The 30 member CNGA delegation participated in business-to-business (B2B) meetings, factory visits, and dialogues with key governmental institutions.

“The primary objective of this high-level delegation was to bolster existing trade relations and explore fresh avenues of collaboration and invest in the Sri Lankan apparel industry,” the EDB said in a statement.

“The B2B meetings provided a conducive environment for fostering direct dialogue and exploring potential synergies between the Chinese representatives and their Sri Lankan counterparts.

The interactions enhanced mutual understanding, facilitated knowledge sharing, and lay the groundwork for investment opportunities and mutually advantageous partnerships, EDB said.

The CNGA is a leading industry association with over 1,400 major members and covers most of the original apparel brands in China. (Colombo/May15/2024)

This is subject to the approval of the Department of Foreign Exchange of the Central Bank of Sri Lanka.

After the investment Hela Apparel will directly hold 99.9 percent in Hela Brands Limited, the firm said in a stock exchange filing.

The remaining 0.01 shareholding would be held Hela Clothing (Private) Limited, a subsidiary company.

Hela, an apparel manufacturer, has factories across Africa and design facilities in Europe.

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Sri Lanka’s Hela Apparel Africa expansion backed by Norfund

Sri Lanka’s Hela Apparel buys UK-based Focus Brands

In January the company said it acquired Focus Brands, a UK based brand licensing house, which is involved in design, sourcing, distribution and promotion of sports fashion and lifestyle apparel brands.

A Hela Apparel Holdings Plc share was trading up at 6.20. (Colombo/March28/2024)

The exhibition is scheduled to be held in June and has been organised by the Sri Lanka Export Development Board (EDB), Sri Lanka Apparel Sourcing Association (SLASA), Sri Lanka High Commission in UK, and the Joint Apparel Association Forum (JAAF).

The objective of the exhibition is to “support apparel exporters in establishing business connections with UK buyers and expanding exports to the UK through the UK Developing Countries Trading Scheme (DCTS) and expand the Sri Lanka apparel exports share to the UK,” SLASA said in a statement.

“Additionally, the aim is to showcase Sri Lanka as a responsible apparel manufacturing destination in Asia, fostering awareness among UK-based buyers.”

Sri Lanka’s garment export sector is facing a decrease in demand in the high-end market over the last two years in its main markets, the United States of America, the United Kingdom and European countries.

“To cope with this situation, it will be essential to identify new markets as well as new buyers within the market.” (Colombo/Feb6/2024)

Hela has acquired a 100 percent of Focus Brands from JD Sports Fashion Plc, a statement said. The firm paid 8 million sterling pounds, a stock exchange filing said.

“Focus Brands will form the basis for the organisation’s new brand licensing division, which will initially operate independently of the existing apparel manufacturing business,” Hela Apparels said.

“The transaction also marks the first time a Sri Lankan apparel manufacturer has acquired a brand management company in one of its key markets…”

Hela said the acquisition will bring significantly closer to its end customer and expanding its range of services to brand marketing and distribution,

“We see immense potential to build significant synergies with our existing manufacturing business, supported by the addition of a Focus Brands well-experienced team of over 200 who have a proven track record of successfully growing major apparel brands,” A. R. Rasiah, Chairman of Hela Apparel Holdings said.

“We intend to leverage their renowned design, product development, marketing, and distribution capabilities to further elevate Hela’s offering to its existing customers across the industry.”

Hela will have access to Focus Brands’ six product showrooms located in London, Manchester, Berlin, Munich, Düsseldorf, and Amsterdam, and a sourcing office in China as well as a network of warehousing facilities in the UK and Europe. (Colombo/Jan29/2023)

A statement by Fitch Ratings said it “has downgraded Sri Lanka-based Hela Apparel Holdings PLC’s National Long-Term Rating to ‘BB+(lka)’, from ‘AA- (lka)’. The Outlook is Negative.”

“The downgrade follows the sharp deterioration in Hela’s financial profile following the apparel manufacturer’s significant adjustment of financial accounts from the interim accounts during its annual audit for the financial year ended March 2023 (FY23).

