Prospects for the Textile and Clothing Industry in Sri Lanka, 2022

The textile and clothing industry in Sri Lanka is of major importance for the country’s economy. Textile and clothing exports accounted for almost 43% of Sri Lanka’s total exports in 2021, and the industry provided direct employment for about 350,000 people and indirect employment for about 1.0 mn people in support activities.

However, these encouraging numbers mask marked differences between the textile industry and the clothing industry. In the textile industry, there has been a sharp decline in the number of manufacturing facilities. In the clothing industry, by contrast, there has been significant expansion over the years, at least in terms of output. Success in clothing has been based on Sri Lanka’s growing reputation in international markets as a reliable supplier of competitively priced high quality products, and the establishment of strong and enduring links with Western brands and retailers.

Looking ahead, Sri Lanka faces growing competition in Western markets from other Asian suppliers. But there are opportunities for the clothing industry to secure further advances. In particular, Sri Lanka has already made gains in the EU import market following the reinstatement in May 2017 of its GSP+ status under the EU’s General Scheme of Preferences (GSP). However, it is uncertain whether the country will continue to benefit from the arrangement from 2023 onwards when it comes up for renewal. More urgently, the industry is likely to be heavily impacted in 2022 from a deepening economic crisis in the country. Furthermore, a sharp depreciation of the rupee has increased the cost of purchasing imported textiles - on which the Sri Lankan apparel industry depends heavily. On the positive side, foreign direct investment in backward vertical integration looks set to increase sharply.