SL firms likely to shrink or shift business abroad
Sri Lanka’s debt-ridden economy without any real solution in sight is pushing industries to scale down operations or rethink their geographical spread.
All industries are on the verge of trimming their operations and certain companies in the apparel sector are shifting operations to countries like Vietnam. “Firms in the IT sector are shifting to Dubai. The negative publicity, power cuts, and general business sentiment are affecting their business and it is increasingly hard to secure orders,” Mahendra Jayasekera, Managing Director Lanka Tiles PLC said.
While one cannot shed businesses overnight and move out, there is a greater effort to diversify the production base, analysts point out. “All exports-based industries are trying to do this,” noted Murtaza Jafferjee, CEO JB Stockbrokers.
Brandix Group Finance Director and Managing Director Brandix India, Hasitha Premaratne said the apparel industry has posted strong export performance during the first half of the year. Apparel exports for the first half of this year was US$2.8 billion which is higher than the 1H 2019 pre-COVID-19 numbers. “Despite all the challenges the industry has recorded $530 million in exports for June 2022 which is an all-time high. However, due to the global retail slowdown, the industry is expecting a slight reduction in export numbers during the 2H of 2022 but we are doing our utmost to maintain the momentum.”
Mr. Premaratne pointed out that the currency depreciation has pushed Sri Lanka ahead in cost competition compared to other apparel exporting nations such as Vietnam., India, Bangladesh etc. “Therefore, longer-term fundamentals in the industry still remain strong.”
A senior banker said that some firms in the power sector are trying to secure international contracts. On the other hand, the renewable energy sector has its own set of problems with the Ceylon Electricity Board payments to the industry still at large.
A senior director in a large conglomerate stressed that companies would find it increasingly difficult to go ahead with business owing to the exacerbating fuel crisis.
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