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Taxation increase counter-productive to increasing exports, competitiveness – JAAF

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‘Rebuilding Sri Lanka is a national priority and the government of Sri Lanka has aptly stated that the path to rebuilding the nation is in strengthening export-led growth. Sri Lanka’s merchandise exports currently are approximately USD 12 Bn annually, although the country really needs to notch exports closer to USD 20 Bn per annum to take the quantum leap into becoming a developed nation.

‘This will be particularly challenging given the contraction in Sri Lanka’s export markets. While apparel showcased commendable growth in the first eight months of 2022, the industry is now seeing a considerable decline in orders due to a range of global factors, a pattern which may continue indefinitely. Hence, looking at the paradigms unfolding globally, it is imperative that Sri Lanka remains competitive and offers potential and existing investors a competitive investor environment, the Joint Apparel Association Forum (JAAF) said in a press release.

Extracts from the release: ‘JAAF is deeply concerned by recent discussions for the removal of the concessionary rate granted to exporters, replacing this with a single rate of corporate taxation. This would mean the rate of corporate taxation doubling for exporters. The industry has been contributing 52 per cent to export revenue continually throughout the crisis, a contribution that is critical to keep the economy afloat, despite challenging internal and external factors. An additional rate of taxation will make the apparel industry very uncompetitive when compared with regional peers.

‘Until September 2022, apparel exporters were liable to pay a concessionary corporate income tax rate of 15 per cent (which was previously 14 per cent). However, aligned with the IMF staff-level agreement, the government tabled proposals in the 2022 interim budget to increase the standard corporate income tax rate to 30 per cent from 24 per cent, effective from the 1st of October 2022. JAAF is disturbed by this proposed increase as the apparel industry is already confronting a 25 per cent decline in its order books for Q4 of 2022 due to the softening of global markets.

‘The IMF in its Article IV Consultation in March, identified corporate and personal income tax exemptions (CIT and PIT) to have eroded the effectiveness of the 2017 Inland Revenue Act (IRA), paving the way to large revenue losses. This prompted the rationale to the current proposal to increase the corporate income tax rate. As Sri Lanka only collected 7.7 per cent of its GDP in taxes in 20211, the objective of the IMF is to increase revenue collection to finance social services, critical infrastructure and public goods.

‘JAAF fully understands and supports the need for the proposed tax reforms as the government is challenged for options to raise much-needed revenue. However, while the policy is well-intended, the resulting consequences are dire and may have disastrous outcomes for an industry that is striving to increase export income, local value addition, foreign direct investments, sustaining employee security and economic growth.

‘However, it is crucial that the government takes note of the following concerns prior to implementing the increase in corporate taxation for exporters to 30 per cent.

‘Firstly, export industries do not operate in isolation and are in constant fierce competition with regional competitors. This means that investors and buyers are actively conscious of the cost of doing business. Therefore, businesses rationalise the pros and cons and affirm business that would favour their operations. This may lead to shifting to countries offering lower costs of operation. Sri Lanka is already disadvantaged in comparison to regional peers who have better trade agreements and more liberal trade policies. Further tightening bottom lines for exporters to pay a CIT rate higher than that of Bangladesh, Vietnam, Thailand and Indonesia for example will hurt the country’s ability to remain competitive in this region.

‘Further, it is worthy to note that geographically smaller countries like Hong Kong, Singapore and Dubai are modelled on low taxes at early stages of economic growth. Even today, Singapore’s corporate income tax is imposed at a flat rate of 17 per cent with partial tax exemptions and a three-year start-up exemption extended to qualifying start-up companies. It is only larger economies like India with a sizeable domestic market that are able to impose higher tax rates than regional peers.

‘Increased corporate income taxes also carry the potential to discourage the value addition of existing export businesses. For example, businesses will have reduced incentive to further reinvest their reduced profits into research and innovation and other possible avenues for product diversification and product quality improvement. In the medium to long term, this may erode Sri Lanka’s hard-won position as a hub for sophisticated, innovative and ethics-based apparel manufacturing. With this, Sri Lanka also runs the risk of gaining the reputation of a cost centre model that doesn’t necessarily contribute to the profit-making process of a business but still incurs costs for low-value product creation.

