Chasing the next $3Bn: What it will take for Sri Lanka's apparel sector to get there

For thirty years, Sri Lanka's apparel industry has quietly powered the country's export economy accounting for roughly 40% of merchandise export revenue and employing 300,000 to 350,000 people. That scale wasn't accidental. It was built through deliberate government-industry planning dating back to the early 1990s.

The first transformation, anchored by the 200 Garment Factories Programme, pushed manufacturing beyond Colombo, created jobs in rural communities, and built the industrial base the sector still runs on today. It worked because government and industry moved together, not apart.

Now the industry is asking for a repeat but for a very different set of problems.

Sri Lanka’s Government has launched an ambitious National Export Development Plan (NEDP) targeting an increase in merchandise exports from $13.6 bn (2025) to $28bn in 2030. Aligned to this, JAAF is looking at a target of US 8bn. Against a backdrop of exports that have remained around the $5 bn mark for the last 5 years, this highlights a deeper challenge: the industry has outgrown the model that once drove its growth. The next phase will require a stronger focus on value addition, innovation, automation, productivity, market diversification and moving further up the global value chain.

The competition has changed. Manufacturing giants with deeper supply chains, wider trade access and lower costs have pulled ahead. Automation, digitalization and sustainable manufacturing are no longer differentiators, they are the baseline, one thing is clear: simply adding more sewing lines won't close the gap.

So what does the industry actually want?

JAAF is calling for stronger investment incentives, to attract new foreign direct investment and encourage manufacturers already established here to reinvest not just in apparel manufacturing, but also in fabric mills, trims and packaging. The goal is to grow our apparel manufacturing base whilst reducing Sri Lanka's reliance on imported materials by building a stronger domestic supply chain, especially in synthetic yarn and fabric, where local production currently meets barely a third of demand. To deliver on this, Sri Lanka needs to have a proposition for investors that competes with the offers on the table by other countries. If not, investment will not flow into the island.

There is a strong case for a dedicated push toward automation, robotics and AI-driven manufacturing. Industry leaders don't frame this as a cost-cutting exercise, but rather as increasing productivity as a driver to boost overall exports. It is also a matter of staying competitive, as without this shift, Sri Lanka risks falling further behind manufacturing hubs that have already made the leap.

On trade, the asks are specific: pursue the application for  the EU's new GSP+ scheme in 2027, secure a preferential trade arrangement with the United States, and strengthen the existing free trade agreement with India. JAAF also wants Sri Lanka to open new negotiations with South Korea, Japan, Australia and New Zealand, and to set up a dedicated government-industry working group to keep trade talks focused and consistent.

Perhaps the least glamorous but most practical request is institutional. Industry leaders say there needs to become a genuine one-stop shop rather than one stop among many. That means faster approvals, clearer VAT treatment for exporters, more flexibility for companies to transact in foreign currency, and long-overdue labour law reforms.

Energy policy is also key. Open access and power wheeling regulations are moving toward being fast-tracked, alongside stronger incentives for battery storage together aimed at giving manufacturers more reliable and sustainable power options.

None of this stands alone. Industry commitments of new investment, productivity gains, local supply chain development and job creation are matched by asks of government: market access, a competitive tax environment, reduced costs of doing business and regulatory certainty in return.

The stakes go beyond a single industry. This is not just a plan for Sri Lanka to recover lost export ground. It builds a more resilient, higher-value apparel sector that can withstand global shocks better than the current one does.

Whether this plan of action takes shape will depend on how quickly Government agencies move to match the industry's proposals with actual policy. Three decades ago, a similar alignment of purpose reshaped Sri Lanka's apparel industry. The question now is whether that same coordination can happen again, at a moment when the competition has only gotten tougher.