“Hela reported additional operating costs of more than USD6 million, leading to a nearly 80% reduction in EBIT, and higher finance costs of more than USD1.6 million, cutting EBITDA interest cover to 0.3x, from 0.8x.

“The Negative Outlook reflects our expectation that interest coverage will stay weak in the next 12 months, leading to continued strain on liquidity.

“We expect Hela to continue to make EBITDA losses in the next 12 months, leaving the company entirely reliant on the success of its turnaround strategy and the support of external lenders.” (Colombo/Nov9/2023)

Sri Lanka appointed a committee to look in to growing cannabis for export, and report has been completed. Authorities have tapped international experts to help devise a set of rules to govern cannabis growing and processing.

Several investors have expressed interest.

“They will not only have to grow it, but manufacture a product which will be the value addition part, Minister Amunugama said.

“How we do it is being discussed. We are working with the experts, plus the investors, mostly foreign guys, so that we won’t have disputes later once we lay the rules,”.

The investments will be contained within a zone once the rules are finalized.

Canabis has multiple uses, including medical applications linked to the active ingredient cannabidiol. (Colombo/May27/2023)

A group of individuals had attacked the managing director of an apparel factory in Halpe, Katana, after breaking into his residence. The Omani national is on an “observation tour”, the Joint Apparel Association Forum representing the trade said.

A security officer as well as the Omani national had been injured.

“As the apex body of the apparel industry, we condemn such acts of violence,” the JAAF said.

“We call on law enforcement authorities to act swiftly and take prompt action to uphold the rule of law and bring the instigators of this attack into custody.

“We empathize with those affected by the incident and request that the matter be allowed to reach a peaceful resolution in accordance with the laws of the land.

“The Joint Apparel Association Forum (JAAF) vehemently condemns this cowardly attack and calls for an impartial investigation and swift legal action from the officials in charge.”

The attack had taken place on Thursday March 30. The factory employs over 300 workers. (Colombo/Apr02/2023)

“We have our manufacturing branch in China to support to localize and strategize the Sri Lankan manufacturers, “. Surain Senaratne, the Factory Manager of Grand Gain Industrial (Ceylon) told Economy Next.

“We hope to provide 600 direct jobs, along with other indirect jobs as well as there will be some food suppliers, Transporters and testers etc.”

The facility has the capacity to produce 1.5 million bra cup pairs per month and expected to produce 10.6 million pairs garments per year.

Sri Lanka is a top producer and exporter to intimate wear, and is estimated to supply 5 percent of the global demand.

Sri Lanka is also the second-largest exporter of undergarments to the USA and the EU, accounting for 10 percent of the supply to each market, according to Sri Lanka Export development board.

The country process for global brands including Victoria’s Secret, H&M, Tommy Hilfiger and Mark and Spencer. (Colombo/ Mar 7/2023)

NDB Investment Bank Limited was the financial advisor.

Hela Kenya, established in 2016, over 4,000 people and produces around 20 percent of the country total apparel exports.

Hela Kenya had set up manufacturing locations in Ethiopia and Egypt.

“Our expansion to Africa has been a rewarding venture, and we continue to see many opportunities within the region for further development,” said A.R Rasiah, Chairman of Hela Apparel Holdings in a statement.

“Given the increasingly unpredictable global environment, establishing long-term financing relationships with strategic partners who share our vision for Africa as a global apparel sourcing hub plays a critical role in ensuring the envisioned plans for growth are realized.”

Norfund’s will be used to strengthen supply chain partnerships in East Africa and enable Hela to leverage regional sourcing from Kenya and Tanzania to a larger extent, providing significant cost and lead time advantages for manufacturing in the region. A

potential supply chain investment is also being considered by Hela for the proceeds.

“Proposed Capex investments within the Kenyan manufacturing facility on process automation will enhance productivity and place the facility in a more competitive position within the region” the firm said.

