by Lindsay Beck
Seeduwa (Sri Lanka) Aug. 20 (Reuters) —

A giant stuffed panda on the garment factory floor is hardly an obvious way to spur production.

But at Sri Lanka’s L. M. Apparels (Pvt) Ltd, the cuddly toy sits in front of the production lines as a grim reminder of the Chinese competition the island faces.

"China will beat the hell out of everybody," said Ashroff Omar, who heads an association of industry groups drawing up a strategy for the garment sector.

The last day of December 2004 is the date that looms in his mind and in the minds of 300,000 Sri Lankans directly employed in the industry that accounts for more than 50 per cent of the Indian Ocean island’s export earnings.

That’s when the Multi-Fibre Arrangement — that gives Sri Lanka a guaranteed share of the U.S. market — expires.

The island of 19 million will be left to compete head-on with giant and cheap production centres such as China and Bangladesh.

"Our model of factories will completely change within the next two years. The way we work currently, we won’t be able to survive," said Omar.

At L. M. Apparels, where 1,900 workers snip and sew trousers for brand names such as Liz Claiborne (LIZ.N), Abercromble and Fitch (ANF.N) and Gap (GPS.N) human resources manager Rex Fernando is gloomy about the industry’s prospects.

"Fifty per cent won’t survive," he said. "My gut feeling is, the bigger players will survive. The smaller ones will have to merge or have some kind of game plan."

Industry players say while Sri Lanka will not be able to compete for the mass market, the future lies in offering a range of textile, design and sewing services to allow high-end customers to focus on their brand image.

At Apparel’s sister plant L. M. Collections (Pvt) Ltd, Director Jeremy John has had a team of U.S. consultant since last October measuring efficiency at every stage of the production process to improve what he sees as key to staying alive — speed to market.

On the factory floor, where rows of workers in smocks and hairnets cut, sew, press and fold stacks of pink pyjamas and silky robe for U.S. lingerie giant Victoria’s Secret, the workers are all to aware of the pressure to produce.

If they close the factory and there is a loss of employment, I can’t even think how I could find another job," said Hansika Dilani, a 19-year-old machine operator.

John is determined it will not come to that.

"We will not survive in the mass market, as in Wal-Mart or Kmart. That will migrate to the cheapest country. But if you can offer something different like speed, then that gives you that little bit of edge," he said.

John says Victoria’s Secret, which commands 15 per cent of the $ 12.5 billion U.S. lingerie market, is trying to capitalise on the late colours and trends by placing orders later but aiming for this same store arrival dates.

He hopes to market his factory as one that can do "chase orders", which entail an initial small run of goods and then a rapid, follow up larger order if the product sells well. "The customers are looking for a steady base, not just someone who offers you 10 cents less," John said.

Sri Lankans also stress the island’s adherence to labour, safety and environmental standards as a draw for brand-name clients under increasing consumer pressure to meet basic standards.

"The U.S. is tightening up on compliance. They’re going to have to come to terms with China and Bangladesh," he said, adding his factory undergoes regular audits from clients such as the British retailer Marks and Spencer (MKS.L).

But the apparel association’s Omar says the industry will get nowhere unless it steps up marketing efforts to showcase Sri Lanka’s social compliance and the advantages of its more technologically advanced factories and literate workforce.

He also hopes the lobbying power of his joint association can push the government to wider changes in the island’s infrastructure that could benefit the industry.

"We can clear cargo in Sri Lanka in 24 hours. We have told the government that has to be five hours," he said.

"We want to be more efficient on the supply chain, on control of the blue chain because we don’t have too much raw material here. We want to be agile and quick," he said.

Omar admits the industry’s wish list is long, and the government’s reputation for efficiency in infrastructure projects poor, but, as he puts it the country is at a stage where it is out of choices.

The option of notmaking it can be really dire. If we drop the ball here, unemployment and social issues can be massive."