Creating new spaces in crowded market

To create new space in the ever crowding supplier market and to sidestep price competition, the apparel representative body is advocating the use of ethical manufacturing themes to tap niche markets.“From January 2008 we will be exposed to open competition in the EU and from January 2009 we will be exposed to open competition in the US. So we are trying to promote Sri Lanka as an ethical trading destination through the Garments Without Guilt campaign,” says the Secretary General of the Joint Apparel Association Forum (JAAF), T G Ariyarathne.

Most trade and industry experts say Sri Lanka’s garment industry has done very much better than expected in the post quota era.
In 2006, according to JAAF data, the industry continued to grow, with apparel exports increasing by 6% compared to 2005. Although exports to the US market showed a marginal decline of 0.4%, the EU market grew by 13%. These exports brought US$ 2.911 billion into the country, compared to the US$ 2.746 billion in 2005.

However, industry experts point out that the growth is taking place in an environment where the world’s most competitive apparel producer is still held down by quotas. China was put under quotas by both the EU and the US within months of the quotas officially ending. Industry experts say Sri Lanka’s export growth could be due to this reason - because full blown competition is yet to hit.

“The US has imposed quotas on China and most of the categories that are of interest to Sri Lanka, such as lingerie, are under quotas.
So the growth in exports is while Chinese exports are under restraints,” says Ariyarathne. However, EU quotas on China end by the end of this year and US quotas end by the end of next years.

“The EU quota restraints on China will go way by the end of 2007. The US restraints will end by December 31, 2008,” says Ariyarathne
Meanwhile a new noteworthy competitor, Vietnam, has also entered the free market. “Vietnam is no longer under quotas after it joined the World Trade Organisation this year.

We have not seen an immediate result of their entry into the market but there is concern that Vietnam will build up its exports very fast,” says Ariyarathne. The new entrant is adding to existing strong competition from countries like China, India and Bangladesh. To sidestep price competition in an already crowded market the JAAF is trying to promote Sri Lanka as an ethical manufacturing destination. The JAAF is also trying to build industry image locally through publicity campaigns.

These local image building campaigns are aimed at removing the stigma associated with garment industry work. The industry is counting on various productivity improvement programmes to cut costs and increase productivity. The industry is also investing in upgrading local design and development talent.