“We see great opportunities in contributing to large-scale job creation in East Africa by investing in the apparel and textile industry, in line with our goal of building sustainable businesses to combat poverty” said William Nyaoke, Norfund’s Regional Director for East Africa in a statement. (Colombo/ Feb 27/2023)

The Sri Lanka Export Development Board (SLEDB), the country’s export overseer, said a significant decline in the order volumes in all the exporting sectors has been observed.

“All orders are dropping due to the recession,” SLEDB, Director of Policy and Strategic Planning, Kumudinie Mudalige told Economynext.

“All sectors, mainly, apparels, and coconuts, have informed us that their order books are not full in comparison to other years.”

Industry leaders in apparel, rubber and coconut industries told EconomyNext that sales are slowing down, and the country should explore other markets to secure more exports.

“In the last few months, we saw a decline in apparel exports due to the impact of a pending global recession, overstocking of goods in customer warehouses and the fallout of the war in Ukraine,” Joint Apparel Association Forum (JAAF) Secretary General, Yohan Lawrence said.

“The forward order book is similarly showing lower volumes and we expect Q1 2023 to be around 20 percent less than the same period last year.”

The industry in 2022 ended up with exports of 5.5 billion US dollars, an increase of nearly 10 percent from a year ago. However, in the last four months, it has fallen to an average of 430 million US dollars per month from 500 million.

With interest rates increasing, the purchasing ability of customers in these markets have gone down, resulting a drop in demand which affects exports.

“This would be over and above measures taken to protect our existing markets in the USA, the EU, and the UK,” Lawrence said, adding that JAAF has identified five markets are showing potential including Canada, India, China, Australia, and Japan.

“We welcome the FTA negotiations with China and India and would request that the authorities also look at the other countries we mentioned,” he said.

“Joining with other markets will give us the ability to compete on even terms with those countries.”

He added that Canada should be looked at separately.

“The UK is heading for a recession next year and it is one of our key markets.,” Director General of the Sri Lanka Association for Manufacturers and Exporters of Rubber Products (SLAMERP), Rohan Masakorala said.

“The US may not go into a recession, but it may slowdown.

“We have to slowly look at more diversified markets to get into, rather than sticking to our two main export markets.”

The SLEDB Development Board said the government has identified this issue and is making attempts to explore markets such as China, India, and Thailand. (Colombo/ Feb 07/2023)

Dinusha Somasiri. Head of Innovation & product development at Hayleys, said, due to the energy consumption reduction in the European countries, the customers of have requested thicker fiber to cope with the cold.

“They have asked us to produce thicker fabric to make the winter clothing,” Somasiri told EconomyNext.

“Due to the energy use reduction, they have to now reduce the use of in-house heaters. So at the moment that is a market we have more opportunity”.

He also said, the firm is also focused on designing and manufacturing high tech sportswear as well.

“The sports world need more water absorbing and heat resisting clothes, and that is another trend we are seeing growing at the moment” Somasiri said.

Europe is in an energy crisis and a recession after the Ukraine and Russia war, with deliberate reduction of gas supplies by Russia is the main cause of the recent skyrocketing gas prices in the EU, which have impacted the price of electricity produced in gas-fired power plants and affected electricity prices overall.

Due to the energy crisis, the Europe Union has taken measures reduce electricity by 10 percent by the end of 2023, and asks the European countries to take reduction measures in their countries respectively.

With the energy consumption being reduced, the EU has warned the countries to be prepared to withstand a harder winter season where the energy consumption usually goes high.

Hayleys Fabrics currently earns a 150 million USD per annum and produces around 17,326 metric tons of fabrics per year after acquiring South Asia Textiles Limited on 22nd April 2021. (Colombo/ Nov 30/2022)

Wickremesighe in his capacity as the finance minister has announced bold tax hike to raise the government revenue and reduce the budget deficit. Sri Lanka is in discussion for a $2.9 billion International Monetary Fund (IMF) loan and the global lender has requested some drastic measures to boost tax revenue as preconditions for the loan, government officials say.

The tax revenue is expected to be raised by 69 percent in 2023 to 3.13 trillion rupees compared to this year with increase in many taxes including personal taxes. The corporate tax is raised to 30 percent from 24,  most concessions given to economically important sectors were removed.

