The local Apparel Export industry, amid the COVID-19 outbreak is hopeful that more opportunities could open up for the Sri Lankan industry as the apparel supply chain seeks to be less reliant on China as a source for apparel.
Sri Lanka Apparel Exporters Association Chairman Rehan Lakhany told Daily News Finance that one of the opportunities that arose with this pandemic situation is to move into the supply of Personal Protective Equipment (PPE). In the short term there is a large demand for any type of PPE products and many companies have started up with the supply of non-medical PPE products.
Whilst this will help the industry in the short term it’s unlikely to be something that develops in the longer term, as this is a commodity item produced in mass volumes all over the world. There are many enquiries for medical PPE such as gloves and masks however currently there are limitation on imports of these raw materials as most countries that produce this raw material are focusing on their domestic requirements.
“Also for surgical products the authenticity of the raw material is key and companies need to go through proper due diligence checks on suppliers. Moreover there is international certification needed for manufacturing facilities and this has both cost and time implications,” he said.
With the spread of COVID-19 virus following the lockdown of the country, exporters have received huge amounts of order cancellations from customers for which they have borrowed from banks to fund raw materials. Some customers have also imposed arbitrary discounts on goods already shipped & delayed payments for up to 180 days, causing losses & straining cash flow to continue operations.
Lakhany also pointed out that Sri Lanka will have a long term impact on the apparel export sector where it is expected that markets in the West would take up to one to two years to fully recover to pre-COVID 19 levels.
“Furthermore, the health restrictions and social distancing rules allow factories to operate at maximum of 70% capacity, which means the factories will continue to make losses for next few months until 95-100% capacity is possible,” he said.
Flexibility on labour laws is vital to deal with the COVID 19 crisis for the sectors affected. The Apparel sector been one of the worst affected sectors of the country with this situation is important to be protected if it is to be retained.
The line of low cost funding at 4% interest for the working capital including the payment of employee wages made available by the government even does not show adequate support for the industry.
“Unfortunately the banking sector is making these loans dependent on either collateral or personal guarantees which many companies are not able to provide. Where companies are able to provide the collateral here too there seems to be some bureaucratic red tape in the system as companies are not getting access to the funding. Currently there are only a handful of companies in the apparel sector who have actually been able to receive the funding,” he added.
He also said that a number of members of the Sri Lanka Apparel Exporters Association are simply unable to pay full salaries or even the Rs 14,500 minimum that the government is requesting.
Nearly 100 companies have written to the CGL requesting relief as they are unable to make salary payments for the period where the factories were closed.Thus in the absence of this line of funding it’s both unfair and unrealistic to expect companies to pay salaries where there has been no income to the business.
On the long term Sri Lanka needs to lobby hard for preferential access to the EU and the USA if the industry is needed to be given a chance to survive because the country will still remain at a disadvantage against the competitor countries, the majority of whom have preferential trading arrangements with the EU and the USA after the impacts of the COVID-19.
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