Apparel industry of Sri Lanka

From Wikipedia, the free encyclopedia

The design, manufacture and export of textiles and apparel products is one of the biggest industries in Sri
Lanka, and one which plays a key role in advancing the country's economy.[1] Theapparel industry of Sri
Lanka employs about 15% of the country's workforce, accounting for about half of the country's total
exports,[2] and Sri Lanka is among the top apparel-producing countries in the world relative to its population.
[3][4]

Contents
[hide]

1 Development
2 Economic growth
3 Trade partnerships
4 Social responsibility
o

4.1 Women and minorities in the workforce

5 Apparel Giants in Sri Lanka
6 See also
7 References
8 External links

[edit]Development
Sri Lanka's apparel industry began to grow significantly in the 1980s as an alternative to India's garment
manufacturers, because of its open economic policy as well as the trade and investment friendly
environment. Under the Multi Fibre Agreement, quota regime Sri Lanka became an attractive new venue
for businesses. In 1985, Martin Trust, one of the pioneers in the development of speed sourcing [5] for the
American fashion retail sector, began working with Sri Lankan textile and apparel companies. In 1986 and
1987 he established joint venture partnerships with The Omar Group (formerly known as LM Apparels and
part of the Brandix group) and The Amalean Group which helped make the country more competitive
through knowledge transfers and technology, attracting further foreign investors. [6] These were the first of
nearly two dozen joint venture companies in Sri Lanka which made the country competitive in the garment
sector. Including Trusts partnership with German brassiere maker, Triumph International, and Sri Lankan
company, MAS Holdings, to create a new venture called Bodyline.[7]

When the U.S. and other countries eliminated quantitative restrictions on garments produced in China,
many garment facilities in Sri Lanka were consolidated. As of 2010, most of the exports to the U.S. are from
MAS or Brandix, with smaller amounts coming from the Hirdaramani & Jay Jay Mills Groups. Together,
these three companies account for a majority of the value of exports of garments to the U.S. market. [8]

[edit]Economic

growth

Exports of apparel per capita to the U.S. market from leading garment-manufacturing countries, 1989-2009.

Over the next few decades, the apparel industry grew to represent Sri Lanka's number one export.
Following a 38% increase in textile-based revenue from 1996 to 1997, in which the industry generated
$2.18 billion in earnings, 50 new textile factories opened in Sri Lanka in 1998. [9] As of 1998, the Sri Lanka
apparel industry employed about 300,000 people in 800 factories. Sri Lanka nationals are primary owners
of 85% of the small-to-mid-sized factories, while larger operations are typically joint ventures or foreignowned.[9]
The end of Sri Lanka's civil war in 2009 relieved pressure on the country's garment industry. After fighting
ceased, Brandix, a garment manufacturer with 25,000 employees, [10] announced that its factory in Punani
would double its exports.[11] Later that year, Sri Lanka held its largest ever Design Festival, highlighting the
country's high-fashion merchandise, upcoming designers and advancing the industry's desire to become
known as a hub for design, as well as manufacturing.[1] More exhibits followed once the Conference and
Exhibition Management Services began operating out of Sri Lanka in 2010. In doing so, the global
company announced three international textile exhibits in Sri Lanka, each to highlight a different aspect of
the local textile and apparel industry while allaying fears about political instability and to show that Sri
Lanka can compete with the EU market.[12]

As of the late 2000s (decade), the Sri Lankan textile industry contributes 39% to the industrial production of
the country and represents 43% of the country's total exports. Since the 1970s, the industry has grown to
become the country's largest single source of export revenue. [13]

[edit]Trade

partnerships

The United States is the main importer of textile goods from Sri Lanka, accounting for 76% of total exports
from Sri Lanka. As of 2009, Sri Lanka ranked 12th among apparel exporters to the United States in terms
of value.[14]
Sri Lanka partnership was advanced in 2000 in part by setting up logistics centers at key U.S. ports to
smooth the importation of Sri Lankan goods.[15] Beginning in 2004, Sri Lankan officials have sought to
increase textile deals in North Carolina, the American state with the largest concentration of textile
industries.[16]

[edit]Social

responsibility

Women working in Sri Lanka apparel industry.

Sri Lanka's apparel industry has invested much in achieving recognition for what the Daily Mirror calls its
"conscientious standpoint in apparel production". Through the long-running Garments without Guilt
campaign, the industry's trade association, Sri Lanka Apparel has called attention to its adherence to
ethical considerations, including its opposition to child labor. Sri Lanka Apparel is a signatory to 39
conventions of the International Labour Organization, the only country with a significant manufacturing
industry to do so.[1] Child labor is outlawed in the country, and the minimum statutory age for employment is
18, though some conditional exemptions exist for those over 16. Sri Lankan law also mandates that
employers contribute 3% of an employee's salary to a trust fund, which the employee receives after he or
she leaves the company.[17]
Among the largest firms in the Sri Lanka apparel industry, employing about 16,000 people, [18] is MAS
Intimates, which is a supplier to Gap, Marks and Spencer, Nike and Victoria's Secret, among others. In
recent years, MAS has placed a strong emphasis on corporate social responsibility, for which it has been
recognized with a CIMA Financial Management Award in 2007.[19]

