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Friday August 19th, 2022

Sri Lanka apparel industry appeals for re-opening, salary support over Coronavirus crisis

ECONOMYNEXT – Sri Lanka’s apparel industry has asked for early re-opening of factories to avoid competitors taking their business, suspension of provident fund contributions and support and more credit without collateral to pay 400,000 direct workers.

The industry is expecting to lose 1.5 billion US dollars of order in the next quarter, hitting 400,000 workers and over 2.0 million indirect workers, Sri Lanka’s Joint Apparel Association Forum said.

Unless factories are re-opened “a very serious trade shift that may take place in favor of our competitor countries,” the JAAF said.

Competitors like Vietnam and Cambodia are open, the group said.

Vietnam is actively tracing contacts but the country is largely operating.

“Suspension of EPF/ ETF for 6 months for employers and employees is another temporary relief requested to increase worker income plus aid in the current working capital dilemma of companies,” JAAF said.

Vietnam has also suspended social security contributions for all workers.

JAAF said there was no substance for workers especially small firms. While exporters have lost markets, apparel firms catering to domestic market was also hit with no sales.

The central bank is re-financing loans which have been limited 25 million rupees per company, the JAAF said.

The JAAF is asking for loans above the 25 million limit for smaller firms to pay a two month basic salary to workers.

Sri Lanka is waging battle to stop Coronavirus and is making strong progress with confirmed count at 190 a month after the first Wave II infections from third countries began in Sri Lanka.

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Sri Lanka has slapped nation-wide curfews as part of the effort, though authorities have said they would consider relaxing controls around the third week of April.

The full statement by JAAF Chairman Mr. A. Sukumaran on

The Impact on Sri Lanka’s Apparel Industry Due to the Prevalence of Covid-19

As the novel coronavirus (Covid-19) pandemic continues to spread across the globe, people around the world find their daily lives and means for subsistence affected in numerous ways. The impact of this phenomenon on the apparel industry in Sri Lanka is unprecedented and second to none. Currently, the apparel industry in Sri Lanka is home to over 400,000 direct employees and in the last fiscal year recorded $5.6 billion of exports.When compared to the last fiscal year, the Joint Apparel Association Forum (JAAF) foresees an immediate contraction of US $1.5 billion in Sri Lankan apparel exports during the 3-month period ending in June. However, the damage does not stop there as we expect further demand contractions that could result in reduction of apparel exports by an additional 30 – 40% after June, in a best-case scenario.

The reduction forecasted above is due to a multitude of factors such as mass cancellations by buyers of orders currently in production or already produced, orders that Sri Lankan entities have assumed liability for through the purchase of necessary raw materialforce and orders for future.These circumtances coupled with forced, discounts, delayed payment terms, have led to a decimation of working capital across the industry and significantly hindered the future prospects of revival to the normalcy. The situation alluded to above is further compounded when the effects of the current closure with no clear date of resumption are factored in.

The primary concern of ours at this point of time is the health and well-being of all employees and bearing this in mind the current curfew is prudent to prevent the accelerated spread of the novel coronavirus. However, it is inevitable that the extended curfew will lead to additional losses to those projected above as more and more orders in production get cancelled as a result of delays in production. The impact of the curfew is compounded and may result in trade shift due to countries like Vietnam, Cambodia, and Indonesia, our main competitors, being completely operational. The few orders Sri Lanka could be getting are being diverted due to the uncertainty related to when the country will begin work again.

The members of JAAF believe that extreme measures are inevitable unless there is intervention and support to avert the impending disaster. While most companies have pledged to pay March salaries, a vast majority of the industry will struggle to pay salaries from the end of April onwards due to the factors outlined above that have led to the evisceration of the industry’s working capital.

Despite the challenges of the situation, the primary goal of industry participants is to do what is best by the workforce. While measures such as pay cuts are inevitable,most players are considering relative income bands and ensuring any reductions are reasonable and do not adversely impact lives to an unreasonable degree.

The JAAF played a key role in working with the Government to obtain certain relief measures such as the concessionary working capital loan and others granted through Central Bank circular nos. 4 and 5.

We are extremely grateful for these provisions however, we look forward to working closer with relevant authorities to further explore what can be done to mitigate the current situation as the problem has evolved since these measures were granted.

When these relief measures were granted, Sri Lanka’s primary issue was a supply chain problem related to raw materials coming in from China. Currently, the problem has evolved to become one of demand contraction. This new problem would require further measures to avert the disastrous outlook for the industry.

Keeping the well-being of our employees as our primary focus and the development of a scheme that would enable us to do what is best for our workforce, our current mission remains working with all parties involved, including the government, to develop a modality that can benefit those dependent on the apparel industry for their sustenance despite the low demand projections in the coming months.

Further, industry players are exploring all new markets in play, including those related to new products currently in demand in Europe and North America. Despite the presence of other markets, it is unlikely any of them will compensate for the losses the industry is and will be facing.

The sustenance of this industry is vital to over 400,000 direct beneficiaries as well as over 2 million indirect beneficiaries. Sri Lanka’s apparel industry has a proud history and we implore that all avenues are explored to ensure the continued survival and growth of an industry that is vital to countless individuals and this country we all call home.

