The South Asian island nation has witnessed an appreciable growth in apparel exports in recent years

Sri Lanka's crucial apparel industry contributed 32 per cent to the country's gross domestic product (GDP) and 44 per cent to its total exports in 2018. With low wage and cost-effective production, the sector offers sophisticated solutions to the industry's more complex global needs and leverages on design, research and development and innovation. In addition, strict adherence to international labour standards, adoption of ethical production and high-quality workforce transformed the nation into an apparel hub. The sector offers employment to more than 9,90,000 people. Sri Lanka recorded the highest apparel exports per capita of any exporting nation in the region. Major international apparel brands having a manufacturing base in the country include BR Fashion, Ralph Lauren, H&M, GAP, Victoria's Secret and Triumph.

Source: The Board of Investment of Sri Lanka, Sri Lanka Export Development Board, Central Bank of Sri Lanka, Sri Lanka Customs

Sri Lanka's overall apparel exports were worth $4,866 million in 2016 and increased by 8.91 per cent to $5,300 million in 2018. A rise of 5.68 per cent was seen in 2018 over 2017. It is expected to reach $5,814.56 million in 2021 with a compounded annual growth rate (CAGR) of 3.13 per cent. The sector accounts for the major part of the country's merchandise exports. The share of apparel exports in total merchandise exports dropped to 42.21 per cent in 2017 from the 45.03 per cent in 2016. The share 
moved up in 2018 to 42.61 per cent and is expected to recover consistently by 2021 and reach 44.37 per cent.

According to the Joint Apparel Association Forum (JAAF), Sri Lankan apparel manufacturers are more focused on a sustainable domestic fabric supply to benefit from the generalised system of preferences plus (GSP) scheme while exporting to the European Union (EU). The country now is not able to meet the country of origin rule. The available domestic fabric is only knitted fabric. The fabric capacity available is not able to fulfil industry demands. Hence, fabric imports have been consistently increasing. The total yearly fabric import has exceeded beyond the $2 billion mark. Whether GSP exists or not, the country's domestic fabric base will ensure sustainability of the apparel industry.

The country has a target of 6 per cent year-on-year (YoY) export growth in 2020. The government plans a textile development park in Eravur. A 200-acre fabric park has been planned in collaboration with the Board of Investment (BOI) in the Eastern Province to attract large-scale orders by reducing lead times with locally-sourced fabrics. A minimum of three plants will be promoted by JAAF.

With the help of this park, Sri Lanka can source fabric locally and reduce the lead time, especially from India and China. This park is expected to attract investments from China and India in the range of $50-100 million, with the US-China trade war acting as a catalyst.

Sri Lanka can have faster shipping times to the US and EU markets due to its strategic location. Its apparel industry is targeting the BRIC countries, in particular India and China, to catch the growth in mature clothing markets. Both the free trade agreement (FTA) with China and the proposed Economic and Technology Cooperation Agreement with India are crucial for the country.

Major apparel export markets (2018)

Source: - The Board of Investment of Sri Lanka

The United States, the United Kingdom, Italy, Germany, Belgium, the Netherlands, Canada, India, Australia, France, Sweden, Japan and China remained the key export destinations for Sri Lankan apparel in 2018. The first three nations together accounted for nearly 70 per cent of the total apparel exports. The United States and the EU jointly accounted for 85-90 per cent share.

Sri Lanka's apparel export by HS codes (2-digit)

Sri Lanka's export of apparel included in chapter 61 of harmonised system (HS) for international trade was $2,807.88 million in 2016, which increased by 4.36 per cent to $2,930.46 million in 2018. Total exports surged by 3.35 per cent in 2018 over the previous year and is expected to reach $3,361.56 million in 2021 with a CAGR of 4.68 per cent from 2018.

Export of apparel included in chapter 62 was $1,980.94 million in 2016, which increased by 14.89 per cent to $2,276.07 million in 2018. Total exports surged by 8.63 per cent in 2018 over the previous year and is expected to reach $2,339.70 million in 2021 with a rise of 2.79 per cent from 2018. Export of apparel included in chapter 63 was not much significant as compared to the earlier two.

