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Sunday April 14th, 2024

Sri Lanka apparel sector faces mass-unemployment, firms run out of cash

ECONOMYNEXT – Many of Sri Lanka’s apparel firms have run out of working capital and credit lines to pay salaries in April and mass unemployment looms as prospects of a quick recovery is also dim with clothes being a discretionary purchase in Coronavirus hit countries, industry officials said.

Sri Lanka’s small apparel firms will not be able to pay salaries in April, though some of the bigger firms would be able to manage for one or two months, Ashroff Omar, Chief Executive of Brandix said at an online forum organized by Advocata Institute, a Colombo based think tank.

“I believe there will be intense pressure on prices because we won’t be able to fill capacity, and that will result in several closures,” Omar said.

“So we have been advising the government that they will find massive unemployment starting at the end of April.”

Mass Employment

As an industry relying on human capital, almost 70 percent of its overhead costs are generated from its workforce, with factories consisting of 500 as well as 5,000 workers meaning there is not much room to cut costs.

Omar says that apart from the direct stakeholders being impacted, there’s a whole chain of people who provide transport and food services to the factories who also be equally hit.

The industry employs around 400,000 workers and the sector says another two million indirect workers also depend on it.

He says unless an injection is provided for SMEs initially and the rest of the industry in the longer run, survival is bleak without any revenues and a 70 percent cost.

“Buyers have requested extended payment terms, some buyers have cancelled orders, pushed back existing orders for next year therefore, resulting in a huge cash crunch,” Omar said.

“The bigger companies will be able to pay the basic wage for a couple of months more, but SMEs have given in writing that they have somehow paid March wages, but they won’t be able to pay April wages.”

Cashflows Devastated

Cashflows of most firms have been devastated. Money is tied up in raw materials and half-finished goods, the orders for which have been cancelled in some cases.

Omar says there is a “huge impact on the working capital, primarily there was inventory in form of raw materials, finished product and work-in-progress, everything has just got stuck there.”

Apparel were initially hit by raw material shortfalls after China got Coronavirus, but the worst hit came as orders disappeared with Europe and the US going into lockdown.

Exports in April will be a minuscule of what it was in the same time last year, he said.

“I believe May will be a very rough month for us, June will be tough and hopefully if the rest opens up and the demand picks up maybe from July, August or September,” Omar said.

“But we don’t see a good situation at least up to September. So, it’s very, very, critical and this industry is concerned. Being the largest exporter, it will impact the whole country.”

Sri Lanka exported 341 million dollars’ worth of apparel in April 2019 and achieved the 5 billion export target for the full year.

Buyers had cancelled orders and or requested extended credit period from 30 days to 120-180 days for already exported goods.

“For my companies, right now our priorities are the well-being of our 2500+ people – our greatest asset – many of whom are the sole breadwinners of their family; and to keep our business alive,” Chamila Samarakkodi who heads Design Studio, which has plants in Anuradhapura and Kurunegala, told EconomyNext.

“All manufacturers have paid salaries for the month of March, due on 10th April 2020, by way of collecting all available cash-in-hand at their disposal. Even this required certain pay-cuts to have been made.

“Manufacturers have no means to provide for the remaining timeframe of 6 months at minimum until trading resumes and we are all back in business.

“As such, we request the Government to join hands with us and make arrangements to provide some form of allowance for our employees during this period.”

Shriveling Demand

Sri Lanka’s garment manufacturers are expecting the demand to fall almost 40 percent for the whole year and the demand for next three months until June to shrink about 80 percent.

Apparels predominately being a fashion product is not an urgent requirement, unlike food.

“If you look at the demand, we believe there will be a contraction about 40 percent for the rest of the year but if you look at April, May and June demand will be about 70-80 percent,” Omar said.

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Sri Lanka shares about one and half percent of the 40-billion-dollar worth apparel industry worldwide, Omar said.

Omar said the biggest player China was now well on track while competitors like Bangladesh was in semi-lockdown and Vietnam and Indonesia was still working, there could be a price war.

“So, once the demand shrinks there will be a price war,” Omar said. “In that war because of the customer relationships, because of the products that you supply we will be able to retain some amount of product but it will at prices which will not be attractive at all.

“And if you can break-even you will be lucky.”

<b>Adapting to demand medical garments</b>

With the indefinite fall in demand for non-essential products while demand for food, agriculture and surgical clothing on the other hand has opened new opportunities in personal protective equipment (PPE) to fight the virus.

“There is immense pressure on pricing except for people who are involved in PPE area,” said Omar. “So, one change we are trying to do is get into other products such as PPEs which is in demand but again due to the curfew government is trying very hard to relax it but with care.”

However, the industry is still trying to source the raw materials to kick start medical garments.

“Sri Lanka’s apparel industry flexibility to switch its production line to produce medical garments and PPE suites is hindered by the unavailability of raw materials in the country,” reiterated Omar.

