Strong US Demand for Sri Lanka Apparels. Weak Europe and Domestic Conditions in China Favour Sri Lanka

09th March 2012, www.lankabusinessonline.com, By Jayantha Kovilagodage

Demand from the United States for apparels would be strong this year, though Europe may be weak and domestic conditions in China, a key competitor favoured Sri Lanka, a top industry official said.

"I am of the view that the American market is beginning to pick up," Mahesh Amalean, head of MAS Holdings, a top apparel exporting group said.

"There is labor shortage in China, in the areas where appeals are manufactured."

He said capacity in China is also being utilized to cater to the local market, which is increasingly becoming more prosperous.

"Because of all those reasons, countries like Bangladesh , Sri Lanka, Vietnam, Indonesia are now busy," Amalean said.

"And I believe you will see growth. Like we saw last year, you will see growth this year, and next year as well."

China's Renminbi has risen from 8.2 yuan to the dollar in 2000 to 6.2 now, pushing real wages up, poverty down and forcing firms to increase labour productivity.

Analysts say currency depreciation, which destroys the real value of salaries wage earners, pensions of old people and lifetime financial savings of everyone is the principle tool through which a state impoverishes citizens.

Competitive currency depreciation began during the great depression and was institutionalized as a policy tool partly after the interventionist administration of Franklin Roosevelt depreciated the US currency from 20 to an ounce of gold to 35.

Amalean said Europe is expected to be stagnant, but exporters had done well despite the loss of trade preferences.

In 2011 Sri Lanka's apparel exports rose 24.6 percent to 4.2 billion rupees, while exports overall rose 22.4 percent to 10.4 billion rupees.

Sri Lanka's Export Development Board has said that exports to the US, which make up 20 percent of the total, rose 26 percent. Exports to the UK, which made up 11 percent of the total, rose 12.4 percent.

The European Union took up 34 percent of all exports.

Hirdaramani Group Invests $ 6.3mn In Asia's First Apparel Factory to Receive the Carbon Neutral Award

12th February 2012, www.nation.lk

Hirdaramani Group (HG), one of Sri Lanka’s largest apparel exporters, have invested US$ 6.3 million in their new factory ‘Mihila’ located at Agalawatte, the first apparel factory in Asia to receive the Carbon Neutral award, a senior official of the firm said. According to HG Director Aruna Kuruppu, the firm expects cost of production through the new plant would reduce by 15%- 20% monthly due to its eco-friendly construction that reduces water and energy consumption.


“This factory is also the first in Sri Lanka to receive the LEED certificate. Though this is more of Corporate Social Responsibility (CSR) project, in the long run it is going to be beneficial for the company as it will attract more customers and business partners due to this certification,” Kuruppu said.
He said, “Hirdaramani is also presently in the process of converting their factory based in Eheliyagoda as a Carbon Neutral factory, which will be completed within this year and plans to convert other factories under their holdings as Carbon Neutral in the future.”


“We have 18 companies here in Sri Lanka and two others in Vietnam and the Maldives. We will be converting each one of these in to carbon neutral factories in time to come,” Kuruppu said.
Meanwhile, Director of HG Nikhil Hirdaramani said that HG planned to invest US $5 million in opening a new factory in Vauniya in the near future, which would produce around 15, 000 pieces per day.

Related Info :

• Sri Lanka Could Generate $100mn in Carbon Trading

Sri Lanka Apparel Industry Tops $ 4bn for the First Time

10th February 2012, www.dailynews.lk, By Sanjeevi Jayasuriya

Sri Lanka’s apparel industry has surpassed the US $ 4 billion mark for the first time in its export earnings reaching $ 4.09 billion for 2011.

The industry tops $ 4 billion in foreign exchange for the first time and this impressive performance has also recorded a 22 percent growth over 2010 where the earnings were $ 3.2 billion. This shows that the country’s apparel industry is resilient and we need to take measures to sustain the growth, Joint Apparel Association Forum Secretary General M P T Cooray told Daily News Business.

We have now a bigger challenge to sustain the $ 4 billion level. This is largely due to the recession in the West. The USA and Europe are our biggest markets. However, we do not consider this as a serious threat as during the past we have overcome many difficulties successfully, he said.

