Sri Lanka far behind regional rivals in capturing China’s apparel exodus– JAAF
Sri Lanka is capturing only a sliver of the manufacturing capacity leaving China, even as the regional rivals post double-digit gains from the same shift, according to the Joint Apparel Association Forum (JAAF).
Speaking at a recent edition of First Capital Stock Talk, JAAF Secretary General Yohan Lawrence said the ‘China Plus One’ trend, in which the global brands diversify sourcing away from China, is real but Sri Lanka is barely benefiting from it.
According to him, between 2024 and 2025, China’s apparel exports fell 32 percent while Sri Lanka’s grew only 5 percent. Bangladesh grew 11 percent over the same period, Vietnam 12 percent, Indonesia 9 percent and Cambodia 28 percent.
“What’s coming out of China is being taken up by the other countries in the region but Sri Lanka is at the bottom of that pack,” Lawrence said.
“We are not benefiting as much as we could have or as much as we should have done.”
Part of the reason, Lawrence suggested, is cultural as much as economic. The manufacturers relocating out of China have tended to gravitate toward Vietnam and Cambodia, where the earlier waves of Chinese investment have already built networks of suppliers, logistics providers and expatriate managers that Sri Lanka never developed.
“The Chinese companies maybe feel more at home in Vietnam or Cambodia,” he said.
“We’re not drawing in the FDI; we’re not bringing the investment in that’s allowing us to grow and to take that benefit.”
That pattern shows up in how the Chinese capital has actually entered Sri Lanka. Research by Chatham House found that the Chinese FDI into the country has been dominated by infrastructure projects such as ports, rising from 88.7 percent of the total in 2009-12 to 99.4 percent by 2017-18.
Manufacturing and services, the categories that matter for a China Plus One shift, received comparatively little. That stands in contrast to Vietnam and Cambodia, where the Chinese capital has flowed more directly into factories.
The scale gap extends well beyond China. Sri Lanka’s total inward FDI reached roughly US $ 1.04 billion in 2025, its strongest year since 2022, according to the UNCTAD figures. Vietnam, the country Sri Lanka is most often benchmarked against, attracted more than US $ 20 billion in FDI in the same year, more than 19 times Sri Lanka’s total.
Lawrence argued the fix has to start with market access and the investment climate, not cost. Sri Lanka has preferential access to the EU and UK but none to Japan, Korea or Australia, markets, hence, he opined that these countries could absorb more Sri Lankan apparel if the tariff barriers were removed.
In terms of Sri Lanka’s 25-year-old free trade agreement with India, he stressed that it needs updating.
On the investment side, he pointed to the income tax rates higher than those of the competing exporters, along with the negative lists and para-tariffs that inflate the cost of setting up a factory in Sri Lanka.
“If somebody wanted to invest in Vietnam, he would pay a lower tax rate than he would if he paid in Sri Lanka,” Lawrence said.
He also pointed to Sri Lanka’s slipping ease of doing business as a structural problem, contrasting today’s approvals process with the 200 Garment Factories Programme launched in 1992, when a dedicated government task force cleared the roadblocks for investors quickly.
“We’ve kind of built in some controls, some restrictions and so on that make doing business in Sri Lanka not as easy as it was,” he said, adding that the country needs a dedicated team focused solely on negotiating trade agreements rather than treating them as a side responsibility.
That diagnosis echoes a broader critique of Sri Lanka’s investment climate. In a recent analysis, economist Ranjith Bandara argued that the country’s real barrier to foreign capital was never its pitch but its paperwork: overlapping agency mandates, unpredictable approval timelines and policy volatility that the investors cannot price in. Lawrence’s own prescriptions point in the same direction, which advocates for a dedicated case management, clear timelines and a single point of accountability.
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