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A new vision to help Sri Lankan apparel rise to the challenges of 2022

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By A. Sukumaran – Chairman, Joint Apparel Association Forum

Despite having faced down another tumultuous year, the Sri Lankan apparel industry has shown remarkable resilience in 2021, and we believe the advances we have made over the past year have put the entire sector in a much stronger position to weather the escalating challenges of 2022. A review of the data from 2021 and the measures that firms in the industry have taken indicate how the industry is poised.

Following in the wake of unprecedented economic disruptions for Sri Lanka – and the rest of the world – caused by the second and third waves of the Covid-19 pandemic we now see some persistent uncertainty around prospects for 2022. Driving this volatility so far is the emergence of Omicron which is reportedly the most highly transmissible variant of Covid-19, and in the backdrop of rising geopolitical tensions between the US, and China and Russia. If any one of these factors is exacerbated, further disruptions to global trade are inevitable.

Consider exports. In pre-pandemic 2019, apparel exports amounted to $5.2 billion1, almost 48 per cent of all merchandise exports (which makes it a crucial contributor to trade and external finances). In 2020, the pandemic’s spread led to a steep decline in trade and travel, and ultimately global GDP; no country was spared.

Sri Lanka’s garment exports also declined sharply in 2020; nationally enforced lockdowns hit production, and order cancellations were high. Exports fell by almost a quarter (more than 24 per cent) to $3.93 billion. In 2021, garment exports jumped back up by 21.5 per cent at September-end to $3.54 billion2. They will fall just short of the targeted $5,1 billion.

The remarkable progress was made possible by an accelerated vaccination programme with the support of the government and the logistical capability of our military. The Joint Apparel Associations Forum of Sri Lanka (JAAFSL), an apex body of apparel industry associations, played a crucial coordinating role.

For business owners, worker safety is a high priority. Factories and places also put safety protocols, redesigned shop floors to enable social distancing, strictly monitored masking, personal protection, and employee behaviour. Compliance was strictly implemented with surprise checks by officials from the Ministries of Labour and Health.

Yet, during the course of the pandemic in 2020 and 2021, business owners were faced with false accusations that workers were not being paid and were instead being laid them off by the thousands. But as events later demonstrated, these accusations was totally unfounded, and ran contrary to the actual situation on the ground.

First, in cooperation with the government and represented by JAAFSL, workers who could not come to work because they were sick were paid LKR 14,500 a month whether they came to work or not. That is 45 per cent more than the minimum wage mandated by law, even when they were not working.

Second, as noted previously, an accelerated vaccination programme was implemented and acted upon. Worker safety was ensured with strictly enforced mandated safety protocols. The enforcement of the protocols were extended even to non-direct apparel workers such as canteen workers and other suppliers and vendors.

One number helps make the point. One important study on the impact of Covid-19 on the apparel industry estimated the pre-pandemic workforce at roughly 350,0003. The strength of the workforce at the end of 2021? Contrary to reports of layoffs and resignations made publicly by some parties during the pandemic, the workforce is now back at 350,000.

That’s not all. During the course of the pandemic, both large companies and smaller firms adopted and adapted technology to develop solutions to new problems. Consider samples. Fashion changes are fairly frequent, so buyers require samples that they test and then approve for manufacture. As transport was disrupted and flights restricted, some firms used 3D technologies that could be created at the buyers’ end and approved.

That was just one instance where technology was used innovatively to overcome logistical challenges. Many others are aligned with the vision of making Sri Lanka a global hub for innovative apparel making. There are many others, aligned with the vision of making Sri Lanka a global hub for innovative apparel making. And the same spirit of innovation is pervasive in the apparel industry’s sustainability agenda that sets a global benchmark for ethical, environmentally responsible manufacturing.



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Seven factors of concern at upcoming Monetary Policy Review

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by Sanath Nanayakkare

The Central Bank of Sri Lanka (CBSL) is scheduled to announce its latest monetary policy review on 20th January 2022, with all eyes on dwindling foreign reserves and foreign currency exchange in the country.

In this context, First Capital Research has named 7 factors of concern that could be taken into account at the upcoming monetary policy review. They are as follows.

* Foreign Reserves USD 3.1 billion – Dec 2021

* Inflation CCPI 12.1% – Dec 2021

* GDP Growth -1.5% – 3Q2021

* Private Credit LKR 60.5 billion – Nov 2021

* 03M T-Bill rate 8.38% as at 12.01.22

Liquidity and CBSL Holdings LKR -364.0 billion and LKR 1.42 trillion

Balance of Trade (BOT) and Balance of Payment (BOP) USD -6.5 billion and USD -3.3 billion for Jan-Oct 21

First Capital Research’s Policy Rate Forecast – Jan 2022-Apr 2022 notes that they believe the CBSL may highly consider tightening the monetary policy rates in this policy review but given the concerns over economic growth, there is a probability of 40% for CBSL to maintain its policy stance at current levels.

“With high frequent indicators improving in line with expectations, we have eliminated any probability of a rate cut. We expect a continued increase in probability for a rate hike in order to prevent overheating of the economy amidst the given fiscal and monetary stimulus,” they said.

As per First Capital’s view, CBSL either can choose to hike policy rates by 50bps or 100bps or hold policy rates steady, while a rate cut is off the table due to the high debt repayment and the high domestic borrowing requirement.

First Capital believes that there is a 60% probability for a rate hike due to the remedial actions required in achieving external stability.

However, there is also a 40% probability to maintain the policy rates at its current level in order to further improve the high frequency indicators.30%, they noted.

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Sri Lanka’s dash brand enters international markets

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Multichemi International Ltd, which manufactures and distributes a wide range of products under dash, one of Sri Lanka’s leading detergent and household care brands, has begun exporting its products to several international markets in Asia and Oceania, with plans also to enter Africa. The dash brand includes a wide range of products in car care, household care, home fragrances and laundry care sectors. Multichemi International Ltd, which has been awarded ISO 9001:2015 certification, is a Sri Lankan pioneer in environment-friendly cleaning products, having launched the country’s first biodegradable, safe cleaning products over 28 years ago.

Amila Wijesinghe, General Manager of the Company said,”Having conquered the domestic market, we are now ready to capture the international market. We are confident that our products which are of high quality will receive a good demand overseas as well. The feedback we have received so far from our overseas customers is extremely encouraging. We are dedicated to taking our products to the international market, to bring in foreign currency to the country and help uplift the economy”,

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Janaka Abeysinghe appointed SLT CEO

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Sri Lanka Telecom PLC has announced the appointment of Janaka Abeysinghe as its Chief Executive Officer (CEO) with effect from February 1, 2022.

The incumbent CEO Kiththi Perera will be overseas on leave for a period of two years to pursue higher studies, according to a stock market filing by the company.

Abeysinghe joined SLT in 1991. In his present role, he leads the enterprise and wholesale business of SLT that provides integrated voice and data solutions to enterprises, government institutions, domestic telco operators and global wholesale carriers.

In his career at SLT spanning 29 years, he has held a number of senior positions, including general manager Enterprise and International Sales and has extensive experience in the areas of Enterprise Digital Services, Enterprise Communications Solutions, Data Communications, Business Development, Domestic and International Switching Operations and Global Wholesale Voice & Data Business.

He holds a Master’s Degree in Electrical and Computer Engineering from the University of Kansas, USA and a BSc degree in Electronics and Telecommunications Engineering with a First Class Honours from the University of Moratuwa.

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