The resilience of the industry has proved that we can face any challenge and there will not be any considerable drop that will effect us.

We believe that the rising cost will have a negative impact in sustaining the earnings. The policy framework to prudently manage the rapidly fluctuating exchange rate as proposed in the 2012 budget is timely as if not the market will dictate terms.

The apparel industry continues to aggressively penetrate new markets and it has focused on a number of markets outside traditional markets.

Additionally the country is looking at identifying growing markets such as India, China, Japan and Brazil and also looking at entering Turkey and Spain.

Though these markets are available there are certain barriers to penetrate. India has restricted our export by allowing only 3 million pieces of unconditional quota and 5 million pieces based on Indian fabric. Japan on the other hand has a number of bilateral agreements which provide tax concessions to our competitors. China and Brazil has higher tariff on a global basis this will also be a concern for Sri Lanka.

“We are working hard to becoming an apparel hub and will promote introducing legislation to set up international operations shortly to facilitate this effort. We are hopeful that the Act will be introduced by next month. With the target to become a $ 5 billion plus industry by 2015, Sri Lanka’s apparel industry is focusing on a continuous high growth trajectory,” Cooray said.

Related Info :

• Apparel Indistry to Achieve $5bn in 2015 despite Competition & Uneven Playing Field in the International Arena

• Bhs UK Visits Sri Lanka to Explore the Possibility of Expanding Their Sourcing of Garments without Guilt

Sri Lanka Batiks to be a $1bn Industry in Two Years Having Made a Strong Comeback

08th February 2012, www.dailynews.lk, By Shirajiv Sirimane

The Sri Lankan batik industry is making a strong comeback and is poised to be a US $ one billion export earning industry in two years. One of the pioneering legends in the industry, Eric Suriyasena said that the main reason for business to rebound is the growth in tourism. “With tourism picking up there is a tendency in sales picking up locally as well,” he added. He said that currently the trade’s earnings are around US $ 300 million and the main sales are overseas.

Suriyasena, Chairman of Eric Suriyasena Batiks (Pvt.) Ltd, said that another positive trend is that Batik is once again in fashion and even the younger generation is keen on it. Even in local and international beauty pageants batiks have got its due recognism once again.

In addition, unlike two decades ago, today there are many new designers and this too helps the industry to grow. The industry which was formerly confined to a few items today has a wide range which includes household items and bed linen as well giving more choice for the customer.

Suriyasena said that finding quality fabric which was a problem too is now being solved with a company based in Ratmalana manufacturing quality fabrics for the local market.

He said that one of the biggest problems they faced is the low quality imported finished batik products from neighbouring countries. “Due to this some Sri Lankans also tend to manufacture low quality products which is a major threat to the industry. What the government should do is to increase the duty on imported batiks which would safeguard the local industry,” he added.

A leading exporter of batik art and batik garments, Suriyasena has showcased his artwork in such countries as Sweden, Norway, Australia, USA, Austria, Germany, Canada, Italy, and the United Kingdom. “I am hoping to have another international show in Sweden this year,” he said.

Eric Suriyasena Batiks has also invested over Rs. 30 million to open their modern flagship art gallery Marawila that will be opened on Friday. “This is bound to be a major tourist attraction as there would be live demonstrations as to how batiks are being created,” he added.

Suriyasena who is also the Chairman of three star plus Goldi Sands Negombo said that over 350 are employed with Suriyasena Batiks.

A unique aspect of Eric Suriyasena’s work is the full spectrum of colours used in his artwork. All the final pieces have been boiled out at least minimum four times and usually many more times. Each time the wax is boiled out, he introduces a new primary colour and with overlaying of colours is able to achieve the entire colour spectrum in each piece.

Related Info :

• Sri Lankan Elephant Sindu's Paintings on Sale at SriLankan

• Ceylon Handlooms Brand for Promotion of Sri Lanka Handloom Sector

Sri Lanka's Former War Zone Gets $ 5mn Apparel Plants by Timex and Fergasam Group

06th January 2012, www.lankabusinessonline.com

Apparel exporters Timex and Fergasam Group will build two factories at a cost of five million US dollars in Sri Lanka's north-western Mannar, part of the former war zone, the ministry of industry and commerce said.

The first Mannar factory is to start production by mid-October 2012, its statement quoted officials of Timex and Fergasam as saying.