Source:  Sri Lanka Apparel Exporters Association

Sri Lanka's Apparel Export by Destinations

Source: Sri Lanka Apparel Exporters Association

The country's apparel export to the United States was $1,956.78 million in 2016, which increased by 5.76 per cent to $2,069.48 million in 2018. Total exports surged by 5.63 per cent in 2018 over the previous year and is expected to reach $2,357.31 million in 2021 with a CAGR of 4.44 per cent from 2018. Apparel export to the EU was $1,800.46 million in 2016 and increased by 6.37 per cent to $1,915.10 million in 2018. Total exports to the US surged by 4.04 per cent in 2018 over the previous year and is expected to reach $2,241.73 million in 2021 with a CAGR of 5.39 per cent from 2018.

Sri Lanka's Textile and Apparel Export 2019

Source:  Sri Lanka Customs / Central Bank of Sri Lanka / Sri Lanka Export Development Board/Joint Apparel Association Forum Sri Lanka

Trade agreements boosting textile-apparel exports

To boost the country's exports, Sri Lanka has signed FTAs with big Asian economies like India, Pakistan, Singapore and China. The FTA with China is still under process. FTAs with India and Pakistan only allow the trade of goods. These agreements provide duty-free entry and duty preferences for manufactured and agricultural goods.  Domestic value addition of 35 per cent makes the goods qualify for concessions.

Singapore-Sri Lanka FTA

The FTA came into force on May 1, 2018, and provides multiple mutual benefits, including investments, facilitation of trade in goods and services, government procurement, telecommunications, e-commerce and dispute settlement.  Sri Lanka has slashed customs duties on approximately half of the tariff lines, including those already attracting zero duty, which will progressively increase to 80 per cent over 14 years. Now Sri Lanka is not going to reduce or eliminate duties on the remaining 20 per cent of tariff lines. The country is also a member of the South Asian Free Trade Area and the Asia-Pacific Trade Agreement.

TIFA

The United States and Sri Lanka bilateral Trade and Investment Framework Agreement (TIFA) provides a framework for the two governments to discuss and resolve trade and investment issues at an early stage. The last TIFA discussions were held in June 2019.

EU GSP

In May 2017, Sri Lanka regained the EU's generalised scheme of preferences plus (GSP) benefit.  Under GSP, duties were fully removed on 66 per cent of tariff lines covering a wide array of products, including textiles.  The GSP scheme is conditional on Sri Lanka advancing human and labour rights and working towards sustainable development.

Major apparel product exports (top 40 tariff lines)

Code

Description

2012 ($ million)

2013 ($ million)

2014 ($ million)

2015 ($ million)

2016 ($ million)

2017 ($ million)

H.610832

Women's or girls' slips, petticoats, briefs, panties, nightdresses, pyjamas, negligees, bathrobes, dressing gowns and similar articles, knitted or crocheted
Women's or girls' pyjamas, etc, of man-made fibres, knitted or crocheted

16.53

18.65

17.97

13.66

19.81

36

H.610831

Women's or girls' slips, petticoats, briefs, panties, nightdresses, pyjamas, negligees, bathrobes, dressing gowns and similar articles, knitted or crocheted
Women's or girls' nighties..., etc, of cotton, knitted or crocheted

28.11

24.94

24.33

25

19.94

22.37

H.610829

Women's or girls' slips, petticoats, briefs, panties, nightdresses, pyjamas, negligees, bathrobes, dressing gowns and similar articles, knitted or crocheted
Women's or girls' briefs, etc, of other textiles, knitted or crocheted

169.56

193.04

135.5

98.78

136.93

94.64

H.610822

Women's or girls' slips, petticoats, briefs, panties, nightdresses, pyjamas, negligees, bathrobes, dressing gowns and similar articles, knitted or crocheted
Women's or girls' briefs, etc, of man-made fibres, knitted or crocheted

