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Reimagining the future of Sri Lanka’s apparel industry

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By Shirendra Lawrence

The emergence of apparel and textiles as a significant contributor to Sri Lanka’s economy began post-Independence in 1948 when a few pioneering industrialists saw opportunities in its domestic market. Following the liberalization of the economy in the late 70’s, the industry ventured into exports, bringing in much needed foreign exchange, and before long, established Sri Lanka’s reputation as a manufacturer of quality products.

During the 90’s, facilitated by the 200 Garment Factories Program, manufacturing that had until then been located in free trade zones was expanded across Sri Lanka. This played a key role in the upliftment of the country’s rural economies.

The last decade has seen a further evolution, focused on end-to-end partnerships and complete customer solutions. However, an in-depth assessment of the sector’s strengths and competencies indicates that its full potential is yet to be realised.

With the pandemic causing significant disruption to Sri Lanka’s economy, our vision of elevating the country to a US$ 8 billion global apparel hub by 2025 is now perhaps more critical than ever. This growth is envisaged through value addition and further evolving from contracted apparel manufacturing for Buying Offices to end-to-end solutions for leading Global Brands and Retailers, spanning innovation to last-mile delivery.

With the pandemic gradually receding, apparel sector stakeholders have renewed collaborative efforts to achieve these goals.

Current status

In pre-pandemic 2019, the value of global apparel exports was estimated at $492 billion. Most would agree that with Sri Lanka’s contribution being just 1% of this, at $5.3 billion, the industry’s aspiration to grow it to $8 billion is not unreasonably ambitious.

Sri Lanka enjoys a reputation as a trusted partner within the supply chains of some of the world’s leading brands and retailers. The country’s apparel industry comprises a few large groups, supported by a strong ecosystem of Small and Medium Enterprises (SMEs). This is a symbiotic system; the larger players have developed meaningful Customer Partnerships, whilst the SMEs have created niches, including supporting the larger Groups to meet their supply chain requirements.

Despite its smaller scale and Sri Lanka’s apparel sector having relatively higher labour costs than some of its regional competitors, along with less preferential export market access, it has still progressed by leveraging other sources of competitive advantages. Sri Lanka ranks high in terms of reliability and product quality, which have elevated the country’s reputation and overall positioning. This is best reflected in the impressive list of global Brands and Retailers served by Sri Lankan manufacturers, including Victoria’s Secret, Marks & Spencer, Boss, NIKE, Calvin Klein, GAP, Levi’s, Ralph Lauren, lululemon, Calzedonia, Intimissimi and Tommy Hilfiger.

This elevated positioning also extends to talent attractiveness, with the country’s apparel sector appealing to the better professional talent, unlike some of our regional counterparts. A case in point is India, where professionals would often see other industries such as automobiles, electronics and IT as more attractive. Furthermore, the Island benefits from its strategic geographical location along major shipping routes as a regional logistics hub.

From an infrastructure standpoint, fabric manufacturers, who require process water, have established their factories within the BOI facilitated Free Trade Zones, which include advanced water treatment processes, whilst those in relatively labour-intensive apparel manufacturing have located themselves in rural areas across the country, providing direct and indirect employment to those communities, accelerating the development of those areas.

Leveraging on trade shifts

Whilst all of this progress has been well invested in, for the country to realise its apparel sector’s true potential, it is essential to fully leverage these strengths while understanding and aligning with the trade shifts that are taking place.

Studies indicate that the impact of increasing political and economic tensions between the Far East and the West will result in the movement of significant amounts of trade from China. Whilst these movements appeared to have commenced pre-pandemic, customers in western markets have delayed this process, not wanting to add additional dimensions of risk on top of pandemic-induced challenges. However, the shift is expected to gather momentum in 2022 and beyond.

Apart from direct business migration, opportunities would include potential FDI inflows from companies in the Far East seeking to augment their existing bases by establishing manufacturing locations in South Asia to mitigate their risk of losing customers. The industry and policymakers are mindful of potential opportunities that could arise as a result. The leadership of Sri Lankan apparel companies, with the support of the industry umbrella organisation, the Joint Apparel Association Forum (JAAF), and its constituent associations, including the Sri Lanka Apparel Exporters Association (SLAEA), are reimagining the sector’s future. These stakeholders are crafting strategic plans to facilitate the process of achieving the sector’s vision.

Maintaining competitive advantage

‘Doing the right thing’ has been the driving philosophy of Sri Lanka’s apparel industry, and this was key in attracting reputed Brands and private label retailers to Sri Lanka during the 80’s and 90’s. Marks & Spencer, in particular, saw Sri Lanka as a credible alternative for the migration of its western manufacturing bases at that time. This catalysed Sri Lankan manufacturers’ alignment with the expectations of the Ethical Trading Initiative (ETI), Worldwide Responsible Accredited Production (WRAP) and other organisations and standards focused on social responsibility and differentiated us from our competitors.