Key sectors amongst the affected are exports and agriculture where the tax rate was increased from 14 percent to 30 percent, exporters say.

“Exporters understand that we have to contribute in a bigger way in the current
circumstances. But the government should have discussed it with us before going up to 30 percent,” Rohan Masakorala, Director General of Sri Lanka Association of Manufacturers and Exporters of Rubber Products, told Economy Next.

Investors have already started to find other routes to continue their export business at a lower cost and they are likely to go to other export destinations and set up their business since they always look at the profit side of their business, exporters say as high taxes have discouraged them to invest in Sri Lanka in future.

“They will look at the tax benefits in those export countries and will invest in those countries,” Masakorala said.

“Investors coming into Sri Lanka for manufacturing and exporting will not see Sri Lanka as an attractive destination compared to other destinations. These are the challenges.”

Sri Lanka’s monthly good export earnings have been over $1 billon despite the unprecedented economic crisis. However, this earnings are expected to fall as looming global recession has reduced export orders from Sri Lanka.

Related: Looming global recession threatens dollar earning of Sri Lanka’s top exports

“The exporters begin transfer pricing and setting out partnerships in other countries, where the tax rates are between 12% to 15%. They can do their expansions in third countries,” Masakorala said.

“Since they are experienced and some of the products are experienced in different areas so they technically know how that market works. There are emerging markets where they call for investors.”

Value Added Tax (VAT) and Social Security Contribution Levy (SSCL) have already hit a booming IT sector, industry experts say.

The Joint Apparel Association Forum (JAAF), the body which deals with the country’s top export earnings garments, in a statement said the removal of the concessionary rate granted to exporters could make the country’s apparel industry “very uncompetitive when compared with regional peers”.

“The competitor countries’ tax  25 percent to 30 percent but effectively exporters pay about on average between 12 percent to 17 percent because of rebates and other benefits whereas in Sri Lanka exporters do not get that and the that leads to lower profitability,” Maskorala said. (Colombo/Nov26/2022)

The dip could slow down Sri Lanka’s efforts to move out of the unprecedented economic crisis resulted after failed economic policies and heavy money printing under previous President Gotabaya Rajapaksa.

The apparel industry accounts for nearly half of the island nation’s total export earnings. Textiles and garments contributed $5.4 billion last year out of the total annual $9.7 billion export earnings. Apparel exports have accounted for 57 percent of export earnings of $8 billion in the first nine months of this year.

“Normally, we receive apparel orders six months ahead of time. Now we have not received the orders as they already have stocks with them and they don’t have storage facilities,” Indumini Kodikara, Export Services Director, Export Development Board (EDP), told EconomyNext.

“In the next six months, there will be a very low amount of orders.”

The world’s leading economies are sliding into recession as the global energy and inflation crises sparked by Russia’s invasion of Ukraine cut growth by more than what was previously forecasted.

The Joint Apparel Association Forum (JAAF) admitted that the industry has started to see a decline in export orders.

“We are projecting over the next two-three months we will see a drop of 25-30 percent in the order volumes”, JAFF Secretary General Yohan Lawrance told EconomyNext adding that a drop has already been experienced in October.

EDB’s Acting Director of Industrial Products Manoja Dissanayake said the country has seen a decline in some other exports as well.

Sri Lanka has so far seen over $1 billion in monthly export earnings almost throughout this year as the country depreciated the rupee currency by over 50 percent in the last eight months.

Some exporters predict a slowing down of exports from December as the government has raised tax rates. However, the government has said it had not taxed exports.

As a result of the disruption caused by Russia’s invasion of Ukraine, Sri Lanka’s traditional markets such as Europe and USA have been reducing exports amid tightening monetary policy to curb increasing inflation.

Sri Lanka is forced to push itself to look into alternate markets such as India, Russia, Taiwan, and regional countries such as Malaysia and Singapore to boost its exports with or without free trade agreements. (Colombo/Nov23/2022)

Sri Lanka President Ranil Wickremesinghe’s office said Monday October 03 morning that von der Leyen had made this reference to the EU’s assessment of Sri Lanka’s commitments in a statement she had made on Sri Lanka.