Failure to intervene at this stage will result in the inevitable doom of the industry with a large proportion of participants being forced into staying at home with no work to fulfill.

With this situation in mind JAAF tabled the following proposals for urgent consideration .

They are to reopen apparel factories in their full capacity as early as possible to avoid a very serious trade shift that may take place in favor of our competitor countries. Since our competitors like Bangladesh, Cambodia, Vietnam, and Indonesia still remain open for business despite the presence of COVID 19.

Secondly JAAF requested a means of sustenance for employees who will have no work to perform from April, for Companies employing less than 3,000 people .JAAF is confident that large and strong players will have their own mechanisms to face force majeure circumstances like this of course only for a given period.

Suspension of EPF/ ETF for 6 months for employers and employees is another temporary relief requested to increase worker income plus aid in the current working capital dilemma of companies.

Finally a request was made to that directions be given to the banking community to grant the loan beyond Rs.25mn and sufficient enough to pay a minimum of two months basic salary being paid by an applicant company who is willing and capable of bearing that liability since we are advised by commercial banks that Central Bank had instructed outside the circular to limit the loan to Rs.25mn per company for better distribution and that banks be directed to provide above loan without collateral but under the refinancing scheme of the government.

We requested that these proposals are treated with the utmost urgency.

Failure to do so would result in the non-existence of an industry to reopen once the global economy normalizes.

Export oriented SME are at very difficult situation compared to large players and our members who are catering to the domestic market also will be in a dire status as a minimum of 50% of their turnover is totally lost as a result of missing this festive season.

Thus the fate of Sri Lanka’s apparel industry where 2 million citizens of this country relies is dependent on the effectiveness and speed at which these proposals can be implemented.

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Sri Lanka schedules 3-hour power cuts for Aug 20, 21: regulator

ECONOMYNEXT – Sri Lanka will impose power cuts of up to three hours on Saturday August 20 and Sunday August 21, Public Utilities Commission (PUCSL) Chairman Janaka Ratnayake said.

All areas (A, B, C, D, E, F, G, H, I, J, K, L, P, Q, R, S, T, U, V and W) will have power cuts of 1 hours and 40 minutes between 10.30 am and 06.00 pm and 1 hour 20 minutes from 06.00pm to 10.00 pm.

Click here for a detailed schedule.

The state-run Ceylon Electricity Board (CEB) said supply interruption time and restoration time will vary within 30 minutes as indicated above.

Sri Lanka’s daily scheduled power cuts that were reduced to one hour in July with power generation from hydro power plants contributing more than 50 percent to the main grid reducing thermal power plant use was extended to three hours last week due to a breakdown at the Norochcholai coal power plant.

According to officials, the breakdown happened in Unit 1 of Norochcholai which will take around two weeks to repair.

The Minister of Power & Energy said Unit 2 is undergoing scheduled maintenance work while Unit 3 will continue to operate. West Coast and other fuel power pPlants will be used to manage the supply, the ministry said. (Colombo/Aug02/2022)

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Sri Lanka guidance peg edges T-bond yield edge down

ECONOMYNEXT – Sri Lanka Central Bank’s guidance peg for interbank transactions edged down on Friday (19), while yields in Treasury bonds picked up slightly and in T-bill remain unquoted in dull trade, a day after the Central Bank announced the policy rates will remain stable, dealers said.

A bond maturing on 01. 06. 2025 closed at 27.95/28.05 percent on Friday, slightly up from 27.90/28.00 percent on Thursday.

No T-bills were quoted on Friday, dealers said.

Meanwhile Sri Lanka’s central bank announced a guidance peg for interbank transactions further weakened by three cents to 361.00 rupees against the US dollar on Friday from 360.97 rupees.

Data showed that commercial banks offered dollars for telegraphic transfers between 368.00 and 370.00 for small transactions.  (Colombo/ Aug 19/2022)

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Sri Lanka records 10 new COVID-19 deaths in 48 hours as case numbers rise

ECONOMYNEXT –  Sri Lanka recorded 10 COVID-19 deaths in the 48 hours from August 17 to 19 taking the country’s pandemic death toll to 16,640, health ministry data showed.

Sri Lanka is experiencing a slight increase in COVID-19 cases with the relaxation of public health restrictions relating to face masks and public gatherings.

Health authorities said the situation will be monitored constantly and have asked the general public to continue to follow basic hygiene measures in order to control the spread of the virus again in the community.

In August alone 2,924 new cases were recorded in Sri Lanka, with 84 deaths attributed to the disease.

So far in 2022, from January onward, health authorities have identified 81,157 patients to date.

Epidemiology unit data showed that 874 patients are currently receiving treatment, out of which 716 are receiving home based care.

The spread of the virus has increased with the use of public transport rising after an easing of a fuel crisis.

Sri Lanka is also facing difficulties in securing essential medicine supplies for the health sector due to a forex shortage.

Health officials said if the number of COVID-19 patients rise to a level the health sector cannot manage,  with the added issues of fuel and medical shortages, the health system might collapse.

“It is the responsibility of us all. There is no use trying to forcibly control people. We all have the responsibility to reduce or stop the spread of the virus before it gets out of control. We have been living with it for the past two years,” Deputy Director General of Health Services Dr Hemantha Herath said. (Colombo/Aug19/2022)

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