Abstract:
When Sri Lanka liberalized its economy in 1977, the country’s garment industry took off
immediately. Initially quota‐ hopping East Asian garment exporters, attracted by the country’s
liberal trade regime, relocated their already well‐ established garment businesses to Sri Lanka.
This relocation encouraged local entrepreneurs to start their own garment enterprises to exploit
markets guaranteed by quotas, assisted by the liberal trade regime and incentives granted by the
Sri Lankan Government. Sri Lanka has since become a world class apparel manufacturer
supplying to global super brands for over three decades. However, externalities have been
created by the apparel industries. The objective of this study is to identify the significance of
the apparel industry and its externalities to the economy of Sri Lanka. For the research primary
and secondary data has been used. Primary data has been collected from interviews and
questionnaires. 100 people who are living and working in Narammala divisional secretariat
were selected by using multiple cluster sampling method. Secondary data collected from
Internet & websites, journal articles and books. After the survey was completed, the data was
processed in SPSS for statistical results. Line graphs, percentages, tables have been used to
present the collected data. This research is based on the Descriptive Analysis. Two hypotheses
were created for the research:
H0: Apparel industry generated positive externalities than the negative externalities.
H1: Apparel industry did not generate more positive externalities than negative externalities.
According to the study, the positive and negative externalities could be identified. The negative
externalities are water pollution with fabric dyes and massive water consumption in different
steps of the process. The positive externalities are increasing the job opportunities,
infrastructures facilities such as road development, transport. It can be concluded that positive
and negative externalities have been created from the apparel industry, Positive externalities
were greater than the negative externalities.
