Globalisation and the garment industry in Sri Lanka

Abstract

The objective of this article is to explain how globalisation, the phase-out of MFA and regionalisation affect the development of the garment industry in Sri Lanka. The article starts with a discussion of the key concepts of globalisation and regionalisation, followed by a presentation of the analytical framework, including a theoretical discussion of winners and losers in commodity networks. It is argued that regionalisation may exacerbate the problems that the Sri Lankan garment industry has already experienced in terms of globalisation. In addition to the limited industrial development effects that are the outcome of the functional division of labour, regionalisation makes it even harder to obtain market access. It is likely that Sri Lanka continues to be tied in, both to the European and American trading blocks for the production of some good quality and reasonably priced standardised garments for the middle market. However, to be tied in as a supplier of standardised products for the middle market is a vulnerable position, especially when the market is flat and lead firms and buyers in the network pass down adjustment costs to the suppliers. When manufacturers earn low levels of profits, the prospects of reinvestment in production and sustained industrial upgrading are negligible.