Sri Lanka Textiles 2003 - Global Business Reports

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specialreportsrilanka Social Compliance Gives Sri Lanka an Edge In a world of borderless trade, the theory of comparative advantage states that when country A is able to produce and export a specific product for less than country B, then country A has a comparative advantage in that product. Nowhere has this theory been more ruthlessly applied than in the world of textiles, where buyers from around the world continuously seek to source increasingly cheaper textiles from countries that have a comparative advantage in producing textiles. Unfortunately, this theory contains a major flaw. It does not allow for equality in standards – not the standards of the final product, but of the environment and social welfare in the place where the garments are produced. All over the world, garment manufacturers are struggling to provide the best quality products at the lowest prices within the shortest space of time. But is this enough to get orders? The whole garmentmanufacturing sector in Sri Lanka is convinced that, to be successful, it has to go further. And the area where Sri Lanka is proudly head-and-shoulders above its competitors within the region is its compliance with international standards in terms of labour laws, environment protection and respect for human rights. In recent years, mass retailers and the biggest brands have been under huge pressure from consumers groups and the ever-vocal lobbies in the Western countries, forcing them to source from countries and companies that comply with international labour standards and human ‘Sri Lanka has a tremendous advantage, especially in comparison with its neighbours’ rights. Damning reports on such high-profile retailers as Nike and Reebok have forced both companies to search for more ‘suitable’ suppliers, whilst also spending millions on building their image as caring employers. And in terms of standards compliance, Sri Lanka has a tremendous advantage, especially in comparison with its neighbours. Firstly, owners throughout the country proudly point out that there is no child labour, nor sweatshops, nor forced labour. Wage rates, overtime and workers’ holidays are strictly covered by law and, as Channa Palansuriya, CEO of Orit, confirms: “Big buyers actually refuse to work with producers that are not april-may 2003 33
specialreportsrilanka socially and ethically compliant. As these issues become increasingly important, Sri Lanka has a real competitive advantage over other regional players.” Even though low, production costs in Sri Lanka are not the cheapest in the region. It has therefore been necessary to develop other advantages. Rami Wiersch, CEO of Hoodvian Ltd, comments: “It will be an even more important subject in the years to come because social compliance is part of the WTO. For an equal price, buyers are definitely choosing the company with the highest level of compliance.” But it does not just make sense from the buyer’s perspective. There is also an advantage for the industry as a whole. Gihan Nanayakkara, CEO of Forbes, explains: “If you are not compliant in today’s business, there’s no point in marketing yourself and no way to get orders.” Big buyers are increasingly sensitive to the way workers are treated in the garment factories where they place their orders, and it is an issue that will become even more important. Rizvi Farouk, chairman of the Sri Lanka Buyers Association, said: “I think that, if we can adapt a higher compliance policy like in the US or in Europe, efficiency will dramatically improve and it will allow the hard-working people to earn more.” It does not take rocket science to realise that, by improving working conditions, companies can look forward to gains in efficiency and productivity, not to mention reduced absenteeism and employee turnover. Shirenda Lawrence, managing director of Courtaulds Lanka, which has an impressively modern factory, illustrates this: “As soon as we started providing meals as well as transportation from home, absenteeism fell immediately and dramatically.” If the whole industry seems to be fully aware of the necessity of compliance, its leaders also point out the need to update labour laws to maintain the industry’s edge over the competition. Farouk, from the Sri Lanka Buyers Association, explains: “Sri Lanka has labour laws from the ‘60s, which are not practical for today’s business. Labour laws are one of the first things an investor needs to be comfortable with. Ours are slightly outdated and could be more appealing, to attract foreign investors.” R.E.V. Casie Chetty, chairman of the Sri Lanka Apparel Exporters Association, goes into more detail: “The government has to step forward to amend obsolete laws, particularly with regard to the termination of employment and overtime limitations, to make the industry globally more competitive.” In addition to social standards, environmental protection appears as a major concern. Indika Silva, CEO of M. Samson Silva, says: “As a Buddhist country, environment protection is considered as natural behaviour.” That’s why water treatment plants are very common within Sri Lankan factories. 34 fashionbusinessinternational
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Sri Lanka Textiles 2003 - Global Business Reports

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