Textile & Garments

Sri Lankas apparel export industry is the most significant and dynamic contributor for Sri Lankas economy. The industry has grown over the last three decades and has become the number one foreign exchange earner and the largest single employer in the manufacturing industry. The industry provides direct employment opportunities to over 300,000 and 600,000 indirectly which includes a substantial number of women in Sri Lanka. This industry, virtually entirely privately owned has successfully exploited the opportunities the international market. Further, the co-operation between the Government and the private sector was a significant factor contributing to the spurt in apparel exports. Today, the garment industry occupies a pre-eminent position in Sri Lanka, producing high quality garments combined with an industry which is flexible and uniquely capable in servicing leading international brands such as Victorias Secret, Gap, Liz Claiborne, Next, Jones New York, Nike, Tommy Hilfiger, Pink, Triumph, Ann Taylor, Speedo, Abercrombie & Fitch, Lands End, Marks & Spencer, Intimmissimi, etc. A wide range of apparel for men, women, girls, boys, children and babies in the categories of fashion-wear, sportwear, lingeries, work-wear, rain-wear, swim-wear is manufactured and exported with the flexibility of catering to the specific seasons to many countries around the world. USA and UK are the top markets for Sri Lankan apparel through out the decades. The industry has been positioned as a socially responsible and preferred destination for apparel sourcing. Sri Lanka is also the only outsourced apparel manufacturing country in Asia which has ratified all 27 International Labour Organisation (ILO) conventions. It stands out as a reliable source that pays fair wages to its workers while discouraging sweatshops and child labour in its businesses Long term relationships with large reputed retailers who have identified standards of manufacture and compliance have also established this focus on ethical manufacture and an approach to Corporate Social Responsibility that responds and caters to the needs and concerns of a diverse set of stakeholders. The association with global brands of international repute has not been a mere business transaction but an exercise in maximizing value of wealth creation for society. Sri Lanka also has an excellent reputation for abiding by the regulations of the World Trade Organisation (WTO). Sri Lanka does not subsidize or provide export rebate. Complaints of anti dumping or countervailing duties have not been made against Sri Lanka On the environmental issues, Sri Lanka Apparel supports many initiatives focused on minimizing its impact on nature. Every effort is being made to create sustainable growth by protecting the environment, both at the workplace and in the community. International standards of recycling, effluent treatment and waste management practices are followed to run the operations at optimum environmental efficiency. Sri Lankan garment industry is now progressively moving towards the fashion industry from a purely manufacturing industry. The team of designers and technical experts being mindful of the fast changing trends in modern designs, use the latest technology in the production of finely tailored and customize products in high volume. Sri Lanka having established itself as a reliable supplier of quality garments at competitive prices, also upholds ethical practices, thus being identified as a producer of Garments Without Guilt, making the Made in Sri Lanka, label synonymous with quality, reliability, social and environmental accountability. With an impressive partnership portfolio, Sri Lanka also showcases the best of technology in the garment industry, including the worlds first eco-friendly Green Garment Factory. The buyers placing orders have the choice of selecting fabric and accessories from any part of the world to be brought to Sri Lanka for conversion into finished apparel. There is also an advantage in sourcing from Sri Lanka due to its central location, which provides the shortest shipping times to Europe. For those who are concerned not only with the quality of the product but also the values of the manufacturers, Sri Lanka will definitely be the ultimate choice.

GSP+ No big deal!

Less than a year after the highly publicized withdrawal of EU trade concessions, the apparel industry seems to be doing better than ever

About a year back, both the business and popular press in Sri Lanka were filled with
stories on how the withdrawal of GSP Plus concessions by the European Union (EU) could strike a deadly blow to Sri Lankas apparel industry. Early last year, the EU announced its intention to suspend the preferential tariff arrangement on account of continued human rights violations and formally withdrew the concession in August. Reeling from the effects of global recession, the garment sector was already struggling, declining by more than 5% in 2009, compared with 2008 (in US dollar terms). Many believed that the withdrawal of GSP Plus to result in disastrous consequences as over the years the EU has emerged as Sri Lankas main apparel market, accounting for more than 50% of garment exports. Closure of hundreds Rising of factories and job losses running into tens of thousands were feared. exports

However, latest data tells a completely different story. Not only that those ominous declines in exports did not take place, but also the industry seems to be doing better than ever. According to data from the Central Bank, last year apparel exports grew to over UD$3.5 billion, recording an impressive growth of 7% over the previous year. What is even more heartening is that much of that growth came in periods subsequent to the withdrawal of GSP Plus. As seen in Figure 1, withdrawal of GSP Plus has failed to make

any dent on the apparel exports. In fact, exports seem to have picked up since the withdrawal, reaching a high of nearly US$450 million in December 2010. This point is made clearer in Figure 2. Figure 2 plots the percentage monthly change in the value of garment exports for 2010 when compared with the same month of 2009. Prior to withdrawal of GSP Plus, garment exports have been on a downward trend with monthly increases reported in only two of the eight months (May and June). Things have been much better since, with all four months since the withdrawal of concession reporting month-to-month increases with last three months garment exports going up by more than 30% over the same period of 2009. Moreover, according to latest available data from the Sri Lanka Apparel Exporters Association, exports in January 2011 have more than doubled from those for the same month last year. It seems that exporters believe this recent turn around to be a good sign of even better things to come. Earlier this year, the Joint Apparel Association Forum launched a growth drive targeting to hit US$5 billion of exports by 2015. If current trends are to continue, achieving this target - which amounts to an annual growth of little over 7% - should not be a problem. Clearly, the industry has weathered the possible negative effects of the loss of GSP Plus and has rebounded remarkably well. (Surely, it could be argued that things could have been even better if not for this loss of EU concession.) It seems that these promising results are due to favourable developments in both external and internal conditions. Global factors

