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Sunday September 24th, 2023

Sri Lanka apparel factories running below capacity, 20-pct drop in orders

ECONOMYNEXT – Sri Lanka’s apparel exporters are seeing a drop in orders amid an economic slowdown in the West, which is forcing factories operate below capacity and adopt strategies to cope State Minister of Investment Promotion Dilum Amunugama said.

“There is drop in orders of around 18 to 20 percent,” Amunugama told reporters. “When orders drop these private companies have to take decisions to adjust.

“Sometimes they have to stop a production line, or operate below capacity.”

A recent closure of a factory by Sri Lanka’s Hirdramani group related to a building leased.

Investors are not closing factories and leaving Sri Lanka, and other exporting countries are also experiencing, a fall in demand, he said.

As the US Fed and European Central Bank printed money and inflated the money supply, during the Coronavirus crisis, effectively accommodating a real shock through monetary means, there was as surge in demand triggering supply chain shocks and inflation.

The supply chain bottlenecks from the sudden surge in demand fired even more orders as companies ran up inventories to avoid stock-outs.

Eventually Western mainstream economic bureaucrats fired inflation not seen since the early 1980s, at the tail end of the Great Inflation period of the 1970s.

Western central bankers are now back peddling furiously, hiking rates and withdrawing excess liquidity, triggering slowdown and recessions.

Sri Lanka last year exported about 5.6 billion US dollars of apparel. Up to April exports were down 23 percent to 343 million US dollars, with price fall also contributing.

“The 20 percent decline in markets is because of the global demand falling that has affected most of the apparel manufacturing countries,” Yohan Lawrence, the Secretary General of Sri Lanka’s Joint Apparel Association Forum said.

“In the last seven months we have seen a decline in our exports and we expect that to continue for another 5 to 6 months”.

“In the US, from January to March 2023, their global apparel imports are down 20 percent which are coming from various countries like China, Bangladesh, Vietnam etc.”

“They have excess stocks in their stores. This will turn around in another 4-5 months.”

No firm has left the sector, Lawrence said.
“Obviously when companies have a sales decline of 20 percent for 7-8 months, maybe they are rearranging in some ways. But we have not seeing companies closing or pulling out from Sri Lanka.

“But factories there will be some adjustments in the head count and there will be one or two factories struggle but the industry will continue.”
The industry is expecting demand to recover in the second half of the year.

Lawrence welcomed Sri Lanka’s efforts to strike Free Trade Agreements in the past few months, which will help all exports. (Colombo/ May 27/2023)

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Sri Lanka India industrial zone around Trinco, maritime links mooted

ECONOMYNEXT – Sri Lanka’s Ports Minister Nimal Siripala de Silva had highlighted the desire of both the Governments to work closely to develop the industrial zone at Trincomalee, after accepting an invitation to participate in a maritime summit.

The Global Maritime India Summit (GMIS) will be held in India from October 17-19, 2023 at Mumbai where Sri Lanka has been invited at a partner country.

At a curtain raiser event on September 22, India’s High Commissioner in Colombo, Gopal Baglay had said both countries were working on enhancing sea connectivity according to a vision document launched during a recent visit of the President of Sri Lanka to India.

Minister de Silva will lead a delegation from Sri Lanka to the summit.

Secretary to the Ministry of Ports, Shipping and Waterways, Government of India, T K Ramachandran said the Global Maritime India Summit aims strengthen the Indian maritime economy by promoting global and regional partnerships and facilitating investments.

The event will give an opportunity to the Government of Sri Lanka to attracting greater investment from India in development of its maritime infrastructure, Ramachandran said.

It will also facilitate greater business to business interactions. (Colombo/Sept24/2023)

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Sri Lanka brings back import para tariff on milk

ECONOMYNEXT – Sri Lanka has brought back an import para tariff called the Ports and Airports Levy, to several grades of milk powder.

Milk powder has been removed from a list of PAL exemptions, making them liable for a 10 percent tax.

The PAL para tariffs are also a contentious issue in terms of export competitiveness, and the government has previously given undertakings that they will be eliminated.

Trade freedoms of the poor figure in an IMF/World bank reform program with the governments.

Milk is a protein rich food, in a country where children of poor families are facing stunting and malnutrition.

Economic nationalism is seen at high levels in food, with several businessmen are pushing for trade protection, amid an overall autarkist (self-sufficiency) ideology, going directly against policies followed in East Asia, which the same as hold up as examples.

Sri Lanka keeps dairy product prices up ostensibly to bring profits to a domestic dairy company and farmers.

Sri Lanka also keeps maize prices up, ostensibly to give profits to farmers and collectors. (Colombo/Sept22/2023)

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Sri Lanka govt warns liquor manufacturers: pay defaulted tax or lose licence

ECONOMYNEXT – Sri Lanka government which is struggling to raise the state revenue despite   higher taxes, has warned liquor manufacturers to pay defaulted taxes or lose their licence.

The government is now getting tough with past tax defaulters amid concerns over falling short of this year’s revenue target agreed with the International Monetary Fun (IMF).

“Liquor manufacturing firms owe us 660 crore rupees (6.6 billion rupees),” Siyambalapitiya told  reporters on Thursday (21).

“Most of this or around a third is the only excise tax amount to be paid. The rest is penalty. If a liquor manufacturer does not pay on time, we impose a penalty of 3 percent per month This means 36 percent (penalty) per annum,” he said.

“We have given them deadline to repay the basic excise taxes. If they don’t pay, we will cancel their licence.”

President Ranil Wickremesinghe’s government committed an ambitious revenue target among many other reforms to the International Monetary Fund (IMF) in return to a $3 billion loan package.

However, the revenue could face a short fall of 100 billion rupees, State Finance Minister Ranjith Siyambalapitiya has said.

A new Central Bank Act also has legally prevented the government of printing money at its discretion as  in the past.  (Colombo/September 24/2023)

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