Garments: What happened and didn’t happen
View(s):By Chandrasena Maliyadde
Former Secretary,
Ministry of Plan Implementation
There have been recent media reports on numerous difficulties and challenges faced by Sri Lankan garment industry. These difficulties were attributed to different reasons. Some hold the industry responsible for its failure to put the house in order and to improve the competitiveness. Others point fingers at the Government for its failure to retain the GSP plus facility. I wish to share some of my recollections and thoughts on this. My thoughts are erratic and my exposition is incomplete.
When the late President Ranasinghe Premadasa launched the Garment Factory Programme some 20 years ago we cursed. That was for two reasons. First was that the very same regime of which President Premadasa was very much a part was responsible for the demise of the then thriving hand-loom and power-loom textile industry through its overnight import liberalization policy. That industry provided low cost livelihood opportunities to hundreds of thousands of rural women across the country. The import content and thereby the foreign exchange drain of that industry was minimal. It catered to domestic market needs. The garment factory programme generated many employment opportunities (some say slavery) to rural women throughout the country. Import content and the foreign exchange drain were high. It catered to global market needs. Some cynics say it produces underwear to oversized ladies and gentlemen in the West.
What was more important for us as Rural/Regional Development planners was the second reason than the first one. What was the second reason? The garment factory programme intruded into our territory – the rural poverty. We cited prevalence of rural poverty, painted a gloomy picture and canvassed for empowerment of poor rural women and raised funds; conducted surveys and studies; collected and analyzed data; produced reports; organized seminars; made trips abroad; virtually did somersaults on rural poverty. In fact rural poverty was our bread and butter. We were engaged in a never ending process of poverty alleviation. When the garment factory programme was introduced all rural women left our programmes and secured employment in garment factories. We lost our target group. Our jobs were at stake.
In fact, Robert England then Resident Representative, UNDP once told me “Maliyadde, with all due respect to you I should say that President Premadasa is a more effective and better Regional Planner”. I was Director Regional Development then. At the time of launching garment factory programme there were many problems. Basic infrastructure facilities such as electricity, water, telecommunication and access roads were not found on the locations identified to establish garment factories. Some had cast doubts on the success, sustainability and effectiveness of the programme. But, President Premadasa was not a man who would be satisfied with a “NO” or “Cannot” response. Proving his foresight and determination right, the programme has come to stay. No longer is it garment factory programme. It is today developed into and known as the garment industry. It has become the highest export earner and beaten the century-old tea. It continues to generate many livelihood opportunities at the doorstep.
Yet the industry complains that it faces challenges and difficulties. They complain about withdrawal of GSP plus facility and discontinuation of some incentives. The industry blames the Government for failing to take timely action to rescue the industry; the Government blames the international community for manipulations. Continuing to pass the buck (in our public service jargon) would not help the industry. It is time to take stock of the situation.
The first question coming to my mind is whether the garment industry has lived up to its expectations? This reminds me the “infant industry theory” taught to us by Professor B. Hewavitharana and Professor W.D. Lakshman during our undergraduate days at Peradeniya. Neither of them had children then but, beautifully explained the theory citing an example of parental care for an infant until it matures. A government would support an infant industry with incentives, protection, markets in its early stages. The Sri Lankan Government obtained the GSP plus facility for the garment industry allowing free entry to EU markets. At the time the programme was launched (at infant stage), the Government provided a host of facilities and incentives to the garment industry.
Among them – duty free facility for imports including a luxury vehicle, availability of basic infrastructure such as electricity, telecommunication, water, access road, land, buildings etc are prominent. The Government pushed the factories to rural remote areas. This was 23 years back when the industry was in infant stage. The industry is no longer in its infant stage. It’s matured into a well grown established industry which can stand on its own feet.
It is true that Sri Lanka lost the GSP plus facility extended by the EU. Garment manufacturers thereby lost duty free entry and quotas allocated to them. Twenty three years later, the industry still expects concessions and facilities from the government. Is it because the industry has not matured as the theory explains and is still in infant stage? Or is it that the industry expects the Government to continue its facilitation throughout its life time? How long does the industry expect the Government to protect and facilitate the industry?
In my opinion many garment factories have failed to introduce cost cutting measures and improve the cost efficiency of their investment. This has caused losing competitiveness of Sri Lankan garments in the export market. Many industries were not able to replace and gradually reduce its import content and increase its value addition. They use the same production methods, same technology and continue to import almost everything making only the labor the local component.
The industry could not diversify the product either vertically or horizontally. They have failed to diversify the markets. The picture of the garment industry has not changed substantially after 23 years of its existence. They have not integrated into the society. They have not acted as the lead investor in the periphery. In fact considering the infrastructure provided and the scale of operations the garment industry was the pioneering, well organized and best managed investment in many parts of the country. They, in a way could be identified as a string of growth nodes spread across the country, especially in rural areas. But that advantageous pioneering position was not seized by the industry.
It is worth recalling the words of late President Premadasa. He once said that he did not believe the garment industry is the right investment to take the economy or the country on a sustainable development path. But this was the easiest and the fastest way to take private investment into rural areas. So, he used that. He introduced the private investment to districts and districts to private investment. It is up to the industry to seize the opportunity. The garment factory should become the centre of activities; it could commence teaching English, IT and other subjects which are not available in such areas; it could become the collection centre in the area. It could collect, sort out, store, process, pack and sell the local produce such as fruits, vegetables and grains grown in the area. The then President wanted the garment factory to become the most dynamic engine of growth in respective localities.
How many garment factories realized and seized the golden opportunity opened for them? No doubt a few introduced cost efficiency measures and diversification. Some introduced several social and livelihood improvement programmes in the area. Some garment factories organized women societies, launched rural credit programmes and introduced livelihood development activities. They survive and sustain in the industry and in the export market. Those who have failed to seize the opportunity face a challenge.
The industry provides a classic example for “theory at work”. Not one theory but a couple of them – infant industry theory and growth nodes theory. The industry which was one time leader and which made a significant impact upon employment and exports is ailing today. I am not competent to find who should bear the responsibility for the present status of garment industry. It is not my intention to look for scapegoats or culprits. There is a challenge before the industry. It is not too late for policy makers and the investors to convert the challenge into an opportunity. The Government does not want the garment industry to be a one-stop operation. It expects a non-stop process growing from strength to strength. It is time that every party concerned gets together and take remedial action to prevent the garment industry from collapse.
(The writer can be reached on c_maliyadde@yahoo.com)
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