Sri Lanka’s access to the Generalised Scheme of Preferences Plus (GSP+) concession has been under review for extension as the country failed to adhere to several of the commitments it had made, mainly with regard to human rights.

GSP+ is an annual trade concession worth over 500 million US dollars which has boosted Sri Lanka’s exports to EU member states over the years mainly in the garments sector, a top forex earner for the island nation.

The president’s media division (PMD) said that von der Leyen had congratulated President Wickremesinghe on his election and has assured the EU’s support to the government of Sri Lanka for its efforts to successfully overcome the country’s prevailing currency crisis.

According to the PMD, the EU commission chief’s statement has said that, at a time of unprecedented challenges faced by the people of Sri Lanka, the European Union remains committed to support Sri Lanka’s efforts to overcome the crisis successfully, including the necessary reforms that will bring the country back to a path of inclusive prosperity and lasting national reconciliation.

She had said that, this process, freedom of expression and assembly, dialogue among all stakeholders, as well as respect for the rule of law and fundamental rights will remain essential.

The EU has stressed on several occasions that Sri Lanka needs to uphold its commitments, particularly with regard to eradicating human rights violations in the country. Of particular concern to the EU has been Sri Lanka’s controversial Prevention of Terrorism Act (PTA), an anti-terror law that critics have called draconian.

In June 2021, the European parliament adopted a resolution calling for the repeal  of the PTA and inviting the EU Commission to consider temporarily withdrawing Sri Lanka’s access to GSP+.

More recently, a spate of arrests of anti-government protestors by police since the election of President Wickremesinghe has drawn international criticism, especially with regard to the detention of three activists under provisions of the PTA. The government, however, maintains that all arrests so far have been legal and were of individuals accused of offences such as damaging public property.

The PMD statement said von der Leyen had “commended the success in the efforts to introduce and steer policies that will ensure the short and long-term interests of all Sri Lankans and address the devastating efforts of the unprecedented economic downturn as well as the negotiations with international financial institutions and creditors.”

She has also expressed an interest in working closely to strengthen further the ties and cooperation, based on commitments to shared values and common interests, the statement said.

In August, British High Commissioner to Sri Lanka Sarah Hulton said Sri Lanka will benefit from the UK’s new trade concessionary scheme Developing Countries Trading Scheme (DCTS) that will replace the GSP+ in that country and will be in force from 2023.

Related:

Sri Lanka to benefit from access to UK’s new trading scheme: high commissioner

(Colombo/Oct03/2022)

The factory will has will be able to knit, dye and finish 50 tonnes of fabric a day at full capacity.

Jay Jay Mills has committed 35 million US dollars for the project which will be completed in three phases over five years, the BOI said. It will employ 460 workers.

The first phase is expected to start within two years.

Jay Jay Mills Lanka was set up 2004 to manufacture and export apparel.  It now has facilities in Avissawella, Matara, Monaragala, Trincomalee and Mannar with over 9,500 full-time employees.

Sri Kumar Managing Director of Jay Jay Mills Lanka said the company will increase domestic value addition by reducing imports for apparel.

“Further, this will enable us to improve service levels for our existing and future customers by enabling speed and flexibility, allowing us to win additional business which will greatly benefit the economy of Sri Lanka,” he said in a statement.

Producing textiles domestically will strengthen supply chains and will improve Sri Lanka’s position as a sourcing destination, BOI Chairman Raja Edirisuriya said.

“In the context of the current global conditions, disasters and pandemics are frequent and evident,” Edirisuriya said.

“Therefore, international leading brands always look for counter sourcing strategy, which is all about sourcing textiles and clothing from the country of manufacturing.”

Sri Lanka is currently facing the worst currency crisis in the history of the island’s intermediate regime central bank. But exports of apparel has been picking up. (Colombo/Sep16/2022)

“The UK’s new Developing Countries Trading Scheme (DCTS) is one of the most generous sets of trading preferences of any country in the world, and will benefit Sri Lanka by boosting the economy and supporting jobs,”British High Commissioner to Sri Lanka Sarah Hulton said in a tweet on Tuesday August 16.

