“No reason for doom and gloom”: Brandix CEO

By David Ebert

Top apparel exporter Brandix Lanka Ltd. CEO Ashroff Omar, last week declared that there was no reason for doom and gloom in the industry.

Making the keynote speech at the Sri Lanka Apparel Sourcing Association's (SLASA) 20th AGM  Omar expressed the belief that there was no reason for doom and gloom in the industry, based on statistics despite a global slowdown in key export markets.

Omar also stated that the local garment industry has shown resilience and that he sees no reason for the industry to be pessimistic at a time when the current manufacturing giants in the region are faced with rising labour costs and shrinking growth.

Sexiest industry in Sri Lanka

In his speech Omar discounted the general perception that the country’s garment industry is not as vibrant as it used to be stating: “There have been rumours that we are not as sexy as we were before, 10 years ago we were much sexier than we are today, but I think we are the sexiest industry in Sri Lanka today. Why? Because we are still the largest employer, the largest exporter and because the most vibrant people in the country work in this industry. So I would like to state that this industry is still the best industry in the country and will continue to remain so.”

Omar also stated that he felt that there was no reason for the sector to have a negative outlook as the industry statistics show that Sri Lanka has been showing better growth compared with most garment exporting countries.

“Everybody feels that this is the end of the road but that is by looking at the big picture of export statistics. I would encourage all of you to go through a more granular level and really see what lies in that. So if you look at 2012, the USA imported $ 77 billion of products, it was almost the same as what they purchased in 2011 so they were flat. If you look at Sri Lanka according to their statistics, we were only one of three countries that grew. This is according to their statistics and there seems to be some mismatch between our statistics and theirs,” he said.

He went on to state that the same statistics have shown that Vietnam, El Salvador and Sri Lanka have exhibited minor growth among the top ten countries exporting into the United States in the country’s key garment categories, showing growth in all of them except for the underwear category where there was a slight drop. This, Omar said was a clear indication that industry is in better shape than previously thought.

“On the other hand when you look at Europe, their exports shrank by more than $20 billion, from $170 to $150 billion between 2011 and 2012. According to their statistics again we shrank by about 18%; other statistics show that we shrank by 8% but I shall stick to one base, their statistics. However, our exports today are in the region of about $1.5 billion dollars so even a 20% drop would be about $300 million but the total drop was $21 billion dollars and including China and Bangladesh, everybody recorded high double digit drops. So looking at that, I don’t think we have any reason to feel sad and upset about what happened last year,” he pointed out.

Industry growth

Omar also made reference to an industry strategy session held 10 years ago where plans were discussed at the time to grow the industry to $4 billion in four to five years, stating that even though the industry should ideally be worth $8 billion today going by those same figures he stated that it is still encouraging that the industry is still only at the $4 billion mark considering that the country has had to face the withdrawal of concessions and quotas in the recent past.

“We should be about $8 billion right now but we are still at about $4 billion. However that strategy came up with those figures with a proviso, that we would have two engines attached to our economy; one was the US FTA which we thought at the time that we were pretty close to signing and the GSP+. However we don’t have those two booster engines anymore and yet we have been coasting along pretty well. That strategy session also recommended that we focus on a few buyers and a few categories that we are best at and I think that if you look at the last ten years, we have done just that. About 10 buyers account for about 75% of the total exports and about seven or eight categories account for a similar amount of our exports. So we have focused on a few categories, focused on a few buyers and thereby we have succeeded in growing the industry,” he said.

Omar also pointed out that the country is currently in a better position to compete with the regional apparel exporting giants on costs alone, as he believed Sri Lanka to be in one of the cheapest regions in the world.

“If you look at apparel exporting countries we have China, Vietnam, Cambodia in that region and then you have Indonesia, the Philippines and Thailand in another region and then you have the Southern Asian region countries of India, Pakistan, Bangladesh and Sri Lanka. If you go westwards, the Middle East was a big exporter and is not significant anymore, Africa was growing very well due but they have not had much traction, Europe has an industry but that is becoming more expensive by the day and it’s the same in the Latin America nations. Now if you look at the whole spectrum, the Southern Asia region is still among the most competitive areas in the world for apparel exports. So we belong by some luck in that region. We also have fantastic logistics and we have a very sophisticated, compliant industry. So it’s not only that we are cheap, we also have the talent and most of the technical talent in the whole South Asian region is manned by Sri Lankans,” he added.

Labour and cost

Omar also pointed out that the biggest issue faced by the industry at the moment is a shortage of workers in the country who prefer to go in search of higher wages offered in the Middle East and suggested that the industry could solve the labour issue by figuring out a way to lure migrant workers back with higher wages and the better working conditions in the local garment industry.

He also added that costs are increasingly going up in countries such as China and Thailand, hence Sri Lanka finds itself in a good position to attract more manufacturers looking to relocate their businesses to a cheaper and more cost effective operating environment.

Speaking on the cost increase issues faced by manufacturing giant China, Omar stated: “In China, costs per operator per month for 240 hours of work, is over $600 and once the workers go for their new year, many don’t come back. So there is a phenomenal shortage of workforce in the main manufacturing centres in the country. I was talking to one of our joint venture partners in fabrics and he told me that in his area, the increment for this year versus last year was 40%. The average increase in the periphery was 19% but because this particular area was considered a fast developing area, there was a 40% increase.”

In closing, he added that he attributed the industry’s doom and gloom perception to undue end-of-the-world paranoia among industry players, stating: “So looking at all that if we feel it is the end of the world, I think it is only us that are a bit crazy in the head because I am sure any banker or any businessman looking at it would say a great opportunity still exists in Sri Lanka. However it does not lie in what we did yesterday, it lies in what we have to do tomorrow. So we have a huge task for the new team and I believe that as an association, if we get the buyers here they would definitely start purchasing. So my request is that we aggressively pursue all the key buying offices, customers or national brands.”

Pix by Upul Abayasekara