Apparel sector in urgent discussions with government on FTAs to boost exports
With fears of a global economic recession looming, the Joint Apparel Association Forum (JAAF) is actively stepping up engagement with top Government and Foreign Ministry officials to expedite negotiations on Free Trade Agreements (FTAs) to help boost exports and strengthen the industry’s resilience.Elaborating on the progress thus far, Deputy Chairman of JAAF and Chief Executive Officer and Managing Director of Omega Line Felix Fernando outlined key priorities for the industry moving forward. Following are excerpts:
Q: What progress has been made in engaging with the Government to address challenges faced by the apparel sector?
A: There has been strong progress made and we are appreciative that the Government has given weight to our concerns. Most recently, we had separate meetings with the Secretary to the President, the Prime Minister and President. During these meetings, we voiced our concerns over the various challenges faced by the industry resulting from both local and global volatility.
In fact, even in August, we saw a 20% increase in turnover generated by the sector. If this trend continues, we anticipate apparel sector earnings to increase to approximately USD 5.6 billion by the end of 2022. However, it is difficult to anticipate industry performance moving into 2023, given the geo-political tensions and economic volatility created by the situation in Europe – which is home to many of Sri Lanka’s most valuable markets. Currently, the US, EU and the UK comprise about 86% of our total exports.In such a challenging environment, it is essential for Sri Lankan apparel entities to diversify their markets. Hence a central focus for our discussions with Government has been the urgent need to finalize FTAs with countries like China, India, Japan and Australia.
,JAAF was pleased to note that the Secretary to the Prime Minister has been appointed to head a task force to expedite the Chinese FTA, and we are already seeing promising signs of progress. We are also pleased to note that JAAF has already been called in for these discussions although they remain at a preliminary stage at present.
Q: What role will economic reforms play in the apparel sector’s ongoing revival?
A: Fundamental reform in economic policy is absolutely critical. Sri Lanka is a small country with 22 million people, which means we simply cannot generate the economies of scale necessary to directly produce everything we require within a closed economy – especially if we hope to continue having access to quality and reasonably priced goods. Therefore we have to focus on export development in order to fund imports of commodities and goods imperative to keep our economy moving. Fortunately, the Government and the industry are in complete agreement on this point.
We also have must remember that at present, Sri Lanka is not competing on a level playing field. Our main competitors, countries like Bangladesh, Vietnam, and some African nations have duty concessions in global markets, which we do not have. Sri Lanka’s only concessions are for the UK and the EU markets, and those come coupled with a variety of strict conditions pertaining to the origin of raw materials which means that utilisation of these preferences remain around 50% for apparel.
Securing new FTAs can help reduce barriers for Sri Lankan apparel exporters to diversify, hence the Chinese FTA is our first priority. We hope to gain clarity on a timeline for these negotiations from the Department of Commerce in the coming weeks, but further progress will also depend on our sovereign debt restructuring negotiations with China. Further trade concessions will help to better integrate Sri Lanka with regional markets. If for example we are able to penetrate the Indian market, even 10% would be equivalent to 100 million people, where we are presently limited to supplying just 8 million pieces. JAAF has reiterated its request to have this quota increased. There’s also opportunities to lobby for the including of apparel into the new round of Canada’s GPT+ scheme. To move forward on such opportunities, we definitely require the support of the Government and diplomatic corps.
Q: How have import restrictions impacted the apparel industry- especially in terms of the raw materials needed?
A: As the sector was permitted to use its foreign remittances for the purpose of payment for imported raw materials, for the most part, the industry was able to meet its requirements without an issue. The export figures for recent months bear testament to the industry’s ability to deliver during this difficult period.. However, the crisis also meant a significant tightening of financing and this has been particularly challenging for the SME sector as they operate on small margins, and mainly provide support services to the main exporters. This is a sector which provides livelihoods for approximately 40,000 people, hence it is critical that we support them.
In many instances, they lack the working capital and foreign currency needed to purchase machinery and spare parts in order to expand capacity to service larger orders. Despite all the struggles faced, SMEs are still surviving for now, but without formal programmes to support them, this may not last. Most SMEs depend on the larger exporters and manufacturers. Once their orders are cut down, SME orders also decline. With the higher cost of living in Sri Lanka, salaries have also been adjusted across the apparel industry, but with orders declining, employees may see a reduction in earnings, impacted by the decrease of production incentives and overtime. This will affect employees’ monthly earnings and we need to be conscious of the cascading potential social impacts this could have, as their buying power is also weakened.
Q: How would an economic downturn impact orders from the US and EU moving forward?