Under the new scheme, Hulton said, Sri Lanka will continue to benefit from duty free exports to the UK on over 80 percent of export products while tariffs on over 150 additional products will also be removed.

“It will also simplify some season tariffs, meaning additional and simpler access for Sri Lanka’s exports to the UK,” Hulton said.

Sri Lanka’s access to the Generalised Scheme of Preferences (GSP) Plus was already under review for extension as the country failed to adhere to several of the commitments it made, mainly with regard to human rights.

GSP is an annual trade concession worth over 500 million US dollars which has boosted Sri Lanka’s exports to EU member states mainly in the garments sector, a top forex earner.

The EU has stressed on several occasions that the island nation needs to uphold its  commitments, particularly with regard to eradicating human rights violations in the country.

Recently Sri Lanka landed in hot water as it failed to implement several of the commitments undertaken including repealing the Prevention of Terrorism Act (PTA).

The EU also had concerns over arbitrary arrests of activists and journalists and detainees.

Sri Lanka lost access to GSP Plus in 2010 due to alleged human rights violations but regained it in 2016 after pledging to implement 27 international conventions. (Colombo/Aug17/2022)

In a letter to Power & Energy Minister Kanchana WIjesekara on Friday August 10, the FTZMA said the high tariffs which are driving up cost of production would make Sri Lankan products highly uncompetitive in the global market, driving away foreign investment at a time the country is dealing with a debilitating forex crisis.

“We urge you to revisit and reanalyse the price structure once again [bearing in mind] that that foreign direct investors are the future lifeline and backbone of our country’s economy,” the letter said.

The Public Utilities Commission of Sri Lanka (PUCSL) has said that prior to the revision, the average revenue from the Industry category was 4.6 US cents per kiloWatthour (kWh) and the proposed increase would only increase revenue to 8.6 US cents per kiloWatthour.

The PUCSL has also asked that users who generate over 60 percent of revenue by forex would have to pay electricity bills in dollars, and would be given a 1.5 percent discount on their bills.

Chairman of the FTZMA, Dhammika Fernando said the dollar benefit would not be passed down to manufacturers, as rupee costs were increasing rapidly.

The PUCSL and the Ceylon Electricity Board (CEB) has for some time been calling for price hikes, as the previous hike was in 2013. Tariffs were decreased by 25 percent in 2014.

The CEB has been running on losses due to several reasons, inefficient and overpaid staff and selling at subsidised rates, according to Wijesekara.

The PUCSL has argued that it may not be prudent to wait for a revision, as it could further deteriorate the financial position of the Utilities.

The revenue requirement for the CEB to cover estimated costs in 2022 is 505 billion rupees excluding Lanka Electricity Company (LECO) costs. The hiked tariffs will bring in an estimated revenue of 512 billion rupees including LECO sales. Covering costs would require an 82.4% increase in revenue, but even with hikes the estimated revenue is at 79 percent.

Out of 7.8 million electricity consumers, 4.8 million domestic consumers are being given subsidised rates, even with the price hikes, the PUCSL said.

These subsidies are recovered in part by increasing the day rate given to Bulk Consumers in the Industry category.

The FTZMA  said that the approved hikes by PUCSL were unreasonable when compared to the CEB requested rates.

The CEB had requested an average of 78 percent increased rates for the Industry (IP1) sector, while the PUCSL has approved an overall increase of 91 percent.

IP2 had a proposed increase of 78 percent and the approved increase is 117 percent.

IP3 had a proposed increase of 56 percent and the approved increase is 118 percent.

Fernando stated that if costs could not be kept down, small and medium enterprises would have to shut down, and that other businesses would have to increase prices to cover production costs.

Sri Lanka is now in a position where it cannot afford to subsidise and consumers cannot afford to pay up.

The FTZMA has requested a meeting with Wijesekara to discuss the situation.

“It is our fervent hope…to come to an agreement whilst reaching a win win situation…and retaining much needed FDIs.” (Colombo/Aug12/22)

The five billion dollars industry, a top dollar earner of the country, so far has a full order book.