The project will be in two phases with the first factory giving employment for 1,200 people and the second for 800.

The new factories will be the 17th and 18th manufacturing facilities to be set up by the apparel group.

Timex and Fergasam currently employs more than 8,000 across its 16 manufacturing facilities with offices in UK and Hong Kong.

Among clients of Timex and Fergasam are top labels like Marks & Spencer, Victoria’s Secret, House of Frazer, Diesel, H&M and SUZI Chin, the statement said.

Sri Lanka Lures back Apparel Buyers Who Went to Bangladesh, Vietnam & Cambodia by Its Superior Service Levels

27th June 2011, www.lankabusinessonline.com

Sri Lanka has begun luring back foreign apparel buyers who shifted to other Asian producers following the global economic crisis after they failed to meet buyer expectations, an exporter has said.

Orient Garments, which is to list on Colombo Stock Exchange's second board, also said it aims to capture orders now supplied by Eastern Europe by offering shorter lead times.

"It has been evident that some of the world's leading apparel buyers have shifted their sourcing towards low cost countries such as Bangladesh, Vietnam and Cambodia from Sri Lanka in the light of the global economic turmoil," the company said in its prospectus.

"However, due to the reason that particular low cost destinations have failed to accomplish service levels with required standards such buyers are gradually returning to Sri Lanka."

According to the prospectus of the firm, which a unit of Sri Lanka's Finco group, Sri Lanka can also benefit from rising costs in China.

"Challenged with currency appreciation, subsidy withdrawals and escalating labour costs China is rapidly turning into an unprofitable garment manufacturing destination," it said.

"This trend in China presents an opening for Sri Lanka to reinforce its position as a cost effective sourcing country in the global fashion industry."

Orient Garments said Sri Lanka's garment manufacturing sector has been able to overcome hurdles like the end of textile quotas and the withdrawal of GSP+ import duty concessions by the European Union.

The company said it also plans to seize the demand in European countries for apparel orders shipped within a short lead time which is currently catered to by Turkey and other Eastern European countries at a premium price.

It plans to allocate 20 percent of its existing capacity of 3.1 million pieces to process export orders which require quick response time.

"Under the new scheme, the company will deliver goods within nearly 70/80 days from the order acceptance instead of 100/120 days," it said.

"This will enable the company to increase the market share by capturing new market segments while increasing its profitability by way of adding a premium to its price."

Related Info :

• Apparel Indistry to Achieve $5bn in 2015 despite Competition & Uneven Playing Field in the International Arena

• Sri Lanka's Omar Proposes a New Business Model for Apparel Industry to Deliver Phenomenal Products at Great Prices

• Sri Lanka’s January Exports Up 72.4pct. Garment Exports to Europe Up 143.5pct without EU GSP+ and Trade Deficit Contracts 10pct

Orient Garments supplies international fashion brands and retailers such as NEXT, Tesco, Tommy Hilfiger, Polo Ralph Lauren and Burberry.

It has five garment manufacturing plants with almost 1,500 direct sewing machines, two embroidery units with 105 embroidery sewing heads, and nearly 3,500 workers.

Sri Lanka’s January Exports Up 72.4pct. Garment Exports to Europe Up 143.5pct without EU GSP+ and Trade Deficit Contracts 10pct

01st April 2011, www.island.lk

No, this is not an April Fools’ Day Joke. Sri Lanka’s trade deficit contracted in January 2011 on the back of a surge in export earnings, driven by the post GSP Plus apparels sector, while imports grew at a much slower pace, according to official external sector data released yesterday (31). Apparel exports to the EU had increased sharply, up 143.5 percent, without the GSP Plus trade concession which was withdraw last August.

The trade deficit for January 2011 reached US$ 687.6 billion, down 10.2 percent from US$ 765.9 million a year ago.

Export earnings in January 2010 increased sharply, up 72.4 percent to US$ 813.4 million from US$ 471.7 million a year ago. Earnings from apparel exports grew 121.9 percent to US$ 385.4 million from US$ 173.7 million, the Central Bank said, releasing its External Sector Review for January 2011.

The import bill grew at a much slower pace, up 21.3 percent to US$ 1,501.1 million in January 2011 from US$ 1,237.7 million a year earlier.

