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estic Market which are highly potential and geared to meet the quality and delivery requirements especially from EU.

c.The arrival of new competitors in the Asian sub continent such as Vietnam, Cambodia , Myanmar and Laos.

d.Special advantages created for the USA market by the NAFTA, consolidation and other regional economic cooperation

e.The increase in Sri Lanka’s labour costs at a faster pace than productivity

f.The necessity to reduce lead time from the manufactures to the shop, and the distant suppliers’ inability to deliver the value added garments on time

g.Successive government has not addressed the issue of low productivity, and even at this stage a government funded garment manufacturing and production management training institute has not been established and this posses a threat to the industry’s future

h.Geographical location of the country. Sri Lanka is located at the furthest end of the Indian Ocean, when compared with other competitive garment exporting countries, which export to the USA, EU and other wealthy nations. Almost all the countries, which are geographically located close to Sri Lanka are under developed and, low income countries struggling to survive.

CHALLENGES FACED BY THE SRI LANKAN APPAREL INDUSTRY

13.In the recent past, the global garment industry has been subject to significant changes in terms of changes in consumer demands, changes in technology, and fierce competition. These changes have also filtered down to the Sri Lankan garment industry and there is now considerable pressure on the industry to each higher standard of production and service.

14.As the garment industry is a relatively low skilled and labour intensive operation, over time there has been a shifting of production from countries such as Hong Kong. South Korea and Taiwan to low wage countries such as Bangladesh, India and Sri Lanka. As this process of shifting (or shifting comparative advantage) has continued, Sri Lanka has gradually lost its low labour cost comparative advantage.

15.As the majority of Sri Lankan manufactures currently produce standard garments where competition is primarily based on price, Sri Lanka faces stiff competition from other developing countries of South and South East Asia where production cost is low (India, Bangladesh, Pakistan, Indonesia, Cambodia, Laos and Vietnam). China has also emerged as a dominant force in the global apparel industry with its massive supply capability and low costs of production. These countries have a lower ranking in terms of cost of production in comparison to Sri Lanka. Given this situation, there may be a need for Sri Lanka to move some of its exports to the top end of the market as a reputable and dependable supplier of quality apparel in Asia. In the higher value clothing segment, countries such a Malaysia, Korea, Singapore, Hong Kong and Japan are serious competitors.

16.While Sri Lanka’ s global market share has been recorded at 1.5 percent, more recent estimates indicate that there has been a marginal increase, and stands at 2 percent of the global garment market. During the period 1995 to 2000, Sri Lanka maintained a 19 percent export earning growth in the garment industry. If there is a lifting of the US tariff barriers for Sri Lanka’s apparels, then according to some commentators there would b