Editorial: Sri Lanka’s apparel industry—a silver lining in a dark cloud?

Editorial: Sri Lanka’s apparel industry—a silver lining in a dark cloud?

Sri Lanka is in crisis. The economy is in dire straits, inflation has soared and there are severe shortages of basic goods such as fuel and food. On July 13, 2022, it was reported that the then president of Sri Lanka, Gotabaya Rajapaksa, had fled the country following angry protests in the streets of Colombo and he later resigned. Ranil Wickremesinghe, the then prime minister, was quickly appointed as acting president and on July 20, 2022, he was elected president by the Sri Lankan parliament. Against this background of descent into economic and political chaos, the apparel industry appears to be one of only a few silver linings. Apparel exports in June 2022 shot up to a record monthly high compared with the corresponding month a year earlier. Furthermore, the value of apparel exports during January-June 2022 was significantly higher than in the corresponding period a year earlier, and the secretary general of the Joint Apparel Association Forum (JAAF), Yohan Lawrence, appears to remain broadly optimistic about the apparel industry’s future. The Board of Investment of Sri Lanka (BOI) has signed agreements worth US$76 mn relating to new investments and expansions in the textile and clothing industry for 2022, and a number of investors are reported to be looking at opportunities for investment in backward vertical integration—including raw material production. Backward vertical integration would enable the clothing industry to make greater use of preferential tariff concessions. Also, it would help to reduce the clothing industry’s reliance on imports for its textile inputs and help to alleviate issues relating to the affordability of imported textile inputs following a plunge in the value of the Sri Lankan rupee. Furthermore, it would provide opportunities for the clothing industry to offer its customers shorter lead times. Much, however, will depend on the success of negotiations with the International Monetary Fund (IMF) regarding a programme for macrostabilisation.