But for the second season (the industry runs on a six-months cycle) that is to begin in July, exporters are saying they are seeing signs of customers pulling out to be on the safer side.

“We are seeing a reduction on the horizon and that is not because of the sector’s ability to deliver to the customer but more because of the customer seeing the country as risk; so to de-risk what they have in Sri Lanka,” Yohan Lawrence, Secretary General of Joint Apparel Association Forum of Sri Lanka, said.

“Where they bought 100, they’ll buy 80. The impact will probably be seen in July/August.”

If the apparel customers of Sri Lanka start to cut down on orders now, the impact of that will be seen only in July or August when the new production season starts.

“We are seeing early signs of customers moving orders to other countries, mainly because they are worried about the country’s social stability,” Rehan Lakhany, former Chairman of Sri Lanka Apparel Exporter Association, said.

“Mainly with what they (customers) see on the news in foreign media, they are worried about whether we are able to operate our factories and if we can deliver goods on time to their stores.”

Customers are sending questionaries to exporters on a daily basis inquiring about the country’s situation.

“We need to show stability in our ports, transport sector, and diesel supply. Unless some concrete assurance is given to them, not just verbal [assurance, they will move orders],” said Lakhany.

He added that there’s unnecessary fear among buyers, but regardless, the country needs to show them that the banks are able to make payments on time and give assurance that operations are running as usual.

The main three factors worrying them now is the shortage of liquidity of dollars in the bank, Lakhany said.

“A lot of the banks don’t have dollars now. Even if we give them a 100 million from exports, they are not able to give us the same 100 million for the import of raw materials.

“We have taken orders, but banks are unable to make the payments. Banks are having liquidity issues in foreign currency.”

The second concern buyers have is the fuel shortage as generators must be run during power cuts and to transport employees.

The third concern is social stability of the country.

In the first four months of 2022, the industry has earned 1.8 billion dollars.

Hanging by a thread

The 30-year-old Sri Lanka’s apparel industry, once known for its quality and reliability has become a question mark among its customers as social instability and a severe dollar and fuel shortage continue to cripple the country.

Compared to regional competitors, Sri Lanka’s garment export size is very small but the quality of its products has made it a favorite among its dollar rich European and American buyers

The Export Development Board (EDB) specifically notes that the island’s fame in apparel is because of its “excellence in speedy delivery and reliability.”

The “Made in Sri Lanka” label is synonymous with quality, reliability, social and environmental accountability, EDB says.

But it all may come to an end as the country goes through its worst economic created by years of bad monetary practices funneled by money printing.

Lakhany says no matter how much they try to say that despite the challenges factories and businesses are operating, the customers are not ready accept it.

To aggravate the situation, Shanghai in China has opened up following a two-month strict COVID-19 lockdown.

This Lakhany sees as bad news for Sri Lankan businesses as now the customers have more options to make an easy shift. Shanghai is one of the world’s largest apparel and textile exporters.

Therefore losing even 20 percent of the orders or one month’s export (500 million dollar on average), the exporters say the impact will be multifold.

“If we lose orders, the impact will be unimaginable. The apparel industry runs on margins. Even if we lose 20 percent of orders, the impact will be 80 percent. Factories will end up shutting down,” Lahany said.

He fears that the factories might not be able to provide for the workers.

There are close to 800,000 workers relying on the industry.

On top of this, the manufacturers have difficulty in paying their suppliers who, after being delayed payments, have started to ask for those payments.

“One of our biggest suppliers has been outstanding for so long they want us to pay the supplier. But we can’t pay because the banks are not releasing funds,” Lakhany said.

“So there are multiple factors, and customers pulling out is the last nail on the coffin.”

“If they pull out without any ground and just out of fear, the impact that will be felt in the next four months will be unstoppable.”

