Brandix Lanka Limited CEO Ashroff Omar affirmed that the Sri Lankan apparel sector has room to grow further despite the country reaching the middle-income status. He highlighted some intrinsic advantages of the apparel industry as a tool for growth and provincial development and stressed the importance of viewing Sri Lanka’s position from a South Asian regional perspective in order to compete effectively in an evolving global market.
The South Asian region possesses the intrinsic advantages of having the largest population, largest cotton and textile base and a skilled talent pool, which could enable it to become the leading sourcing region for the world’s top apparel brands. Omar emphasized that Sri Lanka’s productivity, skilled labour force, logistics offering and compliance with key sustainability and labour practices, positioned the country as the ideal location to become a hub for the region. He called for an enabling policy environment and an investment climate to make this vision a reality.
Omar was speaking at the inaugural session of ‘InsideTrack’, an exclusive, invitation-only series featuring the veterans of Sri Lanka’s business, policymaking and development landscape, organised by Asia Securities, one of Sri Lanka’s leading stockbroking and research firms. This session focused on the topic ‘How will the apparel and textile sector evolve in the next three to five years?’
Omar pointed out that the European Union (EU), as a region, is the world’s second largest exporter of apparel, second only to China, with a share of 26.3 percent in 2014. As such, he contended that the view that the apparel industry cannot support high-paying jobs is a myth. Given Sri Lanka’s niche positioning as a high-quality supplier, he opined that the country can position itself higher on the value chain, as an apparel hub of the South Asian region.
He also showcased statistics that the growth in the apparel industry will continue, boosted by population growth and rising affluence. Accordingly, the global apparel industry, if it continues at the current pace of growth, will reach US $ 834 billion in 2030 from US $ 483 billion in 2014. The decline of China as the leading manufacturer of apparel was also overplayed in his opinion, since China still accounted for a 39 percent share of global apparel exports in 2014. While growth has slowed down, China’s apparel infrastructure would still enable it to maintain a significant presence in apparel production in the foreseeable future.
The Brandix CEO further added that innovation should also be adopted in a tangible manner to develop technology-driven solutions that address challenges, which would make the apparel industry leapfrog to the next level and thereby reap the full benefits.
Following his brief address Omar took questions from the audience made up of leading personalities from the investment community in Sri Lanka, including fund managers and high-net-worth individuals. The question and answer (Q&A) session brought many of the current themes surrounding the apparel sector to the fore.
Sri Lanka’s key competition still remains Asian countries such as Vietnam and China, while Bangladesh is fast upscaling its apparel production offering, aided by Sri Lankan apparel professionals. In particular, he highlighted Vietnam as an immediate threat given that it will be entering a free trade agreement (FTA) with the EU next year. As such, it will be crucial for Sri Lanka to have the GSP Plus concessions by early next year to counter this threat. According to Omar, Brexit will not have a substantial short-term impact since the leading apparel and textile manufacturers denominate all their sales proceeds in US dollars. While the long-term impact cannot be accurately forecasted at this early juncture, he contended that an independent UK is likely to maintain broadly the same tariff structure now employed by the EU, since re-export is an economic reality in both the UK and the EU.
In terms of trade agreements, Omar expressed a preference for bilateral trade agreements rather than large-scale, multilateral trade deals such as the Trans-Pacific Partnership (TPP), which can get derailed by the inability to meet all requirements of such multilateral agreements. He also highlighted apparel distribution channels as being the most likely exposed to disruption, along the apparel production value chain, given the inefficiency and high cost involved in them today.
The event was a follow up to the textile sector report titled ‘Close-knit with Sri Lanka’s apparel sector growth’ published by Asia Securities Research. The sector analyst for textiles, Hasantha Uswatta presented the highlights of the report and the positive outlook of Asia Securities for the textile sector, prior to Omar’s presentation. Uswatta’s presentation concluded that textiles will experience complementary growth along with the apparel industry and that the two listed textile companies will be key beneficiaries of this growth.
Asia Securities, Sri Lanka’s leading independent stock brokerage firm, offers best-in-class research in multiple sectors listed on the Colombo Stock Exchange. The ‘InsideTrack’ speaker series is the latest addition to the comprehensive research product range offered by Asia Securities. The company also offers its investment insights through the ‘Wealth Insights Series’, which focuses on investment ideas and outlook for key sectors. Asia Securities provides its services to domestic institutional, high-net-worth and retail, as well as foreign institutional and high-net-worth clients.