The History of Garment and Apparel Industry of Sri Lanka.

The apparel industry is the single largest source of export revenue to Sri Lanka. It accounts to about 50%
of total exports from the country and employees 15% of the countrys workforce.
Even though the textile and apparel industry started to spread in the island in 1950s, it was to
accommodate the local demand and was heavily backed by the government. In the 1960s established
manufacturers shifted their attention to the export market. As a result in 1965 Hentley Garment Ltd.
managed to send the first batch of ready-made garments, a shipment of shirts from Sri Lanka to the
USSR. This was under a bilateral trade agreement between the governments of the two countries. Apart
from Hentley eleven other pioneers who took the industry to the next level can be identified. They are
Bernard Boteju, Velona, Hirdaramani, Bentley Industries, Lanka Weaving Mills, Ceylon Dia Shirt
Company, Candy Garments, Seylon Knit-Wear Industries, Noortex Garments, Maxims, and DM
industries.
When the new opportunity showed signs of a lucrative future the government was more interested in
inviting foreign manufacturers to start plants in the country. After the political reforms in 1972 the
highly protectionist and hardline restrictive economic policy that prevailed in the era encouraged the
pioneers of many local industries to achieve the governments goals of a self- sufficient economy. It also
shifted its attention to a more export oriented economy. As a result East Asian manufacturers were
lured into the country by providing both financial and non-financial incentives including tax holidays. In
the early 1970s the government introduced the Local Investment Advisory Committee (LIAC) to back up
the export oriented industries. Through this initiative special forex allocations, fiscal and tax incentives
were provided for selected 2500 companies including 2000 textile and apparel related industries. This
trend was further strengthened with the signing of the multi-fiber agreement (MFA) in 1974.
This agreement which was very impactful for the global textile and garment industry governed the world
trade in the sector from 1974 to 2004. It introduced a quota system according to which the trade was
governed for three decades. By this time textile and garment industry was no more a profitable industry
in the Western Europe and the America basically due to high wages which led to high production costs.
Although the MFA can be considered as a short-term protectionist measure taken by developed
countries to back up their local industries preventing a sudden extinction, it was a very favorable turning
point for some developing countries including Sri Lanka. At the same time some other developing
countries lost their export income due to shifts in manufacturing.

Given the above circumstances Sri Lankan share of the industry was expanded by two types of global
manufacturers. Due to quota hopping established manufacturers in countries like Hong Kong, Taiwan,
Singapore and South Korea shifted manufacturing to Sri Lanka which was an attractive destination for
the industry. On the other hand rapidly declining industry in the more developed states of America and
the Europe due to high labor costs also came to Sri Lanka. By 1980s Sri Lanka had the lowest wage rates
in Asia. Hourly wage in Sri Lanka-$0.28, Taiwan-$1.64, South Korea-$1.89, Hong Kong-$1.65.
The industry showed a tremendous growth starting in the 1980s. This was due to several factors. In
1978 the open economic policy was introduced to the country thus helping the islands economy more
receptive of the trends in the global economy. The investment friendly environment attracted global
entrepreneurs into Sri Lanka. The prevalence of cheap and quality labor was the main favorable
consideration for the industry to thrive here. At that time India had an established apparel and textile
industry therefore Sri Lanka became an alternative to India for global customers. The geographical and
demographic closeness of the two countries also should have been a supporting factor in this regard.
Furthermore being centrally located in the globe the island provided the shortest lead times and
convenient shipping routes to Europe. The open economic policies enabled the import of quality raw
materials needed to cater to the requirements of developed markets.
However the local textile industry could not keep pace with the apparel sector. Although the country
was self-sufficient in textiles for domestic consumption the produce did not meet the necessary quality
requirements for export apparel. In the early 1980s the country had a concentrated fabric
manufacturing industry with the major share in the public sector catering exclusively to home
consumption. Fabric used for export apparels were almost 100% sourced from overseas. Sri Lanka did
not manufacture fabrics with international quality. Textile mills needed sophisticated machinery which
were very expensive rather than cheap labor which was crucial in the apparel industry. On the other
hand high energy requirements in the textile production sector made Sri Lanka uncompetitive. This
inability to backwardly integrate has been a major barrier throughout the history of apparel industry in
the country which has prevented the nation from reaping full benefits of the industry.
With the advent of the global trends the country needed heavy capital investments in machinery and
technical expertise. Most of these requirements were fulfilled by Japan. The government also took
measures to introduce textile and apparel industry related curriculums to national higher education
institutes as a foresighted investment for the development of the industry.

