Apparel businesses near liquidation
Sri Lanka’s apparel factories have stopped their machines with no orders and with no hand-outs from the government, they are facing stiff competition from their counterparts.
“None of the companies that has asked for loans from banks have been successful in obtaining a loan,” Sri Lanka Apparel Exporters Association (SLAEA) President Rehan Lakhany said.
The industry has requested the government to allow them to suspend payment of EPF/ETF for a period of six months; provide at least 30 per cent of the apparel industry workforce with three months’ salary as a means of sustenance for April, May and June.
Moreover, he noted they requested authorities to allow for a temporary laying off of workers for a period of three months until business picks up.
“Some have reached the point of closing shop with voluntary liquidation and the medium sized ones say they are unable to sustain through this period,” Mr. Lakhany said.
The industry wants the government to allow 30 per cent of their workforce amounting to around 50,000 employees be provided at least the Rs.5000 hand-out from the state.
Since apparel companies have borrowed from banks to buy raw material and customers of already-executed exports are requesting longer payment terms and discounts, companies don’t have any collateral, he noted. As a result the government has to instruct the banks to give loans without the collateral, he noted.
In addition, he pointed out that limiting the loan to Rs.25 million per customer would cover the salaries of most companies but “I don’t think the factories will survive without staff cuts”.
Sri Lanka’s competitors however, he explained have been given stimulus packages from their respective governments like Bangladesh announcing a US$8.2 billion stimulus including loans for companies to pay salaries for the long term at 2 per cent; Vietnam gave a stimulus including laying off without pay; Cambodia has agreed to split payment of the salary to workers during the layoff period between government ($40) and industry ($30); and even Ethiopia has committed to its national carrier channeling raw material from anywhere for free to the industry and even without orders factories have been asked to produce face masks on a buy back arrangement.
“Sri Lankan apparel manufacturers are the only ones left out,” he noted insisting that they had attended numerous meetings with authorities with no favourable outcome yet.
Most factories in other countries are operational but in Sri Lanka they are closed and so the industry is getting worried. “It does not help the companies that are in trouble right now,” Mr. Lakhany said.