Sceptics...

Central Bank Deputy Governor Dharma Dheerasinghe earlier this week told a public forum that exports had increased by 72.4 percent year-on-year in January and that the trade deficit had contracted, but many were sceptical as it was an unusual trend. Even a top official close the government said he was surprised to hear Dheerasinghe make such a statement saying, ‘Let’s wait for the official data’. So, here it is; the official data.

Exports...

"The largest contribution to the growth in exports in January 2011 was from the industrial sector, reflecting increases in all major categories of industrial exports. Continuing the increasing trend observed since the withdrawal of the GSP+ scheme in August 2010, earnings from textile and garment exports increased by 121.9 percent to US$ 385 million in January 2011, depicting a 143.5 percent increase to EU and 95.8 per cent increase to USA," the Central Bank said.

"Exports of rubber products increased by 118.7 percent, year-on-year, reflecting higher levels of domestic value addition, particularly in the form of solid tyres and rubber gloves. Other key categories of industrial exports such as food, beverages and tobacco, machinery and equipment and petroleum based products also performed well in January 2011," it said.

"Earnings from agricultural exports grew by 28.9 percent to US$ 184 million in January 2011, recording a healthy growth in all major sub sectors mainly due to higher prices. The average export prices of tea and rubber remained high at US$ 4.79 per kg and US$ 4.89 per kg, respectively. However, rubber export volumes declined mainly due to tightened supply as well as the increased demand from the domestic industries for the manufacture of rubber based products.

Earnings from minor agricultural exports increased by 20.5 percent to US$ 31 million in January, 2011 mainly due to higher prices fetched by cocoa products, essential oils and unmanufactured tobacco and increased volumes of fruits, cinnamon and vegetables."

Imports..

"Expenditure on imports of intermediate goods increased 15.7 percent to US$ 812 million in January 2011. The average import price of crude oil increased by 22.6 percent to US$ 95.33 per barrel in January 2011, though import volume declined, the Central Bank said.

The oil bill for January declined 10.4 percent in January 2011 to US$ 364.9 million from US$ 407.1 million a year earlier.

"Imports of textiles increased by 55.2 percent in January 2011 indicating a better outlook for the garment industry. Expenditure on fertilizer imports also increased in January 2011, mainly due to higher import volumes.

"Expenditure on imports of consumer goods increased significantly during the month of January 2011 led by non-food consumer goods, particularly, motor vehicles and electrical equipment. Import expenditure on food and drink also increased with the upward trend in food prices of sugar, wheat grain and milk products in the international market. All sub categories of investment goods imports increased in January 2011," it said.

Reserves...

Worker remittances had increased 20.1 percent to US$ 377 in January 2011 from US$ 313.1 million a year earlier but were not enough to cover the trade deficit.

"Gross official reserves continued to remain above the targeted level and stood at US$ 6.7 billion by end February 2011 without Asian Clearing Union (ACU) balances. Based on the previous 12-month average expenditure on imports of US$ 1,167 million per month, the gross official reserves without ACU balances were equivalent to 5.8 months of imports," the Central Bank said.

Outlook...

Last January, the Central Bank said the Balance of Payments would record a US$ 350 million surplus in 2011. FDIs in 2010 are estimated at US$ 500 million, reflecting declining global capital flows, but FDIs and inflows to the private sector are expected to reach US$ 1.5 billion this year. However, the IMF estimates FDI inflows to reach US$ 900 million this year.

Long term inflows to the government this year are expected to reach US$ 1.7 billion.

The relaxation of exchange controls and improving investment climate would also attract portfolio investments in to the country. Steps have been taken by the government to improve Sri Lanka’s sovereign ratings and also improve its World Bank Doing Business ranking from the current 102nd position out of 183 countries to 30th by 2016.

The rupee which appreciated 3.2 percent against the dollar is expected to appreciate further this year if the expected foreign currency inflows materialise.

This is expected to make imports less expensive and would be a benefit as oil prices continue to increase.

Also, a stronger rupee would help the government meet its foreign debt servicing obligations at a lower cost, thus helping to maintain fiscal discipline so that it would not add pressure on inflation through domestic borrowings as it did in the past.

However, exporters complain of loss of competitiveness as the rupee strengthens, but January trade data suggests otherwise.