‘A growing body of literature has established that higher taxes and higher compliance costs consistently drives more of the economy underground and beyond the reach of the tax collector. The National Bureau for Economic Research confirms this by reporting that as tax rates rise above the median level of 34 per cent, the extent of evasion rises dramatically. This research also found that on average, a 1 per cent increase in the tax rate results in a 3 per cent increase in tax evasion. Tax non-compliance and tax evasion historically have been major sources of revenue loss to the Sri Lankan government. The ‘Parliamentary Committee on Public Accounts (COPA) disclosed that the Inland Revenue Department has been deprived of approximately LKR 144 Bn just last year alone due to tax evasion. In this context, JAAF has severe concerns about the doubling of corporate tax rates at a time of extreme economic distress, which may prompt businesses to evade tax compliance which will deem the very intentions of this policy of increasing government revenue, counterproductive and redundant.

‘The apparel industry is already heading into uncertainty in the next few months due to rising inflation in the biggest export markets, disruptions in global supply chains and geopolitical tensions. Although the industry is confident that this is a temporary predicament and the industry has the capacity to emerge resilient, the timing is not necessarily be prudent and will create a further tough environment for exporters in terms of policy.

‘The apparel industry is determined to direct Sri Lanka into prosperity through the creation of a competitive export-oriented market economy. Therefore, JAAF urges the government to rethink the policy of increasing the corporate income tax rate by 100 per cent (which is from the concessionary 15 per cent to 30 per cent) allowing the apparel industry and all exporters to remain competitive and engage in business and investment in the region.

‘In conclusion, Secretary General of JAAF Yohan Lawrence says, “The apparel industry, which is the largest merchandise exporter reaffirms its commitment to continually support the government in its efforts to reduce the fiscal deficit. JAAF fully supports mechanisms and processes to improve the tax administration and collection and broadening of the tax base which will lead to Sri Lanka to redirect the path of recovery and growth.”



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‘Giving up was never an option’: The fisherman  who fought back after losing millions in SL

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Seamax factory at Dickowita Harbour

 Spanish Israeli entrepreneur Simon Max Astandoust, a fourth-generation member of the renowned Astan fishing family, has endured years of legal battles, business setbacks and the loss of millions of dollars after investing in Sri Lanka’s fishing industry. Yet, despite the challenges, he has chosen to stay and rebuild.

 In an interview with the Sunday Island, the founder and CEO of Seamax Ceylon (Pvt) Ltd speaks about his struggle, the restoration of his state-of-the-art factory vessel Astan II, and his plans to introduce cutting-edge seafood technology to Sri Lanka.

 Q: You began operations in Sri Lanka in 2018. What was your original vision and investment?

 A: We started operations in 2018 with an initial investment of around US$1 million. Over time, that investment grew into several million dollars because we believed Sri Lanka had enormous potential in the fishing industry.

 My original intention was to develop a project through the Board of Investment (BOI) and introduce new technology to the country. However, the Government at the time encouraged us to work directly with it instead. We believed that this partnership would help us move forward faster and create something unique for Sri Lanka.

Overhauled Astan II

 Our goal was to operate within the harbour and establish a modern fishing operation centred around advanced technology and sustainable seafood processing.

 Q: What challenges did you face after starting operations?

 A: Around eight to 18 months after we began our investment, COVID-19 hit. The pandemic created enormous difficulties. In countries such as Spain and the United States, governments provided financial support to help businesses survive. Here, the Government itself was facing a difficult economic situation and was unable to provide similar assistance.

 Initially, we were told that there would be a grace period and that we would not be pressured for payments as long as we maintained our workforce and kept the operation alive. But later, that understanding changed, and demands for payments began despite the fact that we had a 15-year agreement.

 That was the beginning of the major conflict.

 Q: How did the change of Government affect your operations?

A: When a new Government came into power, the 15-year agreement signed with the previous administration was not recognized. The factory was closed and legal action was initiated against us.

 This was extremely difficult because we had invested heavily based on a long-term agreement. We had built infrastructure, brought in technology and created employment opportunities.