A: Both markets last year recorded strong sales. But they may have overestimated demand as most buyers’ inventories are still full. Thus, they don’t want to restock for at least another 4 to 6 months.Recently, the US increased its lending rates by 0.75%, and there is a possibility that certain commodity prices might decline. If that happens, this whole situation can change, but it’s still too early to predict. Logistics and energy costs increased exponentially not just in the US but also in the EU, primarily due to the Ukraine war. If these issues ease by December, orders may pick up. But this is a global issue and not unique to Sri Lanka. Although the first 8 months of the year had a growth in exports, we envisage a decline in our apparel exports by 25-30% for the remainder of 2022.
How global MNCs can help bring USD into Sri Lanka
By Santosh Menon, Director, World for Lanka.
S/h-Motivates all their global employees and consumers to help Sri Lanka at this time of great need.I was recently checking out the website of a global MNC that is a huge player in the FMCG segment in Sri Lanka, and they said they operated in over 190 countries and had over 3.6 billion consumers worldwide.
A well-known No.1 global FMCG brand that dominates the market in Sri Lanka is present in 200 countries and claims to sell 1.9 billion servings daily, whereas the No. 2 global FMCG brand in Sri Lanka claims to be present in 200 countries and sells 1 billion servings daily.
A well-known global food company with famous brands and a sizable market share in Sri Lanka claimed on its website to have paid out 160 billion USD in cash to shareholders globally over a 15-year period. A major search engine claims that its product reaches 3.6 billion people worldwide, whereas a well-known social media brand claims to have 2.9 billion users.
What’s more, each of these global brands currently operates in Sri Lanka.
Let us review what Sri Lanka needs now and how these major global players can assist the country. According to recently published media reports, Sri Lanka currently requires somewhere between 5 billion USD for six months and 9 billion USD this year. This would ensure that people can afford essential necessities like fuel, food, and medicine, allowing them to lead regular lives and preventing the economy from coming to a complete standstill (we have already seen it happen). This also ensures that individuals receive the basic medical care required to maintain their health and that emergency medical care is available when necessary.
So what typically happens when a country does not have enough foreign currency to acquire the fundamental necessities? – It asks financial institutions for assistance, asks its diaspora to bring in the USD, seeks more exports, or tries to attract investments. It also asks friendly nations for loans or credit lines. We can see all of these happening. An Indian credit line has been obtained. I believe there are talks going on for a Chinese credit line. There is a conversation with the IMF. An effort is being made to urge the diaspora to send money back home using the banking system. To increase Sri Lanka’s foreign reserves, the central bank is working with exporters to make sure that all of their profits are being brought home. There are also discussions about how to boost investments, although this is a challenging task at the moment given the current political and economic climate.
So what else can be done? How can global MNCs contribute?
One must admit that these businesses are already accomplishing a lot; in the majority of cases, they continue to operate factories, keep employees motivated, pay salaries, and provide their Sri Lankan teams with a sense of security during these unpredictable times. Everyone in the nation suffers when the nation is suffering. Global MNCs are also no different. Additionally, they have been observed making donations from their CSR budgets to aid the humanitarian situation.
But what if I said that if global MNCs used their global system to help the country, they might be able to bring in enormous amounts of funds?These MNCs have access to an asset that, if they so choose, can be used to significantly assist Sri Lanka at this pivotal juncture in the nation’s history.To reach their customers, this asset consists of a sizable marketing infrastructure.Also, these customers are generous donors. Donors are expected to have given 4.6 billion USD to philanthropic causes in the US alone in 2020, but this is only one nation. Imagine having access to the 200 nations that these multinational corporations do.
It is simple to target these donors—who are the customers of multinational corporations (MNCs) and digital businesses—online with content that will inspire them to donate and lessen Sri Lanka’s suffering. There are 4.6 billion users online, for context. Global netizens are what they are known as, and in the modern world, we can use digital media to directly address them.
Technically, Sri Lanka’s needs for the upcoming year will be met by merely 2 USD from each of the world’s 4.6 billion internet users.If the leading digital companies (the social media and search engine giants) grant internet users access to their customer databases, and if they can be persuasively shown how just a few dollars from each of them would guarantee Sri Lanka and its population a normal life in 2022 or 2023, then we might witness unhindered foreign exchange flow.
So here are three things that global MNCs can do to help Sri Lanka out of this dilemma, with different degrees of impact.Using its staff and global network, it will raise awareness and provide money to Sri Lanka.Target international donors through social media and digital media with an effective and persuasive campaign to encourage USD inflow into Sri Lanka from selected regions.Utilize its products to raise money for Sri Lanka by increasing awareness of the issue there in international markets.
What are the benefits for the Global MNCs if they do this for Sri Lanka?
