Impediments to Promoting Backward Linkages from the Garment Industry in Sri Lanka

The slow growth of backward linkages from the garment industries (export-oriented) in developing countries and the policy merits of promoting these linkages have considerable contemporary relevance. Backward linkages are useful particularly for a garment industry to reduce the lead time and remain competitive in the international market. Local suppliers to the garment industry cannot function however unless conditions exist which allow them to be competitive. Furthermore, in a world where multinational garment-buying firms are dominant, a large import dependence in the garment industry does not necessarily imply that there are many opportunities to create local supplies and thereby create backward linkages. These factors are shown from the Sri Lankan attempts to promote backward linkages from the garment industry. It is argued that formation of backward linkages in the garment industry that operate in an open economy such as Sri Lanka is a natural outcome of industrial deepening and therefore will be time dependent. It is noted that even with less backward linkages, the garment industry in Sri Lanka has contributed significantly to foreign exchange earnings and employment creation in the country.