The impact of coronavirus pandemic on the apparel industry in Sri Lanka is unprecedented and second to none.
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. The situation further compounded when the effects of the current closure with no clear date of resumption are factored in,” JAAF Chairman, A. Sukumaran said.
“The primary concern of ours at this point of time is the health and well-being of all employees and the current curfew is prudent to prevent the accelerated spread of the novel coronavirus. 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, Lanka’s main competitors, being completely operational.
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.
“Measures such as pay cuts are inevitable. We are extremely grateful for the government for granting concessionary working capital loan and others granted through the Central Bank for these provisions. 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.”
JAAF has tabled the following proposals for urgent consideration.
These include the reopening of 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.
Sri Lanka’s 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. The 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 that directions be given to the banking community to grant a loan beyond Rs.25 million which will be sufficient enough to pay a minimum of two months basic salary of employees.
“This loan should be paid to an applicant company without collateral but under the refinancing scheme of the government.”
JAFF says that failure to intervene at this stage will result in the inevitable doom of the industry.
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