A recent survey says that from mid-2005 to now, many large international garment buyers shifted their business out of Sri Lanka and into cheaper manufacturing destinations. Over this period, 75 factories, in seven provinces, closed down, and out of this around 24 factories closed down over the past six months. The survey, which was concluded in February 2009, was conducted by a private consultant, Roy Dawson, in the Western, Southern, Central, Uva, Sabaragamuwa, Wayamba and North Western Provinces.
The findings show that many major foreign buyers of Sri Lankan garments shut down their offices in Sri Lanka within the past three years and also shifted their manufacturing orders to other countries.
“Out of around 50 main international garment buyers registered with the Sri Lanka Garment Buying Offices Association, 12 shut down their offices in Sri Lanka within the last three years. These buying offices were shifted mainly to Singapore, India and Pakistan. Production was shifted mainly to India, Bangladesh and Vietnam,” said Mr Dawson.
By now, around 20 steady foreign buyers are no longer operating in Sri Lanka. While the main reason for this shift in business is the comparatively higher cost of production in Sri Lanka, the unstable security situation is also a factor. For instance, buyers felt it was difficult to send technical staff to local factories for periodic factory inspections, because of security worries.
The survey also found that 75 garment factories had closed down in the seven provinces surveyed, from mid-2005 to 2009, and about 24 factories have closed down over the past six months alone.
These factories were mainly located in the free trade zones in Katunayake, Biyagama, Koggala and Seethawaka Pura. Some factories were registered under the Board of Investment and some under the Textile Division of the Ministry of Industrial Development. In addition to job losses and foreign exchange losses these garment factory closures have also hit other connected industries.
These include embroidery plants, garment washing plants, corrugated carton manufacturers, label manufactures, thread manufacturers, manufacturers of plastic hangers and poly-bags, transport services providers, shipping lines, freight forwarders, customs clearing agents, food suppliers and subcontractors offering services such as fabric cutting, ironing and packaging.
The survey notes that during the period 1980 to 2004 there were more than 650 large, medium and small scale garment manufacturing plants in the island, offering direct employment to around 450,000 people and indirect employment to another 100,000.
However, since 2005, with the expiry of the Multi Fibre Arrangement and the ending of export quotas, the industry has been shrinking steadily. This is mainly attributed to the higher cost of production in Sri Lanka, compared to other garment manufacturing countries in Asia. The current global recession has also hit the garment industry and over the past six6 months the frequency of factory closures has increased.
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