In 1983 ethnic disturbances textile and apparel industry was the worst hit industry. 5 textile mills and 16
apparel production plants were destroyed. However there was no long-term negative impact.
Another turning point in the industry which has paved way for the current success of Sri Lanka as a total
apparel solutions provider took place in 1985. Martin Trust, an American specialist in international trade
related to textile and apparel trade invested heavily in Sri Lanka. He pioneered the speed sourcing
initiative for American retailers through more than two dozens of joint ventures with Sri Lankan
companies. In 1986 he entered into a partnership with Omar brothers (Brandix Group today) and in
1987 with Amalean brothers (MAS Holdings today). Both these are thriving ventures in the country
today as word-class manufacturers providing total apparel solutions in an international scale. At this
time Martin was the president and CEO of MAST Industries which was founded by him and which later
became known as Limited Brands a leading American fashion retailer. He has served in the capacity of
cleared advisor to the United States Department of Commerce with regard to textile trade issues.
Through his contacts he managed to bring world renowned fashion brands such as Triumph, Limited
Brands into the country. Furthermore Sri Lanka started to become a specialist manufacturer of lingerie
after these initiatives which was producing garments such as shirts, blouses until then. Because of this
support given by Martin Trust he is widely considered as the father of apparel industry in Sri Lanka and
has been recognized and awarded by the Government of Sri Lanka.
The Board of Investment of Sri Lanka also encourage and facilitate the development of the industry. Tax
holidays and other benefits are awarded to BOI approved ventures. In fact about 90% of all textile and
apparel related ventures operating today in the country are BOI approved. The 200 Garment Factory
Plants project is also a milestone in the history of the industry for the fact that it transferred factories
out to rural areas of the country. By the year 2001 there were more than 1000 apparel manufacturing
plants operating in the country but foreseeing the expiry of the MFA many factories were closed down.
After 2004 even more plants who were unable to survive in an unprotected market with innovative
concepts collapsed.
Only a handful of manufacturers who could provide the best of cost, quality and innovation survive now.
Furthermore several other factors ensured their survival. Joint ventures opened up by these companies
partnering with foreign companies to produce a part of the international quality fabric inside the
country; especially knitted fabric. They also expanded to neighboring countries like India and Bangladesh
seeking better opportunities making the groups multinational. Brandix Group, MAS Holdings and

Hydramani are the forerunners in this quest for excellence. These three are among the 50 most
important suppliers in the world.
However the industry as a whole has managed to sustain in the country. In 2013 the textile and apparel
sector was responsible for 43% of total export earnings of Sri Lanka with the US and the EU being the
major customers. Sri Lanka has also managed to develop as a total apparel solution provider from its
humble beginnings as a contract manufacturer. The slight set back of the industry on Sri Lanka is
attributed to facts such as rising labor cost, shortage of labor, high energy costs, competition from China
and the presence of cheap alternatives such as Bangladesh. However Sri Lanka still holds its reputation
for quality and environmental and social sustainability while some other cheaper competitors are
accused of unethical practices including the use of child labor, sweat shops etc. Garments without Guilt
is an initiative by Sri Lanka apparel to market their products on this theme.
Catering to global fashion giants prove the heights reached by the textile and apparel industry in Sri
Lanka. The fierce global competition which can hardly be matched by cost keeps the key players busy to
come up with innovation and radical concepts which can in turn expand their capability.