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Sri Lanka exporters buckle-up for Coronavirus hit on China supply chain

ECONOMYNEXT – Export industries in Sri Lanka which depend on inputs from China are looking for alternative source markets as a Coronavirus epidemic continues, with fears of a bigger fallout if the crisis continues.

“We don’t know what the impact is going to be, if it will be a minor impact or major impact, nobody knows at the moment,” Rehan Lakhany, Chairman of Sri Lanka Apparel Exporters Association told EconomyNext.

“We cannot say until we have clarity as to when China will open up. And all depends on that.”

But already the apparel industry is looking for alternative sources for inputs.

“How much of those accessories (apparel accessories) can be sourced from other locations also depends on each individual case,” he said.

Longer Delivery Time

Sri Lanka central bank has said that suppliers’ delivery time was going up especially in the wearing apparel sector.

Lakhany said even if they find alternate markets temporarily, there would be a cost implication due to the shift and depending on different locations it could also impact the delivery lead time.

“Although, lengthening of Suppliers’ Delivery Time usually indicates higher demand for materials with the expanding manufacturing activities, the New Coronavirus (COVID-19) outbreak in China since early January 2020 has mainly caused this delay,” the central bank which compiles a purchasing manager’s index said.

“Further, many respondents in this sector highlighted that their import orders for materials from China have been delayed indefinitely due to the same reason.”

In China, a Lunar New Year holiday was extended and workers were also not turning up at factories in many cities, and internal supply chains were disrupted with trucks and drivers facing restrictions, media reports said.

Inputs moving from neighboring countries into China have also been disrupted.

Trucks were held up at the border with Vietnam with 14 days quarantine being slapped on drivers, disrupting both inputs to companies involved in global supply chains as well as basics such as food, reports said.

According International Trade Centre, an online information portal, Sri Lanka imported 257 million US dollars’ worth cotton in 2017 from China out of 654 million US dollars of total imports.

Sri Lanka also imported 307 million US dollars of knitted fabric from China out of a total of 843 million US dollars and knitted apparel accessories 16.9 million US dollar in 2017 out of 70 million US dollars.

Other non-knitted apparel accessories accounted for 35.8 million US dollar in out of 205.3 billion US dollars in 2017.

Trade Partner

China is Sri Lanka’s second-largest import market after India accounting for almost 21 percent of Sri Lanka’s imports while exporting 3 percent to the market.

Sri Lanka imports a wide range of products such as fabrics, plastic, machinery and steel as well as final goods for retail use. Exports of goods to China include footwear, metal ores, and base metals, according to Colombo-based Institute of Policy Studies.

China is Sri Lanka largest trade partner after India.

In 2018 Sri Lanka imported 4.1 billion US dollars of goods from China in other terms 18.5 percent of the total, just behind India with 4.2 billion US dollars, according to central bank data.

Sri Lanka exported 239 million dollars of goods to China or 2 percent of the total.

China is also important in services trade with tourism being hit from travel restrictions.

Sri Lanka’s tourist arrivals dropped 7.4 percent from a year earlier to 226,094 in January 2020, and visitors from China dropped 15 percent to 22,363. Steeper falls are expected from February.

Several construction projects in Sri Lanka are also delayed with restrictions on workers.

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China Slowdown

More than 350,000 containers have been removed from global trade since the outbreak of the Coronavirus epidemic, Sea-Intelligence, a shipping consultancy has been quoted as saying.

China extended its Lunar New Year Holiday’s till February 10, 2020 and closed many industrial operations temporarily to contain the viral spread.

Wuhan, the capital of Hubei province where the virus spread, extended the New Year holidays until February 13, longer than Shanghai and Beijing.

On the other end, countries, businesses imposed travel bans and even closed their border to China.

Toyota closed its plants in China at least till February 10th, while Honda and Nissan have flown back its employees to Japan.

IKEA, the Swedish retail store closed 30 of its outlets in China until further notice, followed by Google shutting operations in China, Hong Kong and Taiwan and advising staffs not to visit the country.

Starbucks, the American coffee chain closed 2,000 outlets in China.

China has also upgraded the death toll, saying earlier calculations were not correct. Most of the dead are old people, who are finding it less easy to battle the virus and also get medical care, according to media reports.

Coronavirus has killed 1,800 people and more than 72,000 were infected China said Tuesday. New cases reported were 1,886, which was the lowest in recent days. (Colombo/Feb18/2020-sb)

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