Sri Lanka has traditionally been an agro-based economy. Its recorded history, going back more than 2000 years bears ample testimony to this.

With the Industrial Revolution taking root in Europe and later spreading to the rest of the world, Sri Lanka too had to take its place in this scenario.

The role of governments, over the years, especially in developing nations has changed radically because the world itself saw rapid changes – especially over the last few decades.

In Sri Lanka there was a period when the state sector led industrial growth. This gradually gave way to the semi-government, or corporation, sector. In these eras, though growth was seen, it was not as dynamic as expected. Thus, in 1977, a really radical change was introduced in terms of the Sri Lankan economy.

Sri Lanka opened its borders to allow free trade, dismantled price control, eliminated import tariffs and, in a broad sense, introduced an open economy.

The three main strengths that Sri Lanka could offer were :

	Cheap Labour that was easily available and accessible
	Conducive conditions, including infrastructure and tax relief
	Literate Workforce, both in terms of skill and literacy

Free Trade Zones and Export Processing Zones were set up offering many concessions to foreign (and local) investors. The Board of Investment of Sri Lanka (formerly known as the Greater Colombo Economic Commission) was set up as a ‘One-Stop-Shop’ to assist foreign investors.

The granting of licenses to organizations situated outside the BOI Zones, but with all BOI facilities and concessions further enhanced the investor-friendly environment.



The Current Scenario

Though Sri Lanka’s traditional exports were Tea, Rubber, Coconuts, Gems and Jewellery, all of these have been superseded now by the Apparel Industry.

National Export revenues for 2001 bear witness to this fact. In 2001, total export earnings for garments stood at US $ 2.333 Bn followed by Tea - which earned US $ 690 Mn. Thus we see that the garments industry was the largest foreign exchange earner for Sri Lanka. Its Importance to the Sri Lankan economy cannot be underestimated.

Employment statistics, as at 2001 are as follows:

Manufacturing (including apparel sector indirect)	750,000
Apparel Industry (direct)	338,000
Services (including apparel sector – indirect)	2,641,000

The Sri Lankan apparel industry is one of the largest contributors to the National Gross Domestic Product of this island nation, with 6% in 2000 and 5.6 % in 2001.

When one considers the composition of apparel manufacturers in Sri Lanka and their respective output, the following interesting information is revealed.

	72% of revenue in the industry comes from just 12 % of apparel exporters
	the balance 28% of revenue is earned by 88% of apparel exporters

The Sri Lankan apparel industry consists of approximately 800 manufacturing companies, of which, about 75% to 80% are classed as Small & Medium Enterprises (SMEs).

The total quantity of garments (units) produced in 2001 was 2.45 billion pieces. In this scenario we have the smaller manufacturers competing with the really big producers, all competing in harmony with minimum state interference. This ‘mix’ of manufacturers bodes well for foreign investors because each, while striving to be better than their competitors, make every effort to transform their operations to become more professional, more productive and more efficient.

Issues such as environment, workers welfare, ethical trading, etc. play roles of primary importance in the apparel industry. The apparel workers of today are better trained, more environmentally conscious, better paid, show a high degree of loyalty and have access to a host of personal, social and welfare benefits.

Many of the major brands (labels) are manufactured in Sri Lanka. These include, among others, Tommy Hilfiger, Victoria’s Secrets, Van Heusen, Next, Triumph, Bhs, London Fog, GAP, Abercrombie & Fitch, Marks & Spencer, Liz Clairborne and Jones New York.

Sri Lanka, though still a developing nation, has the following strong points:

	Prestigious International Customer base
	Reputation as a quality manufacturer
	Very high compliance with international labour regulations
	Competitive pricing
	Reputation of ‘On-Time’ delivery
	Disciplined, skilled and trainable workforce

On the flip-side, one has also to consider Sri Lanka is somewhat distant geographically with a fairly heavy reliance on the US and EU markets.

However, in the context of the Global Village concept, geographical distance does not really matter. Since of late, Sri Lanka is broad-basing her client-base though reliance on the US and the EU is present.