75.3

87.48

132.09

114.54

169.19

172.48

H.610821

Women's or girls' slips, petticoats, briefs, panties, nightdresses, pyjamas, negligees, bathrobes, dressing gowns and similar articles, knitted or crocheted
Women's or girls' briefs and panties of cotton, knitted or crocheted

114.16

145.24

177.61

273.13

222.9

220.37

H.610819

Women's or girls' slips, petticoats, briefs, panties, nightdresses, pyjamas, negligees, bathrobes, dressing gowns and similar articles, knitted or crocheted
Women's or girls' slips, etc, of other textiles, knitted or crocheted

2.51

2.19

1.92

1.5

1.66

1.64

H.610811

Women's or girls' slips, petticoats, briefs, panties, nightdresses, pyjamas, negligees, bathrobes, dressing gowns and similar articles, knitted or crocheted
Women's or girls' slips, etc, of man-made fibres, knitted or crocheted

8.87

7.81

14.33

7.97

5.71

6.5

H.610799

Men's or boy's underpants, briefs, nightshirts, pyjamas, bathrobes, dressing gowns and similar articles, knitted or crocheted
Men's or boys' dressing gowns, of other textiles, knitted or crocheted

0.86

1.61

0.8

0.56

0.18

0.32

H.610791

Men's or boy's underpants, briefs, nightshirts, pyjamas, bathrobes, dressing gowns and similar articles, knitted or crocheted
Men's or boys' dressing gowns, etc, of cotton, knitted or crocheted

0.41

0.84

1.47

5.11

3.76

0.78

H.610729

Men's or boy's underpants, briefs, nightshirts, pyjamas, bathrobes, dressing gowns and similar articles, knitted or crocheted
Men's or boys' pyjamas of other textiles, knitted or crocheted

0.22

0.3

0.32

0.33

0.54

0.36

H.610722

Men's or boy's underpants, briefs, nightshirts, pyjamas, bathrobes, dressing gowns and similar articles, knitted or crocheted
Men's or boys' pyjamas of man-made fibres, knitted or crocheted

3.64

4.75

4.6

2.5

2.92

3.81

H.610721

Men's or boy's underpants, briefs, nightshirts, pyjamas, bathrobes, dressing gowns and similar articles, knitted or crocheted
Men's or boys' pyjamas of cotton, knitted or crocheted

10.13

9.62

11.05

9.96

9.41

11.84

H.610719

Men's or boy's underpants, briefs, nightshirts, pyjamas, bathrobes, dressing gowns and similar articles, knitted or crocheted
Men's or boys' underpants, etc, of other textiles, knitted or crocheted

11.25

9.49

8.95

4.25

5.9

5.91

H.610712

Men's or boy's underpants, briefs, nightshirts, pyjamas, bathrobes, dressing gowns and similar articles, knitted or crocheted
Men's or boys' underpants, etc, of man-made fibres, knitted or crocheted

5.4

6.71

8.72

7.6

8.65

10.64

H.610711

Men's or boy's underpants, briefs, nightshirts, pyjamas, bathrobes, dressing gowns and similar articles, knitted or crocheted
Men's or boys' underpants and briefs of cotton, knitted or crocheted

100.32

132.83

136.03

135.27

133.54

145.18

H.610690

Women's or girls' blouses, shirts and shirt-blouses, knitted or crocheted
Women's or girls' blouses, etc, of other textiles, knitted or crocheted

11.04

17.73

13.36

9.76

5.78

6.27

H.610620

Women's or girls' blouses, shirts and shirt-blouses, knitted or crocheted
Women's or girls' blouses, etc, of man-made fibres, knitted or crocheted

19.13

17.28

12.34

8.95

7.13

12.37

H.610610

Women's or girls' blouses, shirts and shirt-blouses, knitted or crocheted
Women's or girls' blouses, etc, of cotton, knitted or crocheted