The single biggest contributor to the rebound of the apparel industry is likely to be the gradual recovery of the global economy. After bottoming out in 2009, both the US and EU economies started to slowly pick up in 2010. Recovery of consumer demand in the USA was particularly strong. This author alluded to this fact in a previous article written a year ago: This turning around of the global economy is likely to be the biggest single factor that will mitigate the downward demand pressures resulting from the loss of GSP Plus (Thinking beyond GSP Plus - LAKBIMAnEWS, April 25, 2010). There is general consensus that the worst of global recession is over even though the recovery seems to be somewhat choppy. As long as the major economies do not make unexpected U turns, broad economic outlook for garment exports continue to look favorable. However, there are some concerns over looming fears of global inflation and potential contagion of debt crisis within the EU. Such developments can dampen future demand. Meanwhile, recent developments in China - the major competitor of every other apparel exporting country - have been working in favour of Sri Lanka too. Over the years, China has enjoyed clear advantage as the lowest cost producer in the extremely cost conscious apparel industry. However, this advantage seems to be slowly fading with extreme upward pressure on labour costs and the gradual appreciation of the Chinese Yuan against the Dollar. When the relative cost advantage gets smaller it becomes possible for other Creating countries to compete better in other aspects of the process. advantage

competitive

Meanwhile, over the years, Sri Lankas apparel industry has been exerting considerable effort in improving industry competitiveness, and positioning Sri Lankas products better in the global market. Industry has been undertaking significant investments in process improvements that include automation, enterprise resource planning, and attempts at vertical integration. Moreover, there have been continuous efforts in enhancing design and marketing capabilities. Initiations have been made to differentiate Sri Lankan products in the eyes of ethics- conscious high-end buyers where the price pressures are relatively lower. Anti-child labour initiative - Garments without Guilt and various projects focusing on social and ecological responsibilities are examples of such endeavours. It seems that some of these efforts are bearing fruit in creating sustainable competitive advantages for the industry. These initiatives along with improved infrastructure and post-war political and macro-economic stability should help the Sri Lankan apparel

industry to make maximum use of its unique geographical positioning within global supply chains. Lessons learned

The lessons to be learnt from the aftermath of the loss of GSP Plus concessions go well beyond the garment industry. Over the years, Sri Lanka has developed a culture of high dependency on handouts and concessions. While such interventions may be necessary in some cases to pull people out of abject poverty and kick start the engines of economic growth, more often than not, sustained concessions end up being highly counterproductive. They generate a false sense of security and reliance on external aid so that the individual initiative to improve, innovate, and make things happen goes blunt. The real test for an individual or a society is how well it would do when the concessions and handouts are taken away so that it is forced to come out on top based on its own efforts. More often than not, such challenges bring out the best on us. And whatever the competitive advantages we create the hard way are likely not to go away when the concessions and handouts are no longer there. Tharindra is currently reading for his PhD at the Bauer College of Business, University of Houston, USA.

Sri Lanka continues to experience strong economic growth, driven by largescale reconstruction and development projects following the end of the 26-year conflict with the LTTE. Sri Lanka is pursuing a combination of government directed policies, private investment, both foreign and domestic, to spur growth in disadvantaged areas, develop small and medium enterprises, and increase agricultural productivity. The government struggles with high debt interest payments, a bloated civil service, and historically high budget deficits. However recent reforms to the tax code have resulted in higher revenue and lower budget deficits in recent years. The 2008-09 global financial crisis and recession exposed Sri Lanka's economic vulnerabilities and nearly caused a balance of payments crisis, which was alleviated by a $2.6 billion IMF standby agreement in July 2009. The end of the civil war and the IMF loan, however, have largely restored investors' confidence, reflected in part by the Sri Lankan stock market's recognition as one of the best performing markets in the world. Sri Lankan growth rates averaged nearly 5% in during the war, but increased government spending on development and fighting the LTTE in the final years spurred GDP growth to around 6-7% per year in 2006-08. After experiencing 3.8% growth in 2009, Sri Lanka's economy again achieved growth rates above 7% per year in 2010-11.

6.1 Organizational Structure

Mahogany Western Wear is a small business and therefore requires a simple organizational structure. Chandra Miller will act a general manager. All decisions are made in-line with the company objectives. Employee tasks are delegated based upon their level of expertise, creativity, strengths and weaknesses.

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Executive Summary Mahogany Western Wear is a new apparel store that caters to the African-American cowboy community in Houston, Texas. As our name suggests our focus is to provide western wear apparel and accessories, and position ourselves as the top retail store servicing this particular market. We are the first and only African-American owned western apparel store in the city of Houston. Our intentions are to obtain 80% market share and become a central hub of shopping activity for the local African-American cowboy population as well others who enjoy wearing western apparel. Mahogany Western Wear will be located at 13328 1/2 Almeda Rd., Houston, TX in southwest Houston, TX. Mahogany Western Wear has centralized itself directly in position to the residental location and social activities of our target market. We believe that this is critical to our initial success and long-term growth.

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