Financial Times

More research needed in garments industry
"One of the features of the Sri Lankan policy making is the non inclusion of research studies which bear on critical policy issues and in that context the book 'Ready-made Garment Industry in Sri Lanka: Facing the Global Challenge', written by Dr Saman Kelegama is one very useful and important," said Finance Minister Dr Sarath Amunugama speaking at the recent book launch.

He said this because of the lapse in research study, they had to depend on ad-hoc material, personal experiences, which were not satisfactory. He said that such organizations as universities, research institutions and the Central Bank used to have discussions focused on various important aspects of policy making, but there has been a decline in that type of supportive research.

Dr. Saman Kelegama, Executive Director, Institute of Policy Studies and the editor of the book, said there were two schools of thought for the future of the readymade garment industry in Sri Lanka.

One is that 12 percent of the well established firms that control 72 percent of the industry are expected to expand and consolidate and in this process make use of smaller firms either by acquisition or subcontracting.

The other view is that whatever the percentage of exports that is controlled by the top 12 percent firms, the large scale industry is not competitive enough to show solid performances in the post 2004 period.

While there would be competition among Asian countries to capture part of the shrinking share, Sri Lanka would be at a loss because in the domestic supply side the inadequate development of backward linkages, weak forward integration, low labour productivity, increasing cost of production etc are shown by pessimists to highlight the lack of competitiveness.

In his comments, Dr. Upananda Vidanapathirana, Secretary, Ministry of Industry, Tourism, and Investment Promotion, said:“There are different views coming out from various individuals involved in the garment industry about the future of the industry.

Now that the countdown for a quota free era has begun, there should be a more accurate picture on the industry. More information, more analysis is required.

The book shows that there is an urgent need to restructure the garment industry to face the post-2004 period without being complacent about a possible US-Sri Lanka FTA that will come to Sri Lanka's rescue, or that the WTO Agreement on Textiles and Clothing will not be implemented by end-2004 due to pressure from some lobbies, and so on.

Some claim that Sri Lanka should go for more value added products and capture the niche markets. The book says that the top-end of the market is equally competitive as the bottom end -- other countries that are coming out of the quota system will also be aiming at this segment and thus competition would be intensive at the high end of the market.

Clearly, for Sri Lanka to shine at the top-end is going to be tough.So a sensible strategy is to focus on a mix of high-end, middle-level and low-end products, rather than going fully for high-end garments.

We would like to see the larger well-established industries playing a more active role in making use of some of the small and medium scale industries to do subcontracting work or acquire them and repositioning them to face the global challenges.

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