“Already, many companies have started supplying but the problem is raw materials which still comes from China, we have got a couple of our fabric units to come put with products.

“Sri Lanka’s Export Development Board is also pushing to open factories and resume operations as soon as possible in low risk areas.”

Factories have to operate under strict processes for production and transport.

“The standard operating procedure (SOP) for operations are very very strict,” Omar said.

“There should be social distancing, in transport buses there should be 1 person per seat, etc., so once you do all that what will be your cost, what will be your output and how many can you accommodate in a particular place?”

“So those are the challenges the industry is facing. We will go through a tough time from next to 6 to 8 months and in the short term it will not be a walk in the park.” (Colombo/Apr20/2020-sb)

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LGBTQIA+ Rights: Europe and South Asia See Similar Discriminatory Practices

ECONOMYNEXT – The rights and protections of the LGBTQIA+ community have been fraught with challenges and continue to be so, despite the many gains achieved in recent years.

Nor are those handful of rights universally applied, a recent discussion which looked at the European and South Asian perspectives on same-sex rights and unions revealed. Most developed nations have introduced protections for those identifying as LGBTQIA+, and a view from a distant lens paints a picture of tolerance. Yet, a closer look at the European arena throws up the many gaps that are evident in the application of the law.

In the so-called conservative South Asian nations, changes to legislation are slow to be implemented. That may come as a surprise, for, contrary to popular belief, same-sex relationships were culturally acceptable in the South Asian region and is not a Western concept points out Ruhaan Joshi, a Public Policy Practitioner from India.

Society’s view on same-sex relationships dimmed with the imposition of Western values and the criminalisation of such relationships with the advent of colonial rule.

While the LGBTQIA+ communities in South Asian countries currently battle to have same-sex relationships decriminalised and their unions legally accepted, the irony is that countries that first made such relationships punishable by law have moved on to be more welcoming, though some discriminatory practices continue.

Joshi was part of a discussion themed ‘On Being Queer and LGBTQIA+ in South Asia and Europe, held in Germany on April 9 this year. The discussion which included the release of two papers which examined the rights and protections of the LGBTQIA+ community in Europe and South Asia, respectively, was organised by the Friedrich Naumann Foundation for Freedom.

Joining Joshi in the discussion were lawyer and parliamentarian Premnath C Dolawatte from Sri Lanka, Milosz Hodun, President, Projekt Polska Foundation, Poland, Michael Kauch, a Member of the European Parliament and RENEW Europe Group and Inaya Zarakhel, a Dutch-Pakistani actress and an activist on Queer Rights, who moderated the discussion. The two papers were presented by Hodun and Joshi, respectively.

In his opening remarks, Kauch pointed out that while the view of the liberals is that the rights recognized in one member nation of the EU must be accepted by all member countries, that is not the ground reality, the issue of Rainbow families being a case in point.

In the context of the European Union, though the Court of Justice has ruled on the freedom of movement of those in same-sex partnerships and their families, the ruling is not universally applied by member nations.

In Italy, and some European nations, surrogacy which helps childless couples to become parents is illegal. In other situations where same-sex parents are of different nationalities a child in that union faces restriction of movement or the possibility of being stateless if one parent hails from a country where such parental rights are not recognised.

Hodun meanwhile stated that in Poland transgender persons must first sue their parents for the gender assigned to them at birth, to have their gender marker changed on documents.

Some countries such as Russia and Azerbaijan resort to State-sponsored homophobia, and in many instances politicians and political parties promote such biases to boost their voter base it was pointed out. Even where laws are in place for the protection of LGBTQIA+ rights, there is no political will to implement them.

In Europe where migrants arrive in droves seeking asylum, and are frowned upon by many of those countries, LGBTQIA+ members face even more discrimination Hodun says, both by other refugees and governments, where most often the state ignores the situation despite the guidelines issued by the UN and the European Court of Justice. Hate speech and hate crimes too are on the rise he adds stating that at least 80 per cent go unreported.

Increasingly the LGBTQIA+ community has experienced a diminishing of their safe spaces as right-wing and populist governments are elected across the globe. Taking a dig at feminism, meanwhile, Kauch states that though feminists uphold a woman’s right to opt for an abortion, they take a different approach on the topic of surrogacy.

Dolawatte who waded into unchartered waters when he presented a Private Member’s Bill to decriminalise same-sex relationships through an amendment to section 365 of the Penal Code and the repealing of section 365A in its totality, is hopeful that the Bill will pass its third reading. It’s been an uphill battle he says, referring to the case filed in the Supreme Court against the Bill. The court ruled in his favour.

He had little or no support from his own party members, but says the President of the country, and younger party members are with him on this issue. Apart from making Sri Lanka a safe space, it would encourage foreign nationals identifying as LGBTQIA+ to visit without fear, and thus boost tourism he opines.

