Investment Plan for a Garment in Sri Lanka

Topics: Marketing, Market research, Research Pages: 43 (12374 words) Published: July 30, 2010
Overview of Garment industry in Sri Lanka
Garment industry has an important place in Sri Lanka’s economy. It has become Sri Lanka’s largest export industry since 1986. It is also the country’s largest net foreign exchange earner since 1992. The garment industry in Sri Lanka expanded rapidly after the liberalization of the economy in 1977. During the 1990s, the garment industry grew at 18.5 per cent per annum. The export-led expansion of the industry led to the replacement of tea by garments as the nation’s largest foreign exchange earner. Moreover, the industry has contributing to the livelihood of nearly 1.2 million people. When Sri Lanka liberalized its economy in 1977, the country’s garment industry took off immediately, mainly as a result of quota-hopping. East Asian garment exporters who were attracted by the country’s liberal trade system and relocated their already well-established garment businesses to Sri Lanka. This relocation encouraged local entrepreneurs to start their own garment enterprises to exploit markets guaranteed by quotas, assisted by the liberal trade system for importation, and subsequently, incentives were granted by the Board of Investment (BOI) to selected industries. MFA quotas helped Sri Lanka and many other developing countries to develop their export-oriented garment industries by insulating them from direct competition from established producers. Sri Lanka did not have a well-developed export-quality textile industry base neither did have a base for garment industry accessories. Therefore, from the very beginning, garment production was based on imported inputs and the value added remained around 30 percent. By about the early 1980s, garment exports were growing rapidly and by 1986 garments accounted for the largest share of all exports which was around 27 percent. Over the past three decades the apparel industry has been focusing on innovation, competent workforce, international reputation for quality and environmental accountability. This in turn has helped to develop a sophisticated industry from tailors to total solutions specialists. Total value of export earnings in the sector was more than at US dollars 2,500 million accounting for 45 per cent of the total export earnings in 2009. The contribution to the Gross Domestic Product (GDP) was around 5 per cent in 2009. This industry provides more than 330,000 direct employment or 5 percent of country’s total employment and there are 830 garment factories, 157 of which are small, 438 medium, and 235 large. The industry produces around 500 million units per annum.

Domestic Apparel Industry
When consider the current Sri Lankan Apparel Sector it can be seen that the garment manufacturers mainly target international markets through international buyers. In Sri Lanka mainly product development is done according to the buyers sketch and specifications. Also there is a lack of local competitors to challenge foreign suppliers who export products to Sri Lankan market as India, Thailand, and Bangladesh, China etc. Also there is an unemployment problem in Sri Lanka. As Textile Engineers should have the ability to join to the apparel sector by being job creators rather than being job seekers. The domestic market has shown a significant growth in past registering a considerable Compounded Annual Growth Rate (CAGR). The Gross Domestic Product Growth Rate has been around 5-6% in Sri Lanka. And the domestic market is expected to grow at around 7-8% in the next 5 years. The Sri Lankan apparel market is moving away from the traditional segmentation to a much deeper and wider segmentation based on consumer needs. Some of the segments that are potential opportunities to watch out for are, Women’s wear, Casual wears, Kids wear, School Uniforms, Inner wear, Active wear, Swimwear, and Youth fashion or College fashion. Rural, mass and ethnic wear are huge opportunities that are popularly overlooked in favor of urban, premium and western wear....
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