Financial Times

End of an era
Joy and tears of the TQB allocations
The Textile Quota Board (TQB), the focal point of the era of textile quotas which brought joy to some and tears to others in the allocation of quotas, will continue to function even after the quota era ends this month. The TQB will have three main functions. It will be the central point for local supplies such as accessories, will monitor exports and function as a data collection centre.

This unit was started in or around the early 1990s in order to manage, distribute and allocate quotas under the MFA. A manufacturer of textiles and textile products registered as an exporter with the Board of Investment (BOI) or with the Ministry of Industrial Development was eligible to receive textile quotas or apply for textile quotas. Prior to that quotas were distributed by a unit in the Ministry.

The board comprised officials of the ministry and was often chaired by a senior assistant secretary from the ministry and had representatives of garment and apparel industry associations.

The quotas are issued at the beginning of every year and the old (more experienced) factories get a bigger slice of the allocation. The quota depends on the number of machines and workers and if Employees' Trust Fund (ETF) and Employees' Provident Fund (EPF) have been paid. The allocation is made at the discretion of the TQB.

A balance of the quotas is kept every year in case of an emergency. This is called the 'pool quota' and is usually given in the September/October/November/December period to those who have orders but no quotas. Those who wish to get allotments from the pool quota have to apply for it. A charge of two rupees is levied for each piece while proof of ETF and EPF payment are also required to comply with the application.

There are two main allotment categories, 'hot' and 'cold'. The 'hot' category includes the items required by big buyers from countries like the United States, United Kingdom, Japan and Canada. The 200 factories, which were opened during the Premadasa regime, were allocated quotas from the 'cold' category.

The 'performance quota' decides on the eligibility of getting the same quota allotment the following year. This depends on the quantity that is shipped throughout the year and if the quantity shipped is less than the quota allotment, the quota would be reduced to 90% in the following year, or less, depending on the amount shipped. This quota could be increased if the factory has performed well during the year, increasing the number of machines, workers etc during the year.

Reports and allegations of bribery and wrongdoing in the TQB and those in the industry have shadowed the operations of this key unit over the years. The emergence of the 'broker' or the 'go-between' has benefited many in the industry.

Through this 'go-between' system, those who have been issued quotas for free by the TQB, sell their quota share to those who want the shares, through brokers, enjoying great profits for no investment.

The 'temporary quota transfer' scheme which was introduced on February 5, 2003, allowed those who had quotas and were not utilizing them to temporary transfer the quota to someone who had the orders but didn't have a quota. This scheme was introduced to combat a scheme, which was taking place between the industrialists.

This scheme was the 'ship through' system where one could ship their goods through another's quota allotment for a lesser price than the 'temporary quota transfer' scheme.

This enabled the quota holder to maintain their performance quota and also make a profit without any work while the company shipping the goods is also able to do so without much of a hassle.

Back to Business