Sri Lanka’s apparel industry is calling for stronger investment incentives to attract foreign capital into fabric mills and other upstream industries, as it seeks to deepen domestic value addition and develop a more integrated supply chain to support its ambition of reaching US$8 billion in exports by 2030.
The Joint Apparel Association Forum (JAAF) has identified the country’s continued dependence on imported raw materials as a major constraint to the sector’s next phase of growth. Domestic production currently meets only around one-third of Sri Lanka’s demand for synthetic yarn and fabric, highlighting the need for greater investment in upstream manufacturing.
JAAF is seeking incentives not only to attract new foreign direct investment into apparel manufacturing, but also to encourage existing industry players to reinvest in fabric mills, trims and packaging. A stronger domestic supply chain would reduce reliance on imported inputs while increasing the share of export value retained within Sri Lanka.
Sri Lanka’s apparel exports have remained around the US$5 billion mark for the past five years, leaving the industry with a significant gap to bridge to achieve its US$8 billion target. The ambition is aligned with the Government’s National Export Development Plan, which targets an increase in overall merchandise exports from US$13.6 billion in 2025 to US$28 billion by 2030.
JAAF has argued that Sri Lanka will require an investment proposition capable of competing with the incentives offered by rival manufacturing destinations if it is to attract capital into the upstream industries needed to support further apparel sector expansion.
The industry is facing increasing competition from manufacturing destinations with deeper supply chains, broader trade access and lower production costs. At the same time, automation, digitalisation and sustainable manufacturing are becoming essential requirements rather than differentiators in the global apparel industry.
Alongside efforts to deepen domestic value addition, JAAF is calling for significantly wider preferential market access. The industry has urged the Government to pursue a preferential trade arrangement with the United States, apply for the European Union’s new GSP Plus scheme in 2027 and strengthen Sri Lanka’s existing free trade agreement with India.
JAAF is also seeking the commencement of trade negotiations with South Korea, Japan, Australia and New Zealand. It has proposed establishing a dedicated government-industry working group to maintain continuity and focus throughout trade negotiations.
Greater domestic value addition combined with wider preferential access to major international markets is central to the industry’s strategy to secure the next US$3 billion in export earnings. This comes after several years in which apparel exports have remained relatively close to the US$5 billion level.
Productivity improvement is another priority identified by the industry. JAAF is advocating greater adoption of automation, robotics and artificial intelligence-driven manufacturing, warning that Sri Lanka risks losing further ground to international manufacturing hubs that have already embraced these technologies.
The industry is also seeking reforms to improve the operating environment, including faster regulatory approvals, clearer VAT treatment for exporters, greater flexibility for businesses to transact in foreign currency and long-awaited labour law reforms.
Energy competitiveness has also emerged as a key concern. JAAF is looking towards the acceleration of open access and power wheeling regulations, alongside stronger incentives for battery storage, to provide manufacturers with more reliable and sustainable access to electricity.
Taken together, JAAF’s proposals point towards a renewed government-industry partnership in which manufacturers commit to investment, productivity improvements, domestic supply-chain development and employment, while seeking improved market access, a competitive tax environment, lower operating costs and greater regulatory certainty from policymakers.
The apparel sector remains one of Sri Lanka’s most significant export industries, accounting for approximately 40 percent of merchandise export revenue and directly employing an estimated 300,000 to 350,000 people. Strengthening its upstream supply chain and expanding access to major international markets will therefore be important to the industry’s efforts to move beyond its current export plateau and achieve its 2030 growth ambition.
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