence in manufacturing is expected to pick up as costs decline.
EASE OF DOING BUSINESS Nanayakkara says: “From a policy perspective, investors remain concerned about the ease of doing business in Sri Lanka. Red tape, policy inconsistency and slow approvals have hindered investment despite repeated promises of reform.”
Incentives, especially in the context of the IMF backed economic reform agenda, are now limited. Yet, neighbouring competitors continue to offer attractive tax holidays and subsidies to entice manufacturing investors.
“Without a comparable package, Sri Lanka risks losing out,” he cautions.
HUMAN RESOURCES Workforce upskilling is another vital factor. “While Sri Lanka’s workforce is well regarded for discipline and quality, emerging technologies demand a new mix of skills that the current education system does not yet fully support,” he points out.
“Free trade agreements can also play a role. Sri Lanka currently enjoys EU market access under the Generalised System of Preferences Plus (GSP+), and has inked deals with India and Thailand. However, more agreements with ASEAN, China, and especially Latin America and Africa are needed, to diversify markets and reduce reliance on the US and Europe. Tariff exposure in Latin America in particular is limiting the growth of exports in that region,” Nanayakkara adds.
He perceives untapped potential in raw material production, noting that “if Sri Lanka can scale up synthetic latex manufacturing, perhaps by leveraging plans to expand oil refinery capacity, import dependency could reduce while improving value capture.”
Similarly, he believes that “better integration with the apparel industry’s move towards domestic fabric mills and yarn production could benefit glove manufacturers who rely on knitted components.”
In the near term, the industry remains cautiously optimistic. Product innovation and investing in compliance are expected to drive volume and value growth even as manufacturers brace for short-term tariff shocks.
However, the longer-term goal remains clear: Sri Lanka must evolve from a niche high-end supplier into a diversified globally integrated manufacturing hub.
Nanayakkara concludes: “The transformation we seek will not happen automatically. It requires deliberate policy decisions, coordinated industry action and continuous improvement. But it is clear that the gloves are off – and the race for Sri Lanka’s rubber and latex future has begun.”