[edit]Women

and minorities in the workforce

A large portion of Sri Lanka's factory work is provided by women. As of 2010, 350,000 women are
employed in the country's 850 apparel factories, or 85% of the industry's workforce. [19] Ethnic minorities also
play a significant role in apparel production. The two largest apparel companies in Sri Lanka, MAS and
Brandix, are run by individuals who belong to ethnic or religious minority groups. Sri Lanka is a
predominantly Buddhist country, though Brandix is owned by a Muslim family. MAS Holdings is owned by a
Hindu family, and mem

Countertrade means exchanging goods or services which are paid for, in whole or part, with other
goods or services, rather than with money. A monetary valuation can however be used in counter
trade for accounting purposes. In dealings between sovereign states, the term bilateral trade is used.
OR "Any transaction involving exchange of goods or service for something of equal value."

Contents
[hide]

1 Types of countertrade
2 Necessity
3 Role of countertrade in the world market
4 References

[edit]Types

of countertrade

There are five main variants of countertrade:

Barter: Exchange of goods or services directly for other goods or services without the use of
money as means of purchase or payment.
Barter is the direct exchange of goods between two parties in a transaction. The principal
exports are paid for with goods or services supplied from the importing market. A single
contract covers both flows, in its simplest form involves no cash. In practice, supply of the
principal exports is often held up until sufficient revenues have been earned from the sale of
bartered goods. One of the largest barter deals to date involved Occidental Petroleum
Corporation's agreement to ship sulphuric acid to the former Soviet Union for ammonia urea
and potash under a 2 year deal which was worth 18 billion euros. Furthermore, during
negotiation stage of a barter deal, the seller must know the market price for items offered in
trade. Bartered goods can range from hams to iron pellets, mineral water, furniture or olive-oil
all somewhat more difficult to price and market when potential customers must be sought.

Switch trading: Practice in which one company sells to another its obligation to make a
purchase in a given country.

Counter purchase: Sale of goods and services to one company in other country by a
company that promises to make a future purchase of a specific product from the same
company in that country.

Buyback: occurs when a firm builds a plant in a country - or supplies technology, equipment,
training, or other services to the country and agrees to take a certain percentage of the
plant's output as partial payment for the contract.

Offset: Agreement that a company will offset a hard - currency purchase of an unspecified
product from that nation in the future. Agreement by one nation to buy a product from
another, subject to the purchase of some or all of the components and raw materials from the
buyer of the finished product, or the assembly of such product in the buyer nation.

Compensation trade: Compensation trade is a form of barter in which one of the flows is
partly in goods and partly in hard currency.

[edit]Necessity
Countertrade also occurs when countries lack sufficient hard currency, or when other types of
market trade are impossible.
In 2000, India and Iraq agreed on an "oil for wheat and rice" barter deal, subject to UN approval
under Article 50 of the UN Persian Gulf War sanctions, that would facilitate 300,000 barrels of oil
delivered daily to India at a price of $6.85 a barrel while Iraq oil sales into Asia were valued at
about $22 a barrel. In 2001, India agreed to swap 1.5 million tonnes of Iraqi crude under the oilfor-food program.
The Security Council noted: "... although locally produced food items have become increasingly
available throughout the country, most Iraqis do not have the necessary purchasing power to buy
them. Unfortunately, the monthly food rations represent the largest proportion of their household
income. They are obliged to either barter or sell items from the food basket in order to meet their
other essential needs. This is one of the factors which partly explains why the nutritional situation
has not improved in line with the enhanced food basket. Moreover, the absence of normal
economic activity has given rise to the spread of deep-seated poverty."
[edit]Role

of countertrade in the world market

Noted US economist Paul Samuelson was skeptical about the viability of countertrade as a
marketing tool, claiming that "Unless a hungry tailor happens to find an undraped farmer, who has
both food and a desire for a pair of pants, neither can make a trade". (This is called "double
coincidence of wants".) But this is arguably a too simplistic interpretation of how markets operate
in the real world. In any real economy, bartering occurs all the time, even if it is not the main
means to acquire goods and services.
The volume of countertrade is growing. In 1972, it was estimated that countertrade was used by
business and governments in 15 countries; in 1979, 27 countries; by the start of 1990s, around
100 countries. (Vertariu 1992). A large part of countertrade has involved sales of military
equipment (weaponry, vehicles and installations).

More than 80 countries nowadays regularly use or require countertrade exchanges. Officials of
the General Agreement on Tariffs and Trade (GATT) organization claimed that countertrade
accounts for around 5% of the world trade. The British Department of Trade and Industry has
suggested 15%, while some scholars believe it to be closer to 30%, with east-west trade having
been as high as 50% in some trading sectors of Eastern European and Third World Countries for
some years. A consensus of expert opinions (Okaroafo, 1989) has put the percentage of the
value of world trade volumes linked to countertrade transactions at between 20% to 25%.
According to an official US statement, "The U.S. Government generally views countertrade,
including barter, as contrary to an open, free trading system and, in the long run, not in the
interest of the U.S. business community. However, as a matter of policy the U.S. Government will
not oppose U.S. companies' participation in countertrade arrangements unless such action could
have a negative impact on national security." (Office of Management and Budget; "Impact of
Offsets in Defense-related Exports," December, 1985).