As Joshi states society has come a long way from when LGBTQIA+ were made fun of and were subject to violence to the positive portrayal in movies. Such movies are also well-received by society. Transgender identity has a distinct recognition in South Asian religious beliefs. Hijra, Khwaja Sara or Kinnar are some names given to transgender folk and they have, since ancient times been an accepted group in society. On the one hand, there’s Afghanistan and the Maldives which make no allowances for the LGBTQIA+ community, while Nepal became the first South Asian nation in 2023, to register a same-sex marriage, Joshi states. In most South Asian nations, the courts have ruled in favour of relaxing the rules against this community, and, like in Europe, it is the governments that drag their feet.

For governments to change their stance, society must take the lead in fighting for the unconditional dignity of the individual, freedom of movement, and safeguarding the tenets of democracy, he says adding that it must also run parallel with the LGBTQIA+ community looking beyond themselves at issues that impact democratic values, and the societal restrictions non-LGBTIQIA+ groups face, such as opposition to inter-caste marriage and the right to adopt outside their caste systems and equal access to many other privileges.

While the panellists advocated working together across the global divide as a step towards achieving equal rights for all, Dolawatte also called for caution; too much pressure on such issues from Europe he said may not be welcome, and must be handled with care.

With right-wing and populist governments getting elected across the globe, Kauch claims the forthcoming EU elections will prove crucial in deciding how future and current governments ensure tolerance and diversity amongst their citizenry.

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Sri Lanka making new economic laws to embed structural reforms

ECONOMYNEXT – Sri Lanka is making new laws and also revising old legislation following a comprehensive review of past experience and lessons learned, Treasury Secretary Mahinda Siriwardana has said.

Most of these new laws focus on structural changes of the existing executive and administrative structures, Siriwardana was quoted as saying in a speech to ministry officials on April 08.

The laws related to public finance, procurement, public private partnerships, state enterprises and also a law on the offshore economy.

The following new laws are being made:

a. Public Financial Management Bill
b. Public Debt Management Bill
c. Economic Transformation Bill
d. Management of State Owned Enterprises Law
e. Public Private Partnership (PPP) Law
f. Investment Law
g. Public Procurement Bill
h. Unified Labor Law Bill
i. Food Security Bill
j. Public Asset Management Bill
k. Microfinance and Credit Regulatory Authority Bill
l. Secured Transaction Bill
m.Offshore Economic Management Bill
n. New law for facilitating proposed agricultural land lease programme
Public Service Employment Bill
o. Sri Lanka Accounting and Standard Monitoring Act

Changes are planned to the following laws

a. Amendments to Agrarian Development Act
b. Amendments to Excise Ordinance
c. Amendments to Customs Ordinance
d. Amendments to Finance Act
e. Amendments to Foreign Exchange Act. Colombo/Apr15/2024)

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After PM’s Chinese visit, US NSA talks to Sri Lanka President’s advisor on peace, security

ECONOMYNEXT – The United States National Security Advisor (NSA) Jake Sullivan held talks with Sri Lanka President’s Senior Advisor on National Security Sagala Ratnayaka focusing on regional security issues this week.

The conversation between the two comes days after Sri Lanka Prime Minister Dinesh Gunawardena ended an official visit to China in which he met President Xi Jinping and his counterpart Li Qiang in Beijing amid discussions over further investments in Sri Lanka and concerns over banning Chinese research ships.

The United States along with India is highly concerned over increasing Chinese influence in Sri Lanka, which is located in a strategic location in the Asia.

China already owns a port and a proclaimed land next to the main Colombo port in Sri Lanka and analysts say the Beijing’s ownership of assets has raised doubts if China is planning to use Sri Lanka as a military base. China has denied this and said its relationship with Sri Lanka is only based on commercial aspects.

The discussion between Sullivan and Ratnayaka focused on a range of crucial topics aimed at bolstering bilateral relations between the two nations, the President’s Media Division (PMD) said.

“Central to their discussion was the unwavering U.S. commitment to supporting Sri Lanka’s security and sovereignty,” the PMD said in a statement.

“Acknowledging Sri Lanka’s ongoing endeavours, Sullivan emphasized the importance of completing the fiscal, monetary, and governance aspects of the IMF program.”

The US along with India has raised possible threats of increasing Chinese influence in Sri Lanka, government officials have said. Both  countries see China as a security threat to the Indian Ocean region, they say.

“The conversation also delved into future prospects for collaboration between the two countries, exploring avenues for enhanced cooperation in various spheres,” the PMD said.

“Sullivan conveyed his keen interest in fostering continued engagement with Sri Lanka, underscoring the mutual objective of advancing peace and security in the region.”

“This dialogue marks a pivotal moment in U.S.-Sri Lanka relations, demonstrating a shared commitment to promoting stability and prosperity in the Indo-Pacific region.” (Colombo/April 13/2024)

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