Moving to the present, what were competitive advantages have today become ‘hygiene factors’. Sri Lankan manufacturers have maintained their reputation for ethical manufacturing through environmentally responsible production, strong connections with existing and emerging organisations such as the Sustainable Apparel Coalition (SAC), and investments to reduce their Carbon Footprints. Significant strategic initiatives include the conversion of fossil-fuelled boilers to biomass and introducing other environmentally friendly energy sources such as solar. This also aligns the industry well with the Government’s efforts to increase renewable energy to 70% of Sri Lanka’s total requirement by 2030.

Sri Lankan apparel groups have also grown their businesses through geographic diversification. These efforts seek to minimise customer concerns of single country sourcing, leverage on bilateral and multilateral trade agreements and augment Asian manufacturing locations with a capacity closer to markets.

Improved trade access is vital

Greater preferential market access to existing and identified key export markets would substantially boost Sri Lanka’s apparel exports. However, it is vital to retain existing concessions under the EU and UK Generalized System of Preferences (GSP) Plus schemes while securing tariff reductions to other countries. Considering our success in penetrating key markets such as the USA, where tariffs for apparel exports are as much as, or in some cases even more than 30%, there is a significant opportunity to be had if the industry were provided with tariff waivers or even reductions.

Substantial opportunities also exist in large developing nations. Sri Lanka needs to increase its export quota of 8 million garment items per year to India, one of the fastest-growing regional economies. The Chinese market, too, presents vast potential.

Need for conducive policies

While recent initiatives to modernise trade facilitation, including the digitisation of customs clearance processes and administration of payments through online gateways, are welcomed, much more policy reform is needed. For example, if Sri Lanka is to evolve as an innovative apparel hub, a safe and conducive environment for innovation is required. This is only possible if Intellectual Property and data protection laws are given priority. Similarly, reforming colonial-era labour laws to reflect the very different world that we live in today is essential.

Favourable policies and incentives should be provided for investments related to backward integration and automation. The Eravur Fabric Processing Park is an important development in this regard, and the industry acknowledges the contributions of multiple state agencies in this initiative.

In conclusion, evolving Sri Lanka’s apparel industry will, without doubt, continue to bring benefits to the country – both directly and indirectly – increasing FDI, employment opportunities and export earnings whilst improving innovation and technology inflows.

With all stakeholders working in collaboration, the vision of making Sri Lanka a fully-fledged apparel hub is well within the country’s reach.

(Shirendra Lawrence is an apparel industry veteran and is the Deputy Chairman of the Sri Lanka Apparel Exporters’ Association. He is also an Executive Director of MAS Holdings. Shirendra holds a Mechanical Engineering (Honours) Degree from Imperial College, University of London, and is a Chartered Mechanical Engineer. He counts over 35 years of experience in manufacturing, business development and organisational leadership in the UK and Sri Lanka.)



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LOLC Technologies joins hands with Microsoft to enhance core-banking with Azure

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[from left to right]: Prasanna Siriwardena, Deputy CEO of LOLC Technologies Ltd and CIO of LOLC Holdings PLC; Conrad Dias, Chairman of LOLC Technologies Ltd and Director of LOLC Holdings PLC; and Kapila Jayawardena, Managing Director/CEO of LOLC Holdings PLC together with Harsha Randeny, Country Manager for Microsoft Sri Lanka and Maldives and Dhammika Weerakoon, Corporate Accounts Lead for Sri Lanka and Maldives.

LOLC Technologies Limited, a subsidiary of the LOLC Group, has entered into a collaborative agreement with Microsoft to integrate Azure cloud services into “FusionX”, its core banking platform designed to meet evolving customer needs. This strategic move aims to upscale their operational architecture, enabling LOLC Technologies to harness the power of data and AI to expedite growth and success.

Through Azure, LOLC Technologies can harness cloud-native services to enhance FusionX by enabling scalability, agility, and AI-driven efficiency. Azure serves as the foundation, empowering LOLC Technologies to achieve its evolving digital goals by delivering tailored experiences that meet today’s unique banking demands. Azure’s secure and easily deployable nature, along with its AI capabilities, enables existing functions to be updated without needing a complete rebuild, simplifying the process of rolling back updates. Azure provides FusionX with an additional layer of cybersecurity to counter potential threats and implement best security practices. Consequently, as the organization designs new banking solutions, they do so with a proactive stance against threats.

Speaking on the adoption, Prasanna Siriwardena, Deputy CEO, LOLC Technologies Ltd and CIO, LOLC Holdings PLC, said, “This is not just a technological advancement, but a strategic transformation aimed at positioning LOLC Technologies at the forefront of digital banking solutions. By leveraging the unparallelled agility and resilience of Microsoft Azure, we are focused on redefining financial services. With this shift, we have empowered BFSIs to evolve rapidly while unlocking AI’s full potential through a real-time analytics platform.”

Strategizing for international growth, the company aims to enhance its products’ capabilities by leveraging the cloud service architecture of Microsoft Azure to boost value addition. The Cloud Adoption Framework within Azure will assist LOLC Technologies and their teams in improving operational efficiencies and promptly closing feedback loops, allowing them to cleverly align their business goals, operations, and vision.