Related Info :

• Sri Lanka External Sector Performance – January 2011

• Sri Lanka's First Post War Year Achieves GDP Growth Rate of 8pct. 2009 only 3.5pct. Highest Ever Achieved Since Independence was 8.2pct in 1968 & 1978

Apparel Indistry to Achieve $5bn in 2015 despite Competition & Uneven Playing Field in the International Arena

01st April 2011, www.dailynews.lk, By Ramani Kangaraarachchi

The apparel industry will be able to achieve the growth target of US $ 5 billion in 2015 contributing to the GDP and the economy in the future too.

Newly elected Apparel Exporters Association 200GFP Chairperson Ramya Weerakoon said the industry is competing in an uneven playing field in the international arena. Large number of countries are competing in the international market.

“Despite these challenges it is the only industry that continued to grow despite the war and the recession,” she said.

Weerakoon said the competitiveness of the Sri Lankan product is eroded due to various reasons. India has entered into a free trade agreement with Japan and so is Indonesia with Bangladesh. Preferential treatment in all the markets they compete both India and Pakistan support with their export subsidies. This has affected the Lankan market.

Weerakoon said the Human Resource Department is an essential area that requires attention because of the demand for labour, where challenges were not existent during the war period.

The new demand for labour has been created by other sectors and by the apparel industry, but the availability was limited from apparel industry side.

The target of US $ 5 billion is divided into two in terms of exports manufactured in Sri Lanka both in new and existing plans.

The balance growth is expected from knowledge based on apparel exports using the new macroeconomic policy and the trade regime.

Weerakoon hoped to focus on the growth agenda of the industry during her tenure as the Chairperson.

She appreciated the extensive amendments made to the Inland Revenue laws, VAT law and other related regulatory mechanisms. However, further regulatory mechanisms and introducing a conducive environment to make the country’s export competitive is warranted, she said.

The policy framework has created an interest among all entrepreneurs to enter into more business activities which will make Sri Lanka an emerging economy, aspiring to have USD 4,000 as capital.

This has also created a challenge to the industry compelling the country to look for opportunities in other parts of the country and industrialists would like to explore this opportunity in full, she said.

The Sri Lanka Institute of Textile and Apparel is to improve its capacity to cater to the modern demand in the industry. Weerakoon proposed to the Government to provide vocational training to school leavers, to engage in training for the apparel industry which could absorb such trained work force in a very short period.

The industry is now compelled to look at alternatives in the region. It could provide jobs to the nation, close to their homes. Enabling the industry to shoulder this responsibility. She requested the Government to grant possible concessions to go into or to relocate the industry in regional areas.

Related Info :

• Sri Lanka's Omar Proposes a New Business Model for Apparel Industry to Deliver Phenomenal Products at Great Prices

• Sri Lanka Offers Opportunity to Foreign Companies as China Becomes Expensive - President Rajapaksa to Wall Street Journal

Sri Lanka's Omar Proposes a New Business Model for Apparel Industry to Deliver Phenomenal Products at Great Prices

12th November 2010, www.dailynews.lk

There is a need for a new business model in apparel manufacturing, said Brandix CEO Ashroff Omar. He was delivering the keynote address at the Centenary World Conference of the Textile Institute held recently in Manchester.

Omar explored the topic ‘manufacturing on the global stage,’ making his presentation to an august assembly comprising world renowned corporate leaders, academics and researchers.

He contended that it is at present, a heavily fragmented industry stemming from the single-minded pursuit of cheap labour. He observed that retailers have become pseudo manufacturers taking on roles that belong within the sphere of manufacturing, resulting in an escalation of costs and a lower value proposition to the consumer.

Omar pointed out that industries such as automobile, computer and footwear have provided consumers with ‘phenomenal products at great prices’ whereas the apparel industry has moved in the opposite direction - providing the same product at a far higher price.

He recommended that the new model must be one of collaboration within the value chain enabling greater research and development and the employment of breakthrough technologies.

He said “I believe that, today, on the 100th anniversary of The Textile Institute, we are still a virgin industry.

Automobiles, phones, televisions, airlines are all industries which have large aggressive players while the enormous apparel market has a multitude of small suppliers who do not have the scale to deliver outstanding value.

There is white space for a few $ 5 billion companies.”