The exporters say action must be taken now to mitigate the risks before it’s too late. (Colombo/Jun10/2022)

In a letter to Power and Energy Minister Kanchana Wijesekara, the FTZMA said that Board of Investment (BOI) enterprises were going through a tough time, and that lack of returns on equity (ROEs) are negatively impacting businesses and creating trickle down effects in the supply chain. Given these reasons, the FTZMA said, they cannot agree with a sharp hike in rates, instead calling for “reasonable revisions” to the tariffs.

The FTZMA also stated that while Wijesekara’s plan to solve Sri Lanka’s energy crisis by installing rooftop solar panels in state agencies industries and hotels was “a good idea,” it was not a practical solution as the roofing capacity available for solar panel installation would not allow to generate even half the required power.

The “exorbitantly high cost of solar batteries as a backup system to store power” was also stated as a hurdle for manufacturers.

Sri Lanka’s ongoing crisis situation is affecting the apparel industry, with many overseas brands having already moved to countries like Bangladesh, Vietnam and Ethiopia, in search of cheaper cost of operations and political and social stability.

After campaigning by the FTZMA and other parties, the government decided to give the Free Trade Zones (FTZs) uninterrupted power throughout April, despite power cuts in other parts of the country due to fuel shortages brought about by forex shortages. However, things took a turn for the worse with a recent breakdown in the Norochcholai power plant.

Sri Lanka’s power plants are subject to frequent breakdowns, and experts have been campaigning for a more diversified and long term power production scheme, but bodies like the FTZMA say that a sudden implementation of such moves would not be practical due to unbearable costs and lack of infrastructure.

The letter also added that the current price per unit of solar energy (22 rupees) was not enough to draw investors into the country, which would “halt the country’s ambition to become a high renewable energy generating nation.”

According to FTZMA Secretary Dhammika Fernando, interruptions in the normal operations of FTZ factories lead to losses of up to 18 million US dollars per day, which is not a cost that Sri Lanka can bear in the current climate.

Sri Lanka’s apparel export income hit a five year high, at 488 million US dollars in January 2022. However, Fernando stated that many SMEs in the country had reported that their order books were empty after July of this year. Given the situation, it is uncertain if the country can meet its target of 8 billion US dollars for apparel exports by 2030. (Colombo/Ju01/2022)

“It is critical that a new government be appointed urgently to fill the current political vacuum,” Joint Apparels Association Forum said in a statement condemning the violence that took place on May 09 said.

“We call upon leaders and authorities to immediately restore political stability across the country.”

Apparel accounts for 6 percent of gross domestic product and employs 350,000 people directly and another 700,000 indirectly, making it one of the largest employers on the island.

Following a meeting with Prime Minister Mahinda Rajapaksa at his official residence Temple Trees in Colombo, pro-government loyalists hounded down peaceful anti-government demonstrators who had camped opposite Temple Trees.

This saw the country engulfed in chaos as both the faction of protesters clashed.

Quickly the violence spread across the island and the PM, who was adamant of ever stepping down from his premiership tendered his resignation.

Many properties of ministers and government backers were either burnt or wrecked by angry residents in those areas.

As of now, the country is under curfew till Thursday (12) and a military order was issued to shoot anyone who loots or damages properties.

JAAF also commended the efforts taken by the Bar Association of Sri Lanka to ensure a peaceful, democratic transition of power while calling on the government to restore political stability.

STATEMENT REPRODUCED BELOW:

Statement by Joint Apparel Association Forum (JAAF)

The violence that erupted on the streets of Colombo and in other parts of Sri Lanka on Monday, and the resultant loss of life is both unfortunate and deeply saddening. We empathize with the people’s distress over the extraordinary adverse impact of the economic crisis on their lives and livelihoods. However, violence that costs precious human lives deserves our utmost condemnation.

We call upon leaders and authorities to immediately restore political stability across the country. They should also ensure a safe living and working environment for all people, as we collectively navigate through this very difficult crisis.

By the same token, we strongly support the efforts taken by the Bar Association of Sri Lanka to ensure a peaceful, democratic transition of power. It is critical that a new government be appointed urgently to fill the current political vacuum.

We will also support the efforts of all other organizations that seek the same outcome: an end to the crisis, to the potential violence and a return to political stability.

May 10, 2022