Harsha Randeny, Country Manager for Microsoft Sri Lanka and Maldives, added, “We are enthusiastic about supporting LOLC Technologies break ground on their undertaking to elevate operations through AI automation. Not only are we looking forward to guiding LOLC Technologies through this transition, but we’re also keen on optimizing the organization’s leveraging of Microsoft AI Solutions at every level. We trust that with these tools at their disposal, LOLC Technologies will forge ahead with inventive opportunities.”

Microsoft is committed to empowering LOLC Technologies to drive innovation and transform their business with AI, leveraging cloud agility to support their evolution and advance their core banking capabilities.

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Low investor participation in share market but trading takes positive direction

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By Hiran H.Senewiratne

Stock trading was positive yesterday but investor participation remained at a lower range. The turnover level was 60 percent down compared to previous days after suffering its worst dip in over two years and losing Rs. 188 billion in value on Wednesday, market analysts said.

Amid those developments both indices moved upwards. The All- Share Price Index went up by 227.95 points while S and P SL20 rose by 72.87 points. Turnover stood at Rs 2 billion with four crossings.

Those crossings were reported in JKH, which crossed six million shares to the tune of Rs 136.3 million, its shares traded at Rs 22.70, Melstacope 450,000 shares crossed for Rs 58.3 million; its shares traded at Rs 130, ACL Cables 250,000 shares crossed for Rs 33.7 million; its shares traded at Rs 135 and Dialog 2 million shares crossed to the tune of Rs 26.2 million; its shares traded at Rs 13.10.

In the retail market top six companies that mainly contributed to the turnover were; Browns Investments Rs 115 million (13.2 million shares traded), Access Engineering Rs 88.7 million (2.1 million shares traded), CIC Holdings Rs 88.5 million (792,000 shares traded), Melstacope Rs 85.9 million (678,000 shares traded), Dipped Products Rs 67.8 million (1.1 million shares traded) and Sampath Bank Rs 66.9 million (557,000 shares traded). During the day 78 million share volumes changed hands in 17970 transactions.

During the day the main contributors to the All Share Price Index were, Ceylinco Insurance, 34 points, Melstacope 25 points and JKH 21 points.

It is said that high net worth and institutional investor participation was noted in Amana Bank, Access Engineering and Teejay Lanka. Mixed interest was observed in Browns Investments, HNB and LOLC Holdings, while retail interest was noted in LOLC Finance, Waskaduwa Beach Resort and Dialog Axiata.

The banking sector was the top contributor to the market turnover (due to HNB and Amana Bank), while the sector index gained 0.76 percent. The share price of HNB edged up by 25 cents to Rs. 334.25. The share price of Amana Bank moved down by 10 cents to Rs. 25.

The Capital Goods sector was the second highest contributor to the market turnover (due to Access Engineering), while the sector index increased by 0.79 percent. The share price of Access Engineering recorded a gain of Rs. 1.10 to reach Rs. 40.

Yesterday the rupee was quoted at Rs 298.40/80 to the US dollar in the spot market, stable from Rs 298.40/70 to the US dollar the previous day, dealers said, while bond yields were broadly steady.

A bond maturing on 15.12.2026 was quoted at 9.05/15 percent, up from 9.05/10 percent. A bond maturing on 15.10.2027 was quoted at 9.75/85 percent, up from 9.70/80 percent. A bond maturing on 15.02.2028 was quoted at 10.13/17 percent, down from 10.15/17 percent. A bond maturing on 01.07.2028 was quoted at 10.35/38 percent. A bond maturing on 15.09.2029 was quoted at 10.80/85 percent, down from 10.82/90 percent. A bond maturing on 15.10.2030 was quoted at 11.23/28 percent, down from 11.23/33 percent.

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Timeless elegance and masterful craftsmanship on display

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Director of Hirdaramani Group of Companies Siddarth Hirdaramani, Chairman of Sifani Jewellers Rizvan Sahabdeen and CEO of Chatham Luxury Watches Indrajith Ranawana

Chatham Luxury -the exclusive representative of Chopard in Sri Lanka- held a private preview of the Swiss luxury brand’s newest watch and jewellery collections on Thursday the 23rd of January at the Chatham Flagship Boutique at Galle Face Court; making it the first time a global jewellery label showcased in Sri Lanka.

Representing Chopard at the intimate event was Xavier Lasserre, International Sales Manager of the brand; and as the evening unfolded, models gracefully exhibited exquisite timepieces and jewellery while Lasserre introduced every coveted creation on display with fascinating insight into the design and craftsmanship behind each, while also speaking to the ethos, heritage, and vision of the brand.

Under the spotlight were some of the luxury label’s newest creations that reflected both the masterful artistry and calibre of Chopard, namely the latest additions to the iconic Happy Diamonds and Ice Cube collections.

Chopard’s Happy Diamonds luxury jewellery capsule with its quintessential ‘dancing diamonds’ is recognised for its authentic elegant charm. On the other hand, the brand’s Ice Cube collection of luxury rings, diamond pendants, bracelets, and earrings, perfectly marry classical glamour and sleek modernity.

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