If a recent Daily Mirror news report is anything to go by, and has accurately reported his speech, the Prime Minister has stated that Sri Lanka has no future in apparels exports. The article cites a speech made by the PM at a school science exhibition, in which he has drawn from a Harvard University study done for the GoSL that has come to this conclusion.
“We asked the University of Harvard to carry out a study on Sri Lanka’s economy. The university in turn informed us that Sri Lanka should not rely on importing* apparels any more. This is a correct assessment as Sri Lanka cannot compete with countries such as Bangladesh, where the wages are lower. Therefore we need to concentrate on new export items such as electronics. We can even start manufacturing parts for mobile phones or robotic machines,” the Prime Minister said.
*seems like a mistake, and meant to be ‘exports’
I think this is an ill-informed and inaccurate statement to make. A strong cohort of Sri Lankan apparel firms are demonstrating unique and groundbreaking new capabilities in the apparel industry. True, Sri Lanka is no longer (and for a while now) competitive in the low value apparel exports (simply, ‘stitching’ operations). These are now done by Bangladesh, Cambodia, Vietnam, Laos, etc. But Sri Lankan apparel exporters have evolved substantially to be holistic service providers in the apparel industry; to be design- and technology-led apparel firms; and to co-create new products, including with wearable technology and smart fabrics. Successful apparel exporters are understanding how the retail arena in the industrialised West is shifting sharply, and are catering to that. Many are embedded deeply in supply chains, which are sticky on prices and so Sri Lanka is shed that easily. Lankan apparel firms are innovating in new product spaces of fast fashion and ‘athleisure. Sri Lanka’s leading apparel manufacturers are linked into those brands and supply chains, as I noted in a speech at the British High Commission shortly after Brexit. Ultimately it all depends on which partnerships Sri Lankan firms have – good brands that are on the right trends, and in this, Sri Lankan firms are doing well. So, the PM’s remark about Sri Lanka losing out to Bangladesh, might be true only of a few firms still pitching at a lower level, but certainly not true of the more innovative apparel exporters.
He has also said that, according to Harvard, we should ignore apparels and shift to electronics. Just because electronics exports sounds more value added, a ‘cool’ sector to engage in for the economy to, and is indicative of ‘going up the value chain’, Sri Lanka should be more concerned with more meaningful metrics – for instance, how much value is getting captured in Sri Lanka? are we able to latch on to lucrative production networks (also known as supply chains); what are the multipliers? Because then, high-value, innovative apparel exports could prove to be as value capturing as electronics. And even in electronics, theres a whole spectrum – from low value to high value. Simply saying “Sri Lanka should focus on electronics exports” is not good enough. We don’t want to end up doing simply assembly – which we probably couldn’t compete in anyway, given labour and other input costs that make us less competitive than others in the region.
Of course, there are a host of electronics manufacturing firms producing high quality exports for the international market. We need to look at what they do, why they find SL attractive to operate in, and how we can attract more such firms and growth that industry. But there is no reason why it cannot sit alongside apparels exports, at the higher value end of the spectrum.
Very few Sri Lankan firms do simply stitching operations anymore. I hope the Prime Minister visits some of these industries and learns about the super-innovative things that our apparel exporters are doing – they truly are trailblazing. This insight will help complement the information he is getting from the Harvard studies. Then he may change his belief that ‘apparels is no longer a viable export industry’ and not do injustice to the tens of thousands of folks in this sector in Sri Lanka today, working hard to export millions of dollars of exports for the country.