 During this period, while the vessel was caught up in legal disputes, a group of people attempted to take control of the ship. One of the most painful experiences was that some lawyers who had been working for us changed sides and supported those attempting to take the vessel.

Simon Max Astandoust

 The legal battle continued for years and only concluded in 2025.

 Q: Your vessel, Astan II, is central to your investment. What happened to it during this period?

 A:  Astan II is not just a fishing vessel. It is a huge factory vessel with a complete processing facility inside. It was designed to bring a completely new level of technology to Sri Lanka’s fishing industry.

 Unfortunately, because it remained idle during the legal proceedings, it suffered significant damage. Ships cannot simply sit in a harbour for months or years without proper operation and maintenance. The Sri Lankan weather conditions are particularly harsh on vessels.

The vessel deteriorated badly, but after we regained control, we decided to completely restore it. It was overhauled.

 Q: How much did the restoration cost and what work was involved?

 A:  The restoration cost approximately US$1.5 million and took about one year, beginning in 2025. The vessel was almost a complete rebuild. One of the biggest technical challenges was repairing the three generators. Because the harbour did not provide electricity, these generators had been running continuously to maintain the vessel. Over time, this caused significant wear and tear.

 Finding replacement parts was another major challenge. Many of these parts are not imported into Sri Lanka, so every component had to be sourced from different countries and brought in individually.

 A team of around 14 to 20 people worked on the restoration, including a Sri Lankan chief engineer and local professional deck crew. Their expertise and dedication were extremely important.

 Today, the vessel is in brand-new condition.

 Q: You mentioned that the absence of diplomatic representation made your struggle more difficult. Why?

 A: I hold Spanish and Israeli citizenship, and neither Spain nor Israel has an embassy in Sri Lanka. Normally, when a foreign investor faces serious difficulties, an ambassador can engage with authorities and help protect the investor’s interests.

 In my case, I had to face everything alone. I had to deal directly with government institutions and the legal system through my lawyers. Having diplomatic support would have made a significant difference. But ultimately, I had to rely on the courts and the legal process.

 Fortunately, the maritime judges understood the complexity of the situation and the importance of maritime law. Their fair approach restored some of my confidence.

 Q: Your vessel uses unique -70°C “Ultra-Fresh” technology. Can you explain how it works?

 A:  This is one of the most exciting parts of our project. The technology comes from Japan and is only about two years old. Traditional freezing methods often affect the quality of fish because the freezing process is slower and damages the texture. This technology works differently. It uses a glazing process where the fish is frozen from the outside, creating a protective layer.

Within approximately two hours, the fish is completely frozen. This process eliminates bacteria and preserves the quality of the fish.

When the fish is later defrosted using the correct method, it is almost exactly like fresh-caught fish from the ocean. The taste, texture and quality are preserved. At present, nobody else in Sri Lanka is carrying out this type of ultra-fresh freezing technology onboard a fishing vessel.

 Q: What advantage will this technology give Sri Lanka?

 A: Sri Lanka has excellent fishing resources, but we need to move beyond simply catching fish. The future is about value addition, quality control and accessing premium international markets.

With this technology, Sri Lanka can export seafood at a much higher value because customers will receive a product that maintains the quality of freshly caught fish.

 This is not just about one company. It is about introducing a new concept to the country’s fishing industry.

 Q: After everything you have experienced, why did you decide to continue investing in Sri Lanka?

 A: I come from a family of fishermen. This is my fourth generation, and my son represents the fifth generation. Fishermen are not people who give up easily. The sea teaches you resilience. You face storms, difficulties and uncertainty, but you continue. Of course, there were moments when I lost faith. Losing millions of dollars and spending years in court is not easy for anyone.

But eventually, the justice system gave me confidence again. The maritime judges understood the situation and treated the case fairly. That showed me that there are people in Sri Lanka who understand the importance of protecting investment and respecting the law. That is why I decided to continue.

 Many people told me that, despite the difficulties, the Sri Lankan judiciary would ultimately deliver justice. At the time, after years of uncertainty, it was difficult to know what the outcome would be. But in the end, that is exactly what happened. The courts examined the facts and delivered a fair judgment.

