A report on the closure of three garment factories under the Jaqalanka Group, says that the garment industry is becoming “increasingly financially unviable” in Sri Lanka. Although the industry initially flourished on the basis of low cost labour, increasing domestic costs have now made the industry unviable.
The ‘Jaqalanka Closure Report’ was commissioned by the Fair Labour Association, an international NGO trying to end sweatshop labour, in May this year, to find out the causes for the closure of 3 factories of the Jaqalanka Group. The fact finding was conducted by T- Group Solutions of New Delhi, with assistance from CSR International of Colombo.
Although many reasons are identified as causes specifically for the Jaqalanka factories having to shut down, the report indicates that garment factories are becoming uncompetitive and unviable, in general. This is mainly due to increasing labour and other costs.
Increasing labour costs are linked to shortages of skilled labour. The report says there is an acute shortage of garment industry related skilled labour in Sri Lanka, especially in the Katunayake Export Processing Zone. This shortage has added to financial unsustainability of garment factories by putting up wages and by forcing factories to provide extra benefits to retain workers.
Other reasons, cited by the report, for the closure of the Jaqalanka factories, include increasing costs of raw materials, fuel, electricity and transportation, in the country. However, although manufacturing costs increased, the report notes that garment buyers actually ‘tightened’ prices.
The report said there was no evidence to suggest that demands or pressures emanating from the trade union contributed in any way to the closure of the Jaqalanka facilities. This was confirmed by the owner of Jaqalanka, it said..
According to industry estimates Sri Lanka’s garment sector has by now shrunk to about 300 factories from about 800 factories at one time.