Financial Times

Garment factories invited to go North

By Dilshani Samaraweera

With the end of war, local garment manufacturing companies have been invited by the Board of Investment (BOI) to consider entering the North.“We were asked by the BOI about expanding into the Northern Province and we were asked to give our suggestions for incentives, that will help garment factories enter the North,” said the Secretary General of the Joint Apparel Association Forum (JAAF), Rohan Masakorala.

The JAAF, the garment industry representative body, says garment factories are interested in the North but are waiting for clear policy directives from the government.

“Certainly garment factories are interested in investing in the North. But they are waiting for clear government directions and government plans. They need to know what kind of investor facilitation will be provided by the government, to be able to forward plan and to allocate funds,” said Mr Masakorala.
The North is expected to initially offer a low cost labour advantage for garment factories and the JAAF has already submitted a wish-list of incentives to the BOI. These proposed incentives, including tax holidays and duty free vehicles, are expected to kick start investment inflows and allow quick employment generation.

“If the incentives come through, these, together with the initially lower labour costs, will make the North attractive for garment sector investors,” said Mr Masakorala.

Garment factories say the initial investment - to qualify for special incentives – should start at Rs. 50 million. The industry says the initial investment should not be too high because at present, obtaining credit to fund expansion is difficult, and this situation is not likely to change for at least another year.
Special incentives requested by the garment sector include tax holidays for parent companies, depending on the number of new jobs generated in the North, and duty free vehicles.

Duty free vehicles, like vans and lorries, are needed, say the industry, to transport staff and goods, because transport facilities will be poor in most areas of the North initially. Garment companies are also saying the government should identify and allocate suitable land to set up their factories. Prospective investors should be allowed to buy land based on a government valuation, say garment factories.
The JAAF maintains that such garment industry expansion into the North can be commercially viable. This is despite garment factories closing down in other parts of the country, declining exports and repeated complaints by garment exporters of lowering copetitiveness in world markets due to higher production costs in Sri Lanka.

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