4.88

5.87

9.62

12.01

10.55

11.44

H.610590

Men's or boys' shirts, knitted or crocheted
Men's or boys' shirts of other textiles, knitted or crocheted

8.9

6.78

5.49

1.65

2.11

2.09

H.610520

Men's or boys' shirts, knitted or crocheted
Men's or boys' shirts of man-made fibres, knitted or crocheted

8.72

7.89

2.85

1.92

1.61

1.46

H.610510

Men's or boys' shirts, knitted or crocheted
Men's or boys' shirts of cotton, knitted or crocheted

54.35

70.2

68.58

66.53

61.51

77.47

H.610469

Women's or girls' suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Women's or girls' trousers, etc, of another textile, knitted or crocheted

54.39

75.33

86.68

89.11

68.49

34.29

H.610463

Women's or girls' suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Women's or girls' trousers, etc, of synthetic, knitted or crocheted

19.19

39.81

46.96

82.53

133.88

190.2

H.610462

Women's or girls' suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Women's or girls' trousers, etc, of cotton, knitted or crocheted

109.44

142.59

142.42

121.06

138.58

120.11

H.610461

Women's or girls' suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Women's or girls' trousers, etc, of wool..., knitted or crocheted

0.62

0.95

0.01

0.01

0

0.01

H.610459

Women's or girls' suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Skirts and divided skirts of other textiles, knitted or crocheted

4.56

5.94

5.75

3.47

2.46

2.93

H.610453

Women's or girls' suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Skirts and divided skirts of synthetic fibres, knitted or crocheted

4.54

5.31

3.81

4.59

3.21

5.33

H.610452

Women's or girls' suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Skirts and divided skirts of cotton, knitted or crocheted

2.07

2.65

3.5

1.66

1.35

1.44

H.610451

Women's or girls' suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Skirts and divided skirts of wool or fine hair, knitted or crocheted

0.06

0.05

0.04

0

0

0.01

H.610449

Women's or girls' suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Dresses of other textile material, knitted or crocheted

32.48

37.43

31.37

23.21

21.41

25.49

H.610444

Women's or girls' suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Dresses of artificial fibres, knitted or crocheted

4.88

6.3

8.27

2.53

3.86

5.03

H.610443

Women's or girls' suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Dresses of synthetic fibres, knitted or crocheted

36.37

42.23

55.56

61.54

54.17

61.48

H.610442

Women's or girls' suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Dresses of cotton, knitted or crocheted

14.78

18.49

25.66

15.69

13.18

11.19

H.610441

Women's or girls' suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Dresses of wool or fine animal hair, knitted or crocheted

0.19

0.05

0.03

0.07

0.06

0.08

H.610439

Women's or girls' suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Woman's or girls' jackets, of other textiles, knitted or crocheted

9.56

18.15

15.58

13.63

12.6

4.94

H.610433

Women's or girls' suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Women's or girls' jackets, of synthetic fibres, knitted or crocheted

5.87

5.91

5.85

4.9

8.16

16.61

H.610432

Women's or girls' suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Women's or girls' jackets, of cotton, knitted or crocheted

20.62

20.7

14.07

7.65

13.51

11.26

H.610431

Women's or girls' suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Women's or girls ‘jackets, of wool..., knitted or crocheted

1.72

3.54

0.58

0.22

0.14

0.01

H.610429

Women's or girls' suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Women's or girls' ensembles, of other textiles, knitted or crocheted

0.06

0.03

0

0.15

0.07

0.16

H.610423

Women's or girls' suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Women's or girls' ensembles, of synthetic fibres, knitted or crocheted

0

TRUE

0.01

0.02

0.51

0.08

H.610422

Women's or girls' suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Women's or girls' ensembles, of cotton, knitted or crocheted

0.02

1.53

1.14

0.98

0.51

0.26

H.610419

Women's or girls' suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Women's or girls' suits of other textiles, knitted or crocheted

2.08

1.89

1.25

2.01

3.72

4.15

H.610413

Women's or girls' suits, ensembles, jackets, blazers, dresses, skirts, divided skirts, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Women's or girls' suits of synthetic fibres, knitted or crocheted

0.26

0.25

1.27

0.57

0.88

0.63

H.610349

Men's or boys' suits, ensembles, jackets, blazers, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Men's or boys' trousers, etc, of other textiles, knitted or crocheted

25.38

26.59

35.82

39.74

29.61

8.13

H.610343

Men's or boys' suits, ensembles, jackets, blazers, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Men's or boys' trousers, etc, of synthetic fibres, knitted or crocheted

1.78

1.61

3.66

4.11

11.34

35.56

H.610342

Men's or boys' suits, ensembles, jackets, blazers, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Men's or boys' trousers, etc, of cotton, knitted or crocheted

6.44

6.88

7.28

6.4

7.18

6.37

H.610341

Men's or boys' suits, ensembles, jackets, blazers, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Men's or boys' trousers, etc, of wool..., knitted or crocheted

0

0.01

1.49

0.58

0.13

0.62

H.610339

Men's or boys' suits, ensembles, jackets, blazers, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Men's or boys' jackets... of other textiles, knitted or crocheted

16.61

14.09

11.36

15.7

7.89

7.72

H.610333

Men's or boys' suits, ensembles, jackets, blazers, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Men's or boys' jackets... of synthetic fibres, knitted or crocheted

5.54

6.51

10.34

9.12

8.49

15.45

H.610332

Men's or boys' suits, ensembles, jackets, blazers, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Men's or boys ‘jackets and blazers of cotton, knitted or crocheted

4.28

4.63

5.13

5.87

8.54

11.53

H.610331

Men's or boys' suits, ensembles, jackets, blazers, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Men's or boys' jackets and blazers of wool..., knitted or crocheted

0

0.01

0.02

0.17

0.02

0.03

H.610329

Men's or boys' suits, ensembles, jackets, blazers, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Men's or boys' ensembles of other textiles,knitted or crocheted

0.18

0.01

0.01

0.05

0.05

0.2

H.610323

Men's or boys' suits, ensembles, jackets, blazers, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Men's or boys' ensembles of synthetic fibres, knitted or crocheted

0

0

0.03

0.01

0

0

H.610322

Men's or boys' suits, ensembles, jackets, blazers, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Men's or boys' ensembles of cotton, knitted or crocheted

0.01

0.01

0.15

0.05

0.08

0.26

H.610310

Men's or boys' suits, ensembles, jackets, blazers, trousers, bib and brace overalls, breeches and shorts (other than swimwear), knitted or crocheted
Suits

10.29

5.58

7.49

0.43

0.24

4.69

H.610290

Women's or girls' overcoats, car-coats, capes, cloaks, anoraks (including ski-jackets), windcheaters, wind-jackets and similar articles, knitted or crocheted, other than those of heading 61.04
Woman's or girls' coats, etc, of other textiles, knitted or crocheted

0.04

0.14

0.7

0.3

0.54

0.9

H.610210

Women's or girls' overcoats, car-coats, capes, cloaks, anoraks (including ski-jackets), windcheaters, wind-jackets and similar articles, knitted or crocheted, other than those of heading 61.04
Woman's or girls' coats, etc, of wool..., knitted or crocheted

0.01

0.01

0.02

0.02

0.04

0.01

H.610220

Women's or girls' overcoats, car-coats, capes, cloaks, anoraks (including ski-jackets), windcheaters, wind-jackets and similar articles, knitted or crocheted, other than those of heading 61.04
Woman's or girls' coats, etc, of cotton, knitted or crocheted

2.84

6.9

5.74

4.4

3.15

2.27

H.610230

Women's or girls' overcoats, car-coats, capes, cloaks, anoraks (including ski-jackets), windcheaters, wind-jackets and similar articles, knitted or crocheted, other than those of heading 61.04
Woman's or girls' coats, etc, of man-made fibres, knitted or crocheted

0.26

1.51

5.46

2.57

0.95

1.03