Pentland Group Limited CEO Andy Rubin, Hong Kong Polytechnic University Textiles and Clothing Institute Head Prof Xiao-ming Tao, and Corsair Capital Partner and Vice Chairman Lord Mervyn Davies were the other keynote speakers.

The conference themed ‘Creating a global vision for textiles, clothing and footwear’ recognised the need for change in the textile industry and focused on creating a platform for information exchange and networking.

The Textile Institute, inaugurated in 1910, was incorporated in England by a Royal Charter granted in 1925 and is a registered charity.

It is a unique organisation which has individual and corporate members in approximately 80 countries with the membership covering all sectors and disciplines of textiles, clothing and footwear.

The Centenary Conference was held in Manchester as it has been home to The Textile Institute for the past 100 years.

Bhs UK Visits Sri Lanka to Explore the Possibility of Expanding Their Sourcing of Garments without Guilt

26th May 2010, www.dailynews.lk

A three member team from Bhs UK visited Sri Lanka from May 22 to 25 to explore the possibility of expanding their sourcing from the country. The members of the team were Divisional Buying Director Cassie Moore, Senior Buyer Julian Miller and Senior Quality Advisor Nick Duke.

Bhs, is a British department store chain with 186 branches located in high street locations primarily selling clothing was first launched in the UK in the early 1900's. It was bought by Sir Phillip Green the owner of the Arcadia Group in the year 2000 for Sterling Pounds 200 million. The Arcadia Group had recorded a sales value of over Sterling Pounds 3,000 million during the last fiscal year.

The EDB organized a meeting between the Bhs team, the Joint Apparel Association Forum (JAAF) and the leading apparel associations at the commencement of the program. This was the first official meeting of Janaka Ratnayake the newly appointed Chairman of the EDB. Welcoming the BHS team Ratnayake thanked them for including Sri Lanka in their South Asian itinerary. He stressed that since this is a vital industry for the economy of Sri Lanka accounting for nearly 44 percent of the export revenue, the Government would extend its fullest support to Bhs to increase their sourcing from Sri Lanka.

Sri Lanka Apparel Exporters Association Chairman and Favourite Group Managing Director Kumar Mirchandani, making a presentation on behalf of the industry to the Bhs team said that Sri Lanka has over the past three decades developed into a sophisticated industry from mere tailors to total solution specialists. The industry reality of no sweatshop conditions, no child labour, maintaining international health and safety standards, governed hours of work, community outreach programs were highlighted by Mirchandan.

Garments without Guilt - making the 'Made in Sri Lanka' label synonymous with ethical and sustainable apparel manufacturing was also explained.

It was mentioned that a Sri Lankan company was the first in the world to receive the Leadership in Energy and Environmental Design (LEED) Platinum award - a benchmark for design, construction and operation of high performance green buildings.

JAAF Secretary General Rohan Masakorale said that Sri Lanka has the fastest shipping connections to U.K, which is 15 days transit at the moment, where weekly services are offered with multiple carriers and the service is direct without any transshipment. No other country in Asia can match this service and it would be an added advantage to the buyers to place orders in Sri Lanka as the speed of the supply chain reliability is going to be critical and lead times and production cycles would play a key role in future decision making process for buyers.

Briefing the gathering, Cassie Moore said that Bhs was part of the Arcadia Group UK which owns and operates nearly 3000 Stores in the UK and worldwide. Their brands are Bhs, Top Shop, Dorthy Perkins, Wallis, Evans, Miss Selfridge, Outfit, Top man and Burtons. She said Bhs buys women's and men's clothing, children's wear, school wear lingerie, nightwear, underwear, house wear and footwear. She further said that Bhs has been buying school wear from Sri Lanka for the last 18 years.

The purpose of this visit was to review the opportunities of developing other products through Sri Lanka. Moore made use of this occasion to extend their thanks to their existing suppliers and to the new vendors scheduled to meet in Sri Lanka.

She also thanked the EDB and the Sri Lanka High Commission in the UK for having assisted them greatly in recognizing the opportunities for manufacturing development in Sri Lanka.

The Bhs team visited around 10 factories during their three day tour in Sri Lanka including small, medium and large scale units meeting their basic criterion of being Supplier Ethical Data Exchange (SEDEX) certified.