Financial Times

Quota-less 2005
No big apparel buyers pulling out of Sri Lanka
By Iromi Perera
As the Multi Fibre Agreement (MFA) comes to an end in less than a week, apparel industrialists can only hope that the measures taken by Sri Lankan garment companies and associations are enough to combat the rocky year ahead.

A. Sukumaran, new Chairman of the Sri Lanka Apparel Exporters Association, in an exclusive interview with The Sunday Times FT said that the industry is more positive than they were a few years ago about what may lie in the quota free years.

The different programmes and steps taken by the associations and factors that are not in the hands of the industry such as China's internal problems make the industry more positive about the future. Top buyers such as GAP and Liz Clairborne Ltd have short-listed Sri Lanka in their list of supply bases. Many buyers are shifting their supplier base, not shifting by company but by country.

Fortunately for Sri Lanka, a majority of the large buyers have already chosen this country as one of their supply bases and so far there hasn't been any big industry buyers who have indicated to anyone about pulling out of Sri Lanka. The latter half of 2005 will indicate to some extent as to which direction the industry will be heading.

According to Sukumaran, the present situation is that larger companies are expanding and some small companies are finding it difficult to run and are looking for partners to take them over. More orders are coming in for established companies. Thus these companies are on the lookout to take over or to give work to smaller companies.

"There are some factories, which are going for the very low end of the market, very low cost production. There are some doing the moderate and upper moderate production.

My feeling is that the low end of the market is what one should concentrate on, mainly because we cannot compete in price alone," believes Sukumaran. He said that Sri Lanka would never succeed by going head on with countries like China, Bangladesh and Vietnam with prices and that those types of businesses would be moving out of the country. But those who are in the moderate business and upper end and those who are giving complete package services will remain in the market.

For nightwear and lingerie, Sri Lanka has gained a very good reputation. Sportswear and other up market products are what Sri Lanka should be concentrating on. Sri Lanka's garment industry has grown at a rapid pace within the last few years. This growth came not from new companies but through existing companies expanding. A lot of European buyers have faith in Sri Lanka and Sukumaran believes that this confidence did not come overnight and that it has been earned.

He firmly believes that mere reputation alone will not bring business in 2005 and beyond. The industry would have to work harder, different and smarter. "If we are to survive beyond 2005 we must increase our competitiveness, compared to China, India and other countries," he stated.

In order to increase competitiveness, individual factories have been conducting their own programmes. Furthermore industry associations have been working on key areas such as giving better prices, giving value added services to the customer and reducing the supply chain logistic time.

After lobbying with the government, almost Rs 200 million was granted for a productivity increase programme. The Joint Apparel Association Forum (JAAF) has been getting these funds and have hired a foreign consultant and a team of people and launched the programme where any SMEs or any factory that wants to increase their productivity can apply.

They will go through a training process for about two years and the goal is to increase productivity by 30 points from an existing points-based productivity structure.

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