Sri Lanka’s apparel workers face bleak future
Workers are facing their worst nightmares this year especially in the apparel industry which is facing huge setbacks as employees are forced to quit with no allowances and limited workdays. The industry is likely to face a further 25 per cent drop in orders, in addition to earlier reported drops.
The SME sector responsible for providing garments to the larger apparel corporates is on the brink of closure, FTZ Manufacturers Association Secretary Dhammika Fernando told the Business Times on Wednesday.
Some of the larger apparel companies are said to be downsizing from its existing 8000 workforce, he said.
With a high labour cost and electricity price hike Sri Lanka stands to lose based on its growing costs linked to production as a result of which Mr. Fernando explained the order books are not filling up in Colombo. High inflation in the European and US markets are also causing a heavy burden on future orders.
The only advantage that Sri Lanka has with the other countries is that it still produces high quality products, he noted.
Today most of the larger apparel companies are operating on about 3-4 days per week due to the lack of orders.
The SME sector is burdened with problems of having obtained loans for which they now want a 6-month moratorium as they are finding it hard to meet up all expenses with the rising costs.
FTZ Apparel Workers Trade Union General Secretary Anton Marcus told the Business Times that in the guise of operating only two or three days a week due to low orders factories are today using this tool to send workers home voluntarily. This would then exempt factories from having to pay compensation for workers that they need to lay off.
He noted that already about 40 SMEs have started closing since April and these are those which were operating on sub contract orders from the larger companies. As a result about 10,000 workers are likely to have lost jobs up to now. Mr. Marcus explained that the tactic most organisations are employing is to ask workers to report for duty only a few days so they do not have to be paid attendance bonus or overtime. And this would leave workers with low pay at the end of the month and will eventually lead to most opting to leave their jobs with no compensation either.
At Tuesday’s National Labour Advisory Council (NLAC) meeting employers had requested the extension of five days a week work until end of next year. Employers have called for any additional work to be completed during the work week without overtime.
But the unions had opposed this idea stating that employees are facing issues of lack of food and having to stay in their boarding houses that causes a spiralling of expenses. Employees are provided food by the factories when they report to work.
In this respect Labour Minister Manusha Nanayakkara requested for a review of this discussion to be carried out in six months.
The meeting also highlighted the worsening plight of workers and the economy as employers and the government laid out the bare facts that order books were seeing a further drop and cost of living and inflation were expected to shoot up amidst more new taxes.
They can pay salaries but most have bank borrowings which is a bigger problem, Omega Line Group Director and former Apparel Exporters Association President Felix Fernando said.
He pointed out that at least 20 per cent of the 300,000 employees in the SME sector are facing issues as this sector is operating under increased costs amidst an economic crisis, and as a result they are not working at full capacity.
Workers are asked to carry out their work only on a few days of the week, however, salaries are not impacted, Mr. Fernando said.
With the general economic conditions unlikely to improve for the next 3-4 months the crisis is expected to aggravate for this sector that will see a further drop in orders by about 25 per cent for the first six months of 2023, he explained.
The expected electricity tariff hike will only add to the existing woes, it was pointed out which some in the industry believe will be a foolish decision on the part of the government.
An unfavourable 30 per cent tax increase has caused resentment among industries and some analysts point out that the additional tax revenue due to the tax rate change is less than one per cent of the government cost.
Given the current tax regime, factories might consider moving out to countries that are more favourable, Mr. Fernando said.
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