Extended curfew leads apparel sector to crumble further!

• Apparel exporters urge govt. to allow factories resume work in full capacity
• JAAF fears possible trade shift due to halt of operations
• Requests to do away with EPF/EFT for next six months
• Warns failing to activate proposals will lead to “non-existence of an industry to reopen” 

By Shabiya Ali Ahlam
Sri Lanka’s apparel sector is  crumbling further as the prolonged curfew in place to contain the coronavirus outbreak, has placed the industry at a disadvantage with buyers choosing to divert orders to competitors due to lack of clarity as to when operations would resume.

In addition to export revenue contraction of about US$ 1.5 billion foreseen for the first quarter of the year, the Joint Apparel Association Forum (JAAF) said that it fears a trade shift might take place, which could lead to further revenue losses.

Pointing out that it is inevitable that the extended curfew will lead to additional losses as more orders would get cancelled as a result of production delays, JAAF Chairman A. Sukumaran said 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 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,” said the Chairman in a statement released to the media yesterday.

Sukumaran stressed that JAAF is of the view that extreme measures are inevitable unless there is intervention and support to avert the impending disaster.

In a bid to safeguard Sri Lanka’s largest export sector from further damages, the industry urges the government to allow stakeholders to reopen apparel factories “in their full capacity” as early as possible.

“This is necessary to avoid a very serious trade shift that may take place in favour of our competitor countries since our competitors like Bangladesh, Cambodia, Vietnam, and Indonesia still remain open for business despite the presence of COVID-19,” Sukumaran said.

In addition to the proposal to resume operations, JAAF has also requested the government for a means of sustenance for employees who will have no work to perform from April. The request is made on behalf of companies employing less than 3,000 people.

The JAAF also requested govt. permission to suspend EPF/ETF payments for six months for both employers and employees to increase worker income and support the current working capital dilemma of companies.

Further, the industry requested for directions to be given to the banking community to grant loans beyond Rs.25 million for applicant apparel companies who are willing and capable of bearing that liability, so that the payment of a minimum of two months basic salary is possible.

The particular proposal has been put forward as the Central Bank had instructed commercial banks, outside the circular, to limit the loan to Rs.25 million per company for better distribution.

Sukumaran warned that the failure to activate the proposals would result in the “non-existence of an industry to reopen once the global economy normalizes.” 

“The fate of Sri Lanka’s apparel industry where two million citizens of this country relies is dependent on the effectiveness and speed at which these proposals can be implemented,” the Chairman stressed in the statement.
Sri Lanka earned a record US$ 5.3 billion from its apparel exports in 2019, showing 5.1 percent Year-on-Year (YoY) increase.