 The maritime judges understood the complexity of the situation and the importance of maritime law. Their fair approach restored my confidence—not only in the legal system but also in Sri Lanka itself.

 Q: What are your future plans for Seamax Ceylon?

 A: Our plan is to expand significantly. We intend to bring two or three more large factory vessels to Sri Lanka, along with five local fishing vessels. We also plan to establish a new processing factory near the beach. However, this time we will work through the Board of Investment rather than entering into a direct agreement with the Government.

 The BOI provides a structured framework for investors, and we believe this is the right way forward. My son Sam, who is the CEO of our US-based company, will also return to Sri Lanka to help introduce successful business concepts and support the next stage of development.

 Q: What keeps you motivated after such a difficult journey?

 A:The answer is simple: we do not give up. I come from a family of fishermen. This is my fourth generation, and my son represents the fifth generation. Fishermen understand struggle. You cannot control the ocean, but you learn how to survive. You face storms, difficulties and uncertainty, but you continue moving forward.

 I have lost money, faced difficult times and experienced moments of disappointment. But I never stopped believing in the potential of Sri Lanka. One thing that gave me strength was the faith many people placed in the country’s judiciary. I was repeatedly told that the courts in Sri Lanka would deliver justice, and ultimately that belief was proven right. The maritime judges understood the situation and gave a fair decision based on the law.

That experience reminded me that, despite challenges, Sri Lanka has institutions and people who respect justice. That is why I decided not only to stay but also to invest again.

For me, this is not merely a business project. It is about resilience, trust and proving that when you believe in something, you continue fighting until you succeed.

by Saman Indrajith ✍️

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Lankan natural fibre safety helmet meets international standards

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Kavi Darshi - CEO - Kohu Kreations ( Pvt ) Ltd

A Sri Lankan-developed natural fibre industrial safety helmet has successfully met internationally recognised safety standards, marking a milestone in sustainable product innovation and value-added manufacturing.

The Tortoise Natural Fibre Industrial Safety Helmet, developed by Kohu Kreations (Pvt) Ltd., has passed testing requirements under the European safety standard EN 397:2012 + A1:2012, which governs industrial safety helmets.

The independent tests were conducted by INSPEC Testing Services in the United Kingdom, an ISO/IEC 17025-accredited laboratory specialising in personal protective equipment. The testing programme assessed key safety features, including impact absorption, penetration resistance, flame resistance, chinstrap strength, harness performance, internal clearance and dimensional compliance.

The company said the results demonstrated that a helmet manufactured using a specially engineered natural fibre composite could achieve internationally accepted safety performance levels.

Unlike conventional industrial helmets largely produced using petroleum-based plastics, the Tortoise helmet uses a coconut coir-based natural fibre composite, combining safety performance with environmental sustainability.

Kohu Kreations Chief Executive Officer Kavi Dharshi said the achievement represented an important milestone for both the company and Sri Lankan manufacturing.

“Sri Lanka has always been recognised for producing high-quality coconut fibre. Our vision is to take that resource beyond traditional products and transform it into advanced engineering solutions that can compete internationally,” she said.

She added that safety remained the company’s primary focus, with comfort and sustainability being additional benefits. The natural fibre composite helps reduce heat transfer and improve ventilation, making the helmet more comfortable for workers operating in tropical conditions.

Text and Pix by SK Samaranayake  ✍️

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Hemas Partners with WNPS PLANT to Restore Critical Hill Country Forest Corridors

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PLANT team and the community members

Protecting headwaters of the Kelani and Mahaweli

Hemas Holdings PLC is leading one of the largest private-sector-supported forest corridor restoration efforts in Sri Lanka’s hill country, strengthening ecological connectivity across some of the nation’s most fragile landscapes. Through its partnership with WNPS PLANT- Preserving Land and Nature (Guarantee) Limited, Hemas is supporting restoration at the headwaters of both the Kelani and Mahaweli rivers, marking a decisive expansion of corridor-based conservation in the central highlands.

