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Sri Lankan Apparel Exports Under Threat Amid Economic Crisis

Workers in a textile factory in Sri Lanka.
Workers in a textile factory in Sri Lanka. (Shutterstock)
By
  • Khanh Linh

The country’s apparel export industry is facing a “serious threat” due to a crippled economy resulting from a sovereign-debt crisis and ensuing political instability, according to a local manufacturing association leader.

Over recent decades, the island nation has become an increasingly important production and sourcing hub for global fashion brands but the crisis beginning in 2019 has culminated in protests, looting and violence in the streets this month, raising concerns for the future of the sector.

Police in Sri Lanka’s commercial capital Colombo imposed a curfew after firing tear gas and using a water cannon on protesters who blame former president Gotabaya Rajapaksa for what has become the country’s worst economic crisis since independence from Britain in 1948. Rajapaksa resigned on Thursday.

The country’s manufacturing purchasing managers’ index (PMI) declined 6.2 points last month compared to May, according to the Central Bank of Sri Lanka. The monetary authority said fuel shortages have affected production levels directly and indirectly due to transportation challenges. Many export-orientated manufacturers have witnessed lower than anticipated orders as foreign buyers worry about the fragile political and economic condition and possible disruptions to order fulfilment.

Kolonna Manufacturing chief Ranjith Koralage, earlier this year said his facility, which produces garments for Levi’s, Puma, and Victoria’s Secret, is one of many that is having trouble meeting its production goals because of fuel shortages, power outages, and escalating expenses.

“Owing to unprecedented national economic mismanagement, this sector, which has long served as a fundamental pillar to the Sri Lankan economy, is now under serious threat,” said Yohan Lawrence, secretary general of the country’s Joint Apparel Association Forum.

Sri Lanka’s apparel export industry accounted for approximately 44 percent of total exports, providing about 33 percent of the manufacturing employment in the country, according to the US International Trade Administration.

“Any plan for economic revival must prioritise support to apparel manufacturers large and small and leverage this strength to help stabilise the Sri Lankan economy,” Lawrence added.

Yet despite the crisis, some investors are betting on the resilience of Sri Lanka’s apparel industry. “We have not reduced our sourcing from Sri Lanka,” said Sandro Veronesi, president of Italy’s lingerie retail chain Calzedonia. “We are increasing the volumes that we source from this country.”

Sri Lanka’s Board of Investment (BOI) told media outlet Just Style it has secured agreements worth $76 million for new investments and expansions in the apparel and textile industry for this year.

“We have been receiving multiple queries regarding the availability of suitable land from investors looking to further expand their apparel manufacturing plants in Sri Lanka since many of them have seen an increase in orders,” said Renuka Weerakone, director-general of BOI.

Learn more:

Sri Lankan Apparel and Textile Exports Rise Almost 23% in 2021

The value of the sector reached $5.42 billion after fashion exports rose 22.93 percent year-on-year in 2021, according to provisional data released by the Sri Lanka Export Development Board.

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