A report on the closure of three garment factories under the Jaqalanka Group in Sri Lanka, says that the country's garment industry is becoming "increasingly financially unviable."

The report pointed to rapid cost increases in the country, coupled with 'tightening' of prices by buyers, as the root cause of factory failure.

Costs of labour, raw materials, fuel, electricity and transportation, have all increased in Sri Lanka, it said.

The report also notes an "acute shortage" of skilled labour in Sri Lanka, especially in the Katunayake Export Processing Zone.

This shortage has added to the financial unsustainability of garment factories by putting up wages and by forcing factories to provide extra benefits to retain workers.

Three factories under the Jaqalanka Group shut down this year.

Jaqalanka Limited and Jaqalanka International closed on 7 February, while Jaqalanka Apparel closed on 17 March.

Trade unions blamed the management for the closures that saw around 1,400 workers lose their jobs, while factory owners in the country blamed trade union activity for the closures.

Eventually, in May, the Fair Labor Association commissioned the 'Jaqalanka Closure Report' to get to the bottom of the matter.

The fact-finding was conducted by T- Group Solutions of New Delhi, with assistance from CSR International of Colombo.

Its findings show that the country's initial comparative advantage of cheap labour has now been eroded.

According to industry estimates Sri Lanka's garment sector has by now shrunk to about 300 factories, from about 800 factories at one time. 

By Dilshani Samaraweera.