The new collaboration focuses on the Hatton Oya landscape, managed by Hatton Plantations PLC, who joined hands with PLANT as the crucial land partner for this restoration journey. In this landscape, degraded riparian forests intersect with urgent reforestation needs and national water security priorities. By restoring native forest buffers along streams and reconnecting fragmented habitats across plantation-managed terrain, the initiative targets the active rebuilding of forest structure and function- restoring canopy, soil health, and waterway integrity, for the benefit of millions who depend on these river systems downstream.

Why Headwater Corridors Matter  

Community members during the planting activities

In Sri Lanka’s hill country, forest loss does not stop at degradation; it fragments landscapes, exposes rivers, and destabilizes slopes, putting downstream communities at risk. PLANT’s Rapid Biodiversity Assessments across the central highlands show a clear pattern: where riparian cover is intact, waterways stay buffered and forests regenerate naturally; where it is lost, streams warm, banks erode, and recovery stalls. Hatton is especially critical, sitting at the headwaters of two of Sri Lanka’s most vital rivers- Mahaweli and Kelani, meaning forest loss here threatens thousands of livelihoods far beyond estate boundaries. By restoring along watercourses and natural recovery gradients, corridor restoration protects entire downstream ecosystems from erosion, flash floods, and further forest loss.

Scaling What Works

Abbotsleigh Corridor

The Hatton initiative builds on a foundation of corridor restoration already underway by PLANT in Maskeliya and Talawakelle. Hemas has already supported key restoration segments, including on Dessford in Talawakelle and on Alton along the Maskeliya Oya, and now extends its commitment through restoration at Abbotsleigh in the Hatton Oya corridor. Hatton represents a strategic escalation, to restoring forests where national river systems are born. Over 12,500 native plants will help line over five kilometers of waterway, with around 15 acres of entirely new forest being created. With this expansion, Hemas is now supporting corridor restoration across three major hill-country landscapes, covering critical headwater systems that feed some of Sri Lanka’s most important rivers.

Envisioning and Acting Before Collapse

WNPS PLANT created a totally new thinking by engaging private sector partners and pioneering the building of new forest corridors in a scalable manner in the hill country.  Already working on the largest network of corridor development through a range of partners and nurseries, its corridor creation approach was conceived well before the recent climate-related crises in the hills. The Ditwah flood and landslide impacts served as a stark national reminder of what happens when headwater riparian systems are stripped of forest cover. Had these habitats remained intact, the severity of damage would have been significantly lower.

“Hill-country forests are resilient, but only where the conditions for recovery exist,” notes, Sriyan de Silva Wijeyeratne, Chairman of WNPS PLANT. “When riparian shade and forest connections are broken, regeneration stops. Creating entirely new forest corridors from scratch- replanting native species, restoring canopy, and reconnecting fragmented landscapes, is how we rebuild those conditions within working landscapes, without compromising productive land use.”

A LandscapeScale Commitment

Through its partnership with PLANT, Hemas is advancing its commitment to landscape-scale forest restoration and reforestation. The work aligns with PLANT’s Emerald Trails vision, which focuses on reconnecting fragmented privately owned spaces across Sri Lanka’s biodiversity-rich southwestern and central regions.

“Meaningful restoration means looking beyond isolated planting sites,” Ishani Ranasinghe Head of Sustainability and Corporate Communications from Hemas Holdings PLC said. “By supporting forest corridors at the origins of major river systems, we are contributing to forest recovery, water security, and climate resilience. We also believe lasting environmental impact can only be achieved when local communities are actively engaged, which is why community participation and shared stewardship are integral to this initiative.”

In Sri Lanka’s hill country, restoration is no longer just about protection. It is about active rebuilding. By replanting native forests at the sources of the nation’s major rivers, Hemas and WNPS PLANT, with the support of Hatton Plantations, are ensuring that degraded landscapes are not left to further decline, but are given the native forest cover, canopy structure, and ecological connectivity they need to recover and regenerate. In landscapes where Sri Lanka’s rivers are born, these reforestation corridors are no longer optional interventions. They are living lifelines, rebuilding forest cover, sustaining water systems, and strengthening the resilience of the hill country for generations to come. As a nation, Sri Lanka cannot remain exposed to more Ditwah-scale impacts. Proactive reforestation initiatives will be critical in future against these changing climatic conditions. Time is not on our side.

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