Comparison is the thief of joy for Sri Lanka's apparel sector

Sri Lanka’s apparel export sector recorded improved returns in 2025, but industry leaders caution that the performance is far from satisfactory, citing intensifying regional competition and mounting cost pressures.

The Export Development Board (EDB) announced that total apparel exports increased by 4.93 % year-on-year, rising from 5.05 billion US dollars in 2024 to 5.3 billion US dollars in 2025.

However, Yohan Lawrence, Secretary General of the Joint Apparel Association Forum (JAAF), said the figures were “not anything to be particularly happy about”, especially when compared to growth achieved by regional rivals.

While Sri Lanka’s exports to the United States — its largest export market — grew by around 6%, he noted that competitors such as Cambodia, Bangladesh and Vietnam posted significantly higher growth rates.

“Sri Lanka's business for the US has increased, but other competitor countries have increased by larger amounts,” Lawrence said.

“If you take the periods from January to October, Sri Lanka's export to the US in particular grew by about 6 %, but countries like Cambodia grew at 20 %, Bangladesh grew at 14, Vietnam grew at 12. Even India, who has a higher tariff than Sri Lanka, grew at 7 %.”

He added: “This is something that we have to be conscious of, is that other countries are making bigger headway.”

Looking ahead to 2026, Lawrence said expectations remain cautious, amid several external uncertainties.

“We would predict probably that same sort of 4–5 % growth would be hopefully, but it is dependent obviously on a number of variables,” he said.

“Obviously what happens finally with the US tariff situation is something that's of importance. Today's announcement of a trade deal between India and the EU will have its implications on Sri Lanka's apparel. There are some headwinds ahead that we're going to have to try to manage if we're trying to keep the same level of growth.”

Meanwhile, Central Bank Governor Dr Nandalal Weerasinghe offered a more optimistic assessment, stating that Sri Lanka has managed to secure tariff rates comparable with key competitors.

“They have been able to negotiate a steady 20 % comparable with all the other competitive countries. I don't see an impact in terms of trade for Sri Lanka because we were able to negotiate up to 20 % tariff which is comparable with other competitive countries,” he said.

He added, “There have been some bilateral trade agreements signed recently; India has signed on with the EU. We also had duty-free access to the UK market recently. Those trade agreements are also changing and happening. So there could be some trade diversion, and trade flows could be volatile. But I don't think from our small market we expect that's going to be a significant shock.”

Lawrence, however, warned that cost competitiveness remains Sri Lanka’s biggest weakness.

“Initially, it's cost competitiveness, that's the only thing that today's world, the most important thing is to be cost competitive,” he said.

“We are fine with delivery, we are fine with logistics, all of that is fine, but Sri Lanka has to be cost-competitive. We are finding that we are losing ground here. If you look at the total cost to the company of employing somebody, then Sri Lanka stands out as being higher than our regional competitors.”

Commenting further on the India–EU trade agreement, Lawrence said its implications could be negative for Sri Lanka’s apparel industry.

“On the face of it, it would negatively impact Sri Lanka because India obviously gaining duty-free access to the EU for apparel would be a challenge for Sri Lanka,” he said, adding that complications surrounding the GSP scheme could also place Sri Lanka at a disadvantage.

Despite improved export earnings in 2025, industry leaders stress that maintaining competitiveness and managing external pressures will be crucial if Sri Lanka is to sustain growth in the year ahead.