Companies and brands that are seen to support communities and engage with them are more likely to be preferred by consumers, who then become more devoted to their brands. This is a chance to inspire devotion and show genuine kindness.
There is a chance to shift people’s perceptions of some MNCs from being purely profit-driven organizations to ones with hearts and conscience. A multinational corporation (MNC) will be regarded as a really ground-breaking business if it can mobilize money from donors all over the world to aid Sri Lanka. By bringing money into Sri Lanka, they will also aid in boosting the country’s economy, which will benefit their own businesses and brands.
Now is the perfect opportunity for global corporations to show Sri Lankans that they truly care about them and to show the rest of the world how they can legitimately provide value by aiding a nation in getting out of a crisis. This is done by using their most innovative and top-tier global talent to tackle regional problems and by addressing them. What is needed is local leadership that can activate this program by convincing the global entity to prioritize Sri Lanka and navigating the global organizations’ processes. Let’s hope the multinational corporations (MNCs) present in Sri Lanka can exercise their powerful muscles when it counts most for Sri Lanka.
Lanka IOC shares shoot up; turnover hits Rs. 4 billion
By Hiran H.Senewiratne
CSE trading started yesterday on a negative note due to profit- takings but subsequently turned positive on account of turnover touching Rs 4 billion.Lanka IOC and Expolanka had created a major significant move to the market, stock market analysts said. Market had been gaining for the last five sessions on positive sentiments and speculation hinted that the government has no idea of going for a fuel price revision. The Lanka IOC share price appreciated by six per cent or Rs 12. Its share price during the day shot up to Rs 206.75 from Rs 194.75.
Expolanka Holdings contributed more than 27 per cent to the turnover due to foreign buying and also high institutional participation in the market. Rs 1.1 billion in crossings resulted in the market turning positive.
Amid those developments both indices moved upwards. The All- Share Price Index went up by 51.8 points and S and P SL20 rose by 26.8 points. Turnover stood at Rs four billion with four crossings. Those crossings were reported in Expolanka Holdings, which crossed 5.6 million shares to the tune of Rs 1.1 billion and its shares traded at Rs 198, Colombo Fort Land 6.5 million shares crossed to the tune of Rs 186 million and its shares traded at Rs 31, JKH 750,000 shares crossed to the tune of Rs 105 million, its shares fetched Rs 140 and Sampath Bank 556,000 shares crossed to the tune of Rs 20 million, its shares traded at Rs 36.
In the retail market top seven companies that mainly contributed to the turnover were Lanka IOC Rs 592 million (2.9 million shares traded), Expolanka Holdings Rs 346 million (1.7 million shares traded), Browns Investments Rs 170 million (26.9 million shares traded), First Capital Holdings Rs 154 million (5.5 million shares traded), Sampath Bank Rs 150 million (3.9 million shares traded), First Capital Treasuries Rs 134 million (5.5 million shares traded), and Capital Alliance Rs 93.6 million (4.1 million shares traded). During the day 126 million share volumes changed hands in 21,000 share transactions.
It is said that high net worth and institutional investor participation was noted in Expolanka Holdings, Asia Siyaka Commodities and Sierra Cables. Mixed interest was observed in Lanka IOC, Sunshine Holdings and First Capital Holdings, while retail interest was noted in SMB Leasing (voting and nonvoting), Browns Investments and LOLC Finance.
The Transportation sector was the top contributor to the market turnover (due to Expolanka Holdings) while the sector index gained 1.29 per cent. The share price of Expolanka Holdings increased by Rs. 2.50 (1.30 per cent) to close at Rs. 195.50.
Diversified Financials sector was the second highest contributor to the market turnover (due to LOLC Finance), while the sector index increased by 2.19 per cent. The share price of LOLC Finance recorded a gain of 10 cents to close at Rs. 7.90.Yesterday the Central Bank announced the US dollar buying rate as Rs 361.25 and selling rate as Rs 371.72.
Trio of collections to mark Vogue Jewellers’ 60th anniversary
Marking another milestone, Vogue Jewellers, Sri Lanka’s premier jeweller staged an unprecedented trio of jewellery collections at a lavish jewellery show held at Shangri-la, Colombo. The event featured Royal Majestic Collection – the third volume of Sri Lanka’s first ever branded patented 22 karat gold jewellery; Vogue Lace Collection – a Diamond encrusted 22 karat gold necklace collection inspired by Beeralu lace and the luxurious Diamond Necklaces Collection along with the complete set of Vogue Lotus Bridal Jewellery – 22 karat Kandyan bridal jewellery collection. The collections released exhibit Vogue’s instinctive ability to focus on fashion, uniqueness and everlasting value.
Each handcrafted necklace of the Royal Majestic Collection screams grