Time to go beyond apparel

The apparel industry has been the prime export earner of Sri Lanka for a considerable period of time since the adoption of open-economic policies in 1977. The industry employs about 300,000 directly and around 600,000 indirectly while accounting for almost 46% of the merchandise exports, reflecting its significance to the socio-economic fabric of the country. Nevertheless, recent developments locally as well as internationally, demand policymakers to explore sectors beyond apparel to achieve sustainable economic growth.

Garment exports, up to July this year, declined by 18.1% to $ 2,889.5 million from $ 3,528.7 million in the corresponding period of 2022. The industry’s fortunes are heavily correlated with the economic cycles in both the US and Europe and as the consumer spending remains subdued in the two regions, the sector is experiencing a tough time. The industry has also been experiencing a labour shortage over the years, particularly in terms of hiring women for low-level positions. Unlike the ladies who were recruited by garment factories in the early stages of the industry, most women today are more educated and due to higher levels of education, they do not like to work in garment factories owing to reasons such as poor reputation, bossy work supervisors, etc. As a result, women are more inclined towards job opportunities in fields like retail, tourism, customer care, and Government service.

The apparel industry in Sri Lanka began to take off in the ’80s because of the quota-guaranteed market access to the US and Europe in addition to the advantages the country possessed with regard to low-skilled, low-cost labour. Compared to competing countries like Bangladesh, Sri Lanka’s wage-levels are high and therefore, its early competitiveness as an apparel exporter has deteriorated.

The successful countries in East Asia were capable of diversifying their economies by venturing into technology and skills-oriented industrial and service export sectors and consequently reduced their dependence on highly labour-intensive industries like apparel. Unfortunately, Sri Lanka’s policymakers have not been able to execute that transformation to take our economy to the next level.

President Wickremesinghe is the only national-level leader who has shown interest to implement the paradigm shift the external sector of the economy needs to undergo. In 2018, under the direction of the President (when he was Premier), the EDB unveiled the National Export Strategy 2018-22 (NES), which focused on developing new export industries and services outside the traditional industries of apparel, tea, gems and rubber. Boat building, spices and concentrates, food and beverages, ICT/BPM, electronics and electrical components, and wellness tourism were recognised as the focus sectors under this strategic plan. However, the Gotabaya Rajapaksa administration in 2019, in an awful move, discarded the NES – which was formulated after conducting a series of national consultations for over a year with a number of stakeholders.

A recent economic intelligence report published by the EDB reveals that Sri Lanka exports minerals including silica, graphite, and mica as raw materials to foreign countries that produce technologically advanced products worth billions of dollars by using those raw materials. Sri Lanka must initiate steps to produce technologically advanced products in order to transform its economy into a modern, competitive one as well as realise a significant increase in its foreign exchange earnings. Such a course of action requires extensive investments in research and development, attracting MNCs for investments besides greatly increasing the number of graduates in STEM disciplines.  

Two weeks ago, in an excellent, informative article to this newspaper, Dr. Sanjaya De Silva, a development economist at Bard College – New York, described how Costa Rica’s policymakers in the mid-1990s realised that its workforce was too educated and expensive to be competitive in the garment industry and made a strategic decision to pursue investments in electronics, following the example of the Asian Tigers. It is high time that Sri Lanka too follow a similar path by closely studying the strategies of economic development of successful nations.