ECONOMYNEXT – Orders are beginning to trickle into Sri Lanka’s apparel export firms as Coronavirus lockdowns are eased in the West and buyers re-activating some cancelled orders as stores open, industry officials said.
“Overall, what I hear from other factories is that the reaction on sales is slightly better than predicted at the initial stage of COVID19,” Rehan Lakhany, the Sri Lanka Apparel Exporters Association President told EconomyNext.
“People over-reacted and actually cancelled way more than they should have because there was uncertainty at that time.”
Therefore, the impact is slightly less than initially anticipated, he added.
Sri Lanka’s apparel industry was expecting to lose 1.5 billion US dollars’ in revenue between March and June.
The industry earned export revenues of 5.5 billion US dollars out of 11 billion US dollars of merchandise exports in 2020.
“..[H]aving said that the apparel manufacturers are not running at full capacity,” Lakhany said. ‘They are still running at a loss.”
“Industry is picking up slowly, it is not anywhere close to normal but slightly better than originally anticipated,” he said.
Production was completely stopped from mid-March to the first of May, when the apparel industry restarted production.
Since the apparel industry works on long calendars, the manufacturers produce garments six to four months ahead of the goods entering retail stores, therefore when COVID-19 seeped to the European markets in March, Lakhany said a lot of factories had their orders cancelled while they were in production and many customers had asked them to stop production.
He said it was too early to give an estimation of the exports at the moment which mostly consists of personal protective equipment like masks.
“Shipment, to be honest, has been insignificant, generally we take about at least a month to produce the garment, we are only now going to start preparations to exports,” Lakhany said.
“Even though production started by the first week of May, exports for fashion and normal garments will only start by the first week of June. However, there were small shipments of PPE.”
Hasitha Premarathne Group Finance Director of Brandix who also heads the firm’s India operations said PPE orders are expected to drop from around the third quarter.
But consumers in Western markets are cautiously beginning to shop as lockdowns ease. Though numbers are relatively small, window shoppers or browsers are also less.
“The footfalls to retailers are about 30 per cent of the pre-COVID levels, but many are serious buyers, so the sales volumes are comparatively higher,” Premarathe said.
“But there are challenges like fit-on and returning items which have to be solved. There is also an increase in online sales.”
But with only a small volume of orders, the industry is struggling industry and is still unable to support the pre-crisis workforce.
The industry says it directly employs around 400,000 workers and there are two million indirect beneficiaries.
Lakhany said some factories are looking at laying off because it may take up to a year for the business to come back to pre-COVID levels.
“Downsizing, rightsizing will have to happen, re-structuring of companies will have to happen,” Lakhany said.
“Some factories have already started on voluntary schemes however some are busier than the usual days because of the production of PPEs but even those factories are anticipating a downturn from July onwards.”
“Mask productions are there only up to end July, beyond that they will get back to their regular production and that’s where they will start seeing the drop,” Lakhany said.
The industry is also struggling with import controls slammed recently which had created supply chain bottlenecks making it difficult to full-fill some orders.
Sri Lanka has slammed import controls in the style of an economic embargo, as the rupee came under pressure due to money printing and the lack of a credible anchor for monetary policy. (Colombo/June06/2020-sb)