Upstream Focus is Sourcing Journal’s series of conversations with suppliers, associations and sourcing professionals to get their insights on the state of sourcing, innovations in manufacturing and how to improve operations. In this Q&A, Yohan Lawrence, secretary-general of the Joint Apparel Association Forum Sri Lanka (JAAF), discusses how the apparel sector is faring during the nation’s economic crisis and why small factories are at risk.
Name: Yohan Lawrence
Organization: Joint Apparel Association Forum Sri Lanka (JAAF)
What’s the number one question or concern you hear from your members now that was never really a consideration before?
Now more than ever, the biggest concern and priority for the industry is ensuring timely delivery of products to our buyers.
Sri Lanka has from time to time been wracked with adversities—the 30-year war, 2004 tsunami, 2019 Easter Sunday terrorist attack, Covid-19 pandemic and now the economic meltdown. At every turn, the country has bounced back, and the resilience of the industry is a testament to that.
That being said, the apparel industry has been identified as an “essential service” and therefore prioritized for supplies of fuel and other essential services. We are in close communication with our partners around the world and are keeping them regularly updated on the situation. Factories continue to function, and we have kept our operations running with minimum disruption.
How should factories be evaluating potential brand and retail partners differently now compared to before the pandemic?
Our relationships with our buyers are unique—they are more than transactional. These relationships run deep and have been built over decades of mutual respect and understanding. Having such strong, binding relationships meant that during challenging periods, factories were not left without orders. So when entering into new partnerships, factories should ask themselves how they can establish long-term relationships from the get-go.
What should be manufacturers’ top lesson from the pandemic? How can they address this in their operations?
One of the main challenges we witnessed during the pandemic was the lack of a national social security scheme for workers during a crisis. Sri Lanka’s laws don’t allow for furlough of employees, and during the pandemic, the industry was able to come to a tripartite agreement with the trade unions and the Ministry of Labour to allow companies to pay 50 percent of wages to employees who were unable to report to work. This was the first of its kind and helped ensure that jobs were not lost.
Addressing this problem on a larger scale requires government intervention. For example, research has shown that if the government took steps to modify the current Employees’ Trust Fund scheme, some form of a safety net can be achieved, which will allow workers in the formal sector to access funds during an emergency. Importantly, this can be done without any additional burden on the employer, employee or state. However, other mechanisms will need to be implemented to protect workers in the informal sector.
What is the state of apparel production capacity in Sri Lanka? From your perspective, what is the outlook for 2022?
Despite challenges, I see a lot of confidence and determination within the industry. Manufacturers are focusing on long-term growth and development and are continuing to strengthen their capacity by investing and upgrading their technology and facilities.
Sri Lanka’s apparel sector contributes 6 percent to the country’s GDP and accounts for almost half of all merchandise exports. In 2021, the sector increased its earnings by 22.9 percent year-on-year, generating $5.42 billion in revenue. For 2022, our target is $6 billion, which we are hopeful of achieving despite the current environment.
How can the Sri Lankan government best support the domestic apparel industry during this time?
Creating a conducive environment for new investment is essential for the industry’s growth, and it’s encouraging to hear that this is already being done. According to Sri Lanka’s Board of Investment (BOI), there has been an overall increase of 17 percent in foreign direct investment in the period from January to June 2022 compared to last year. The BOI has also fast-tracked several measures to help facilitate new investments, including setting up a dedicated Investor Facilitation Center.
The commencement of fabric manufacturing mills and parks, such as the Eravur Fabric Park, will greatly help reduce the burden of imports. Some new mills are already signed up and will be ready for operation in a few months, both within the zone and outside. This expansion of supply-side capacity will be vital to the growth of the industry while further increasing the local value addition, which is over 50 percent even today.
If companies aren’t already producing in Sri Lanka, why should they consider using it as a sourcing location?
Sri Lanka’s apparel industry has a highly skilled, professional workforce with the knowledge and capacity to handle complex production and develop new innovations that become commercialized globally. Several design hubs have also been set up, giving the country the added advantage of high-end design development, offering product design for niche markets.
We also hope to drive Sri Lanka’s position as a regional hub for apparel, given the sector’s diverse skillset and the country’s geographical location. By doing this, we will be able to offer customers product design, development and other value-added services on top of producing high-quality apparel products.
What keeps you up at night?
The sustenance of the SME (small- and medium-sized enterprises) apparel manufacturers. These factories are a vital part of the industry, and they are the worst hit by crises such as the pandemic and now the economic crisis locally and the softening of demand in our major markets globally. We fear that given their scale of operations, buyers may not be sensitive to their situation and consider seeking other sourcing destinations.
What makes you most optimistic?
What gives me the confidence to say that the industry will push through this difficult period is our track record of remaining resilient and thriving during the most challenging circumstances. This is one of the biggest reasons we have been able to maintain our global reputation based on our reliability, quality and technical capabilities.
What’s in store for JAAF in 2022?
2022 has been a good year so far. Even amidst challenges, apparel export earnings have continued to grow by almost 30 percent to $446 million in May 2022 compared to a year earlier. We achieved our targets and are hopeful of reaching our annual target.