Sri Lanka's apparel industry is trying to compete with neighbouring Bangladesh by setting up no-frills, low cost, apparel manufacturing units in rural parts of the country.

The local apparel industry estimates that it loses around US$1bn worth of export orders to Bangladesh annually, due to higher manufacturing costs in Sri Lanka - and hopes the supplementary manufacturing facilities will help capture some of these losses.

The government has already initiated talks with the Asian Development Bank (ADB) to finance the venture that is estimated to cost around US$100m.

"We have proposed setting up 100-150 small factories, with about 250 workers per factory, operating on the lean manufacturing principle," Channa Palansuriya, deputy chairman of the apparel industry representative body JAAF, told just-style.

"The larger companies will do the marketing to attract the orders, so these small units will not have to spend on getting orders."

However, talks to fund the plants are still in the preliminary stages.

"We are still negotiating the proposal with the ADB but the response from the ADB has been positive, because this initiative can generate employment in rural areas and will contribute towards overall economic growth," Palansuriya said.