The Competitive Context of the Sri Lanka Ceramics Industry

Field Trip to CENTEC	Sri Lanka Ceramics Workshop

The Ceramics industry in Sri Lanka is composed of three major segments: tableware, (porcelain, stoneware or earthenware); ornamental artware (such as figurines, statuary, and decorations); and ceramic tile (including wall tile and floor tile). There are at present approximately 30 ceramic companies in operation locally, seven of which are large with the remaining being small or medium scale enterprises. Competition among the larger firms is healthy and there is distinct product differentiation among manufacturers. The Sri Lanka Ceramics industry has some significant operational strengths, including a highly skilled workforce, relatively low labor costs, excellent management at the factory level, and design confidentiality/integrity. Total industry employment currently stands at approximately 20,000 thought the quality of the workforce is considered sound, inflation and rising wages have been fast eroding the advantage of low cost manufacturing.

On the supply side, Sri Lanka does not have the large oil and natural gas deposits of some of its Asian competitors such as Indonesia and Malaysia, so it primarily uses imported LP gas as the main source of energy. Energy costs are therefore relatively high. Raw materials such as Kaolin and Feldspar can be sourced locally but certain key raw materials, such as china or ball clays, need to be imported from the United Kingdom or elsewhere to satisfy the whiteness of body needed for porcelain.

Overall, the Ceramic industry in Sri Lanka has reached a stage of stagnation. Ceramic exports have not grown for the last 10 years and the number of people employed in the industry directly and indirectly has remained static. Some of the contributing factors cited by the industry include a lack of (a) Brand and quality recognition (b) Understanding of consumers needs (c) Cost-effective energy sourcing (d) Consistency in quality of raw materials (e) Value-adding capabilities at firm level and (f) Readiness to use advanced technology for expanding product range and capturing new markets.

One of the key obstacles cited above is that the industry does not truly understand its ultimate consumer because it had been largely acting as “contract manufacturers” in the past and had not made much effort or investment to create and improve market awareness or establish a direct channel with international retailers. Ceramics is part of the fashion industry, a business in which perception creates demand, and the profitability of Sri Lanka’s Ceramics industry had been limited from a lack of brand identity— a driver of retail prices in international markets and a generator of value locally.

On the product development front, the Sri Lanka Ceramics industry has been largely lacking in R & D and technical support, which in turn has impeded industry growth and competitiveness. The industry achieves little or no technological advancement locally. Furthermore, the acquisition of foreign expertise and knowledge has proven to be too expensive and consequently out of reach of local organizations. This resulted in slower upgrading of technology, leading to lower value addition and price. Although a considerable amount of academic and technical knowledge is available locally, limited facilities have been available to transform that knowledge into viable business propositions.

Sri Lanka as a country has no institutes or centers of technical excellence equipped to support any industry and the Ceramic industry is no exception. Although there are several institutes involved in ceramics related research such as the Industrial Technology Institute (ITI), the Universities and the Ceramic Research and Development Centre (CRDC)-now owned by Lanka Ceramic Limited - they do not possess the technology or the equipment to meet present day demands. Even the available facilities are scattered in location, ownership and even objective. TCP is currently supporting the establishment of a Center of Excellence at the Industrial Technology Institute (ITI), equipped with a state-of-the-art test laboratory and pilot plant to serve the Ceramic industry in Sri Lanka.

The ITI Center of Excellence together with implementation of joint research programs between the CRDC and University of Moratuwa, are some of the tangible steps being taken by the industry to address the quality of technology and skills available locally.

Ceramics Industry Statistics

Export Performance of Ceramics - 1995-2003 (US$ Millions

Top Three Export Markets (Value of exports in US$ Millions)

The Sri Lanka Ceramics Council (SLACC)

The Sri Lanka Ceramics Council (SLACC) was incorporated under the companies Act No 17 of 1982 on November 19, 2003. It was officially launched on February 11, 2004, under the aegis of the Ceylon Chamber of Commerce (CCC). SLACC’s Board of Management includes:

SLACC is the final development of the Ceramics Industry Cluster, which was formed in 2001 with the assistance of the U.S. Agency for International Development (USAID) funded, The Competitiveness Initiative (TCI). The Cluster was initiated to devise a unified, industry-wide strategy to enhance the competitiveness of the sector.

Role/Objectives

	To promote the Sri Lanka Ceramics Industry and make it more competitive in the global market place
	To serve as the central forum for consensus building among manufacturers, research and development institutes, universities, government institutes and others involved in the ceramics industry and promote high standards of business conduct
	To be an unifying force in working with the Government to ensure that the needs of the Ceramics industry are considered
	To spearhead efforts to create Center of Technical Excellence through a cooperative agreement between relevant institutions to share generic information and facilities that advance the ceramics industry
	To support the creation of a research and development center for the ceramics industry to advance existing and new processes and technologies
	To stimulate interest in ceramics research, education and training through the Centers of Technical Excellence
	To promote investment in the ceramics industry

Key Strategic Initiatives

The Sri Lanka Ceramics Council’s (SLACC) competitiveness+ strategy intends to enhance the competitiveness of the Ceramics sector through branding of Sri Lankan ceramics products, creation of a Center of Technical Excellence to conduct joint research as well as develop value added products and services. It also focuses on a workforce development program to improve the quality of workers entering the industry.

Initiatives supported by TCP and their respective strategic elements/outcomes are:

	Center of Technical Excellence to be set up in partnership with the Industrial Technology Institute (ITI) comprising of a world-class laboratory and a training center. This initiative aims to improve the quality of Sri Lankan ceramic products, encourage new products development through joint research and development and promote implementation of industry wide standards.
	Use Industry Web Portal to create awareness of Sri Lankan ceramics in the global marketplace- project the superior quality of locally manufactured products, serve as a platform for information to both local and foreign buyers, suppliers, manufacturers, raw material suppliers and potential investors and promote industry growth through news features, industry trends and other sources of information
	Implement Workforce Development / Industry Placement program (IPP) conducted as a public-private partnership program with University of Moratuwa. In addition to enhancing employability of participating trainees, this IPP strengthens industry relationships with the Universities and other training providers increase the number of graduates pursuing studies in the field of ceramics, preview candidates for industry to make better hiring decisions and serve as a model for replication in future programs.

Contact Information

Offices:
Secretariat
The Sri Lanka Ceramics Council
C/O Ceylon Chamber of Commerce
No 50, Nawam Mawatha
Colombo 2.
Telephone: 94-11-2343702 / 94-11-2421745
Fax: 94-11-2449352
E mail: ceramics@chamber.lk

Contact:
Ms. Lakmali Udugampola
Coordinator
The Sri Lanka Ceramics Council
C/O Ceylon Chamber of Commerce
Website: http://www.ceramics.lk