Our focus is to propel apparel sector as premier engine of export growth
It would not be an exaggeration to say that Sri Lanka’s apparel industry has weathered a tumultuous journey in the recent times. The seismic impact of the COVID-19 pandemic, coupled with economic instabilities and political turmoil at home, exacerbated by the reverberations of the Russia-Ukraine conflict, has presented an array of challenges.
Despite these adversities, Sri Lanka as a nation remains steadfast in its commitment to economic revival. Against this backdrop, the apparel sector emerges as a beacon of resilience, strategically positioning itself as a driving force behind export growth while adeptly adjusting strategies to navigate the ever-shifting global landscape.
Amidst these dynamic transformations, Fibre2Fashion seized the opportunity to engage in a comprehensive dialogue with Yohan Lawrence, the Secretary General of the Joint Apparel Association Forum (JAAFSL).
JAAFSL stands as a linchpin in Sri Lanka’s apparel landscape, representing the unified interests of over seven professional industry bodies. These bodies encompass diverse sectors within the apparel industry, including apparel manufacturers, accessory makers, textiles, and related enterprises.
Lawrence’s profound insights, from a seasoned professional with over two decades of experience, provide a nuanced perspective on the industry’s past trials and its trajectory going forward.
Equipped with a BSc in Economics from the University College of London and an MBA from Middlesex University, UK, Lawrence’s journey into the apparel sector began in 2000 with Coats Viyella, a prominent UK Plc company. Since then, he has ascended through the ranks, assuming pivotal roles in multinational apparel operations, including significant regional responsibilities.
Lawrence’s influence extends beyond JAAFSL; he has also served as the Chairman of the Sri Lanka Apparel Exporters Association (SLAEA), a constituent organisation of JAAFSL.
In this ever-evolving landscape, Lawrence’s perspectives offer valuable insights on the pivotal role of the apparel sector as a catalyst for growth and resilience. The ensuing excerpts from our conversation encapsulate his astute observations, providing a roadmap for the industry’s trajectory in the face of uncertainty and change.
How do the Joint Apparel Association Forum envision its contribution towards advancing Sri Lanka’s apparel manufacturing and export industry?
The answer to this question needs some context, a look back over the last three or four years. In 2019, Sri Lanka’s apparel manufacturing and exports – which account for half of the country’s merchandise exports – were growing at a steady pace. We were broadly on track to achieve our target of $8 billion by 2024-25. Then a series of adverse events struck without warning.
The COVID pandemic that shut down the world in 2020 was the first. We had to cut back heavily on operations, take measures to ensure the health and welfare of our workers (including that of their families), get them vaccinated and provide economic support. At the same time, we had to ensure that buyers and customers could continue to rely on us to supply their apparel needs.
Even as vaccines were being developed through the year and the infrastructure to vaccinate entire populations was being put in place, JAAF members were re-organising manufacturing operations to deal with some permanent changes in already-stressed global supply chains.
This took us well into 2022 before shipping and transport were able to function effectively again.
Then came the second shock, the Russian invasion of Ukraine; the sanctions that followed disrupted oil and energy supplies, once again almost crippling the global supply chain. That war continues to wage to this day, more than two years later. Then came the third debilitating shock that is now our current macroeconomic crisis, coming on top of a political one in late 2022.
Continuing geopolitical tensions will probably mean that more changes are coming. Uncertainty and volatility are persuading us to reconsider our immediate and near-term strategies for the future. But some bedrock principles remain unchanged.
In 2024 and after, our focus will continue to be on propelling Sri Lanka’s apparel sector as the premier engine of export growth. We are cognizant of the country’s macroeconomic programme with the IMF, making ours a strategic goal. We will work with the government on necessary policy reforms in creating the right environment to achieve our common goals.
How do you assess Sri Lanka’s progress in apparel manufacturing and exports over the past few years?
In the aftermath of the pandemic, manufacturers undertook a comprehensive overhaul of their manufacturing operations. This restructuring encompassed a reassessment of shop floor activities, a redesign of workflows to accommodate abrupt changes in demand and workforce availability, and the renegotiation of energy and raw material contracts directly with suppliers.
Meanwhile, the government focused on addressing broader societal challenges.
Innovation has been an inherent facet of our manufacturing process, and despite constraints, that continued, both on the product and process side. Worker welfare and that of their families was paramount in 2020 and 2021 because of the pandemic and continues to be an integral part of how companies manage their businesses.
Investments have been made to be self-reliant in certain raw material processing inputs and increasing the value added in the apparel we export. Setting up raw material processing facilities at the Eravur Fabric Park in the East of Sri Lanka with the support of the Board of Investments Sri Lanka (BOI) was the first step. Now, many foreign firms are setting up facilities in Sri Lanka, boosting FDI. Can we do more? Yes, and we must.
What is the current situation and prospects for immediate future?
In Sri Lanka, we have faced a substantial loss of orders. But again, the global context matters. Data from Statista shows that total worldwide revenue of the apparel market in 2019 was $1.57 trillion, which dropped to $1.39 trillion in 2020, and recovered to slightly over 2019 levels in 2023. Global inflation and reduced customer buying in the UK, EU and the US affected everyone. The pandemic, the political crisis in Sri Lanka and the macroeconomic crisis that followed put us in a very difficult position.
McKinsey & Co’s The State of Fashion 2024 report acknowledges that the industry faces difficult times but is optimistic about the industry’s capacity to overcome them. For Sri Lanka, emerging from this will take some time, we will also require support from all stakeholders. However, I have to say that in this context, Sri Lankan manufacturers have demonstrated great resilience before and will do so again.
What strategies do you have in mind to further enhance the sector; any blueprint or roadmap in place?
The events of the last couple of years has called for a reset of our blueprint for the industry. This is something we are currently working on looking both internally and externally to help develop a strategy for the next five years. We will continue to look at strengthening Sri Lanka’s apparel industry as the engine of the country’s export growth and enhancing its competitiveness.
The roadmap will also underscore innovation and technological capabilities of Sri Lanka’s apparel industry and showcase it on the global stage. With tangible examples of these capabilities and the presence of a highly skilled workforce within apparel manufacturing, the industry’s reputation is further strengthened.
This proactive approach fostering innovation, harnessing technology, and maximising the potential of our skilled workforce will go a long way to achieve the envisioned goals for our nation’s apparel industry.
Many countries are said to be grappling with idle capacities and decreasing work orders. How does Sri Lanka fare in this regard?
Looking back at the year that passed, Sri Lankan apparel exports fell by more than 18 per cent, from about $5.6 billion in 2022 to about $4.53 billion in 2023. In answering some of the earlier questions we covered some of the reasons: a pandemic, geopolitical tensions, a global economic slowdown, and a domestic macroeconomic crisis that still affects us.
Competitor nations have suffered similarly.
Our estimate is that Sri Lanka’s apparel exports in 2024 will be at the same level as that achieved in 2023, around $4.5-$4.6 billion. Despite several challenges mentioned above that we as a country had no control over, the industry has shown resilience. We have done that while prioritising worker welfare and sustaining jobs, particularly in the SME sector. We have also simultaneously supported initiatives to assist workers and their families during tough times. We will continue to leverage that resilient spirit to return to the path of growth over the next 2-3 years.
In today’s changing milieu, non-traditional markets are gaining tractions due to the opportunities they offer. Is Sri Lanka considering diversifying its market base?
Yes, Sri Lanka’s apparel industry is actively considering diversifying its market base. We have not talked about our capabilities much except to markets that are already familiar with our abilities based on long standing relationships, like the US, EU, and the UK.
One important initiative on the horizon is a planned roadshow in London scheduled for the 6th and 7th of July 2024 at the Royal Horticultural Hall. This is a collaborative effort between the Sri Lanka Apparel Sourcing Association (SLASA), the Export Development Board (EDB) and the Joint Apparel Association Forum (JAAF).
The roadshow will bring together buyers, brands, retailers, and importers and showcase Sri Lanka’s export capabilities.
The primary goals of the roadshow are to boost visibility, generate leads and sales, and forge essential industry relationships. This aligns with the industry’s strategic positioning to navigate markets effectively, explore new avenues, and promote growth through targeted initiatives.
Additionally, the industry has been actively advocating for new and enhanced Free Trade Agreements (FTAs) with advantageous terms of trade, aiming to broaden and diversify its market presence even further.
How is ISFTA helping improve exports to India?
The existing India-Sri Lanka Free Trade Agreement (ISFTA) has been operational since March 2000; it has significantly enhanced trade and investments between the two nations for over two decades. Sri Lanka’s export trade has multiplied by 18-fold under the ISFTA, reaching $815 million in 2021 from $47 million in 1999.
India is a crucial supplier of fabrics to Sri Lanka, accounting for over 25 per cent of Sri Lanka’s total fabric imports, including yarn and intermediary goods. While significant progress has been made under the ISFTA, some challenges persist, notably export quotas that hinder the full potential of the agreement.
As the current trade imbalance greatly favours India, JAAF seeks flexibility and consideration so that Sri Lanka apparel may compete with the Least Developed Country (LDCs) tariff-free access benefits afforded to Bangladesh from a more equitable footing when accessing the Indian market.
This flexibility is deemed essential, particularly given the global market conditions and the downturn in apparel industry demand—all of which is taking place within a wider context of Sri Lanka seeking to move on from the worst lingering impacts of its 2022 economic crisis.
India today boasts an exceptionally fast-growing fashion retail market, with a mix of domestic and international brands and retailers. How do Lankan apparel exporters look to capitalise on this?
In terms of international brands, we are already supplying a number of brands directly from Sri Lanka. In fact, it is not just to India but given the regional connectivity that we have in Sri Lanka, we ship goods to various locations in the region, which is obviously better than shipping the goods back to the US or the EU, and then having them reshipped to this part of the world.
We also have a few local companies who have successfully established a presence in the Indian market, targeting both local, foreign, high, and middle-income consumers under the ISFTA.
Unfortunately, our ability to grow our presence in the Indian market is restricted because of the 8 million export quota, which acts as a barrier to fully realising the benefits of the ISFTA, whilst other countries have unlimited access to the Indian market. This places Sri Lanka at a disadvantage which is why we are looking to more favourable terms of trade as the ISFTA evolves into ETCA.
FTAs with Indonesia, Malaysia, Vietnam, and China are also said to be in the pipeline, which are anticipated to unlock fresh markets for Sri Lanka. Your views?
Sri Lanka’s signing FTAs with Singapore and Thailand indicate a strong willingness to trade with the world which is very much our agenda. Our understanding is that it is the FTAs with India and China that are being worked on at present. These two agreements would present an opportunity for Sri Lanka to get better access into these markets allowing the industry to grow.
We were looking forward to Sri Lanka joining RCEP as this would really open up a new set of markets where we are currently disadvantaged against our competitor countries. Sadly, this seems to have a setback and may not happen in the near future.
Sri Lanka’s apparel industry has been a trailblazer of sorts in advocating for sustainable manufacturing practices. How has the emphasis on sustainability enabled Sri Lanka to carve out a distinctive position for itself?
Sustainability has been a core value in Sri Lanka’s apparel industry for decades now, aligned with customer preferences in global apparel markets. You may recall the ‘Garments Without Guilt’ initiative that met globally accepted standards in sustainable and ethical manufacturing practices in the 2000s. We continue to build on that legacy.
A new initiative we are proud of is the introduction of a singular QR code affixed to every clothing item, functioning like a standard tag. This innovation provides consumers with access to a wealth of information, unveiling details about the brand, supply chain, product specifications, materials used, care instructions, compliance information, recycling guidelines, and comprehensive tracking and tracing along the entire supply chain.
With sustainability legislation becoming a global norm, Sri Lanka’s apparel industry is proactively responding to the call for adherence to evolving legal frameworks.
What is the importance of technology for apparel makers in today’s context; and any advice for other manufacturing destinations in the sub-continent that are looking to adopt technology for growth?
In today’s context, technology plays a pivotal role in the apparel industry, driving efficiency, innovation, and sustainability. The shift from Industry 4.0 to Industry 5.0 signifies a more collaborative and integrated approach to technology, emphasising human-machine collaboration. For Sri Lanka, gearing up for Industry 5.0 underscores the industry’s commitment to cutting-edge advancements.
The importance of technology for apparel makers cannot be overstated. It enables streamlined processes, enhances productivity, and facilitates the adoption of sustainable practices. Sri Lanka’s focus on Industry 5.0 indicates a forward-thinking approach that prioritises not only automation but also emphasises the harmonious collaboration between humans and machines.
This approach can lead to more flexible, adaptive, and responsive manufacturing systems.
For manufacturers in countries like Bangladesh, India, and Pakistan considering substantial investments in technology, the following advice can be drawn from Sri Lanka’s experience:
Strategic Investment: Carefully assess the specific needs and challenges of your industry. Invest strategically in technologies that address these challenges and align with your long-term goals.
Sustainability Integration: Incorporate technologies that support sustainable manufacturing practices. Sri Lanka’s emphasis on green factories and Carbon Neutral certified units showcases the importance of integrating sustainability into technological advancements.
Worker Training and Collaboration: While automation is crucial, prioritise worker training to ensure a smooth transition to new technologies. Industry 5.0 emphasises collaboration between humans and machines, emphasising the importance of upskilling the workforce.
Adaptability and Flexibility: Choose technologies that offer adaptability and flexibility in response to changing market demands. Sri Lanka’s move towards Industry 5.0 reflects an awareness of the need for agility and responsiveness in manufacturing systems.
Global Standards and Compliance: Stay informed about global standards and compliance requirements, especially in terms of traceability and transparency. Technologies that meet these standards enhance market competitiveness.
Industry Collaboration: Foster collaboration within the industry to share knowledge and best practices related to technology adoption. Sri Lanka’s industry initiatives, such as the roadshow in London, demonstrate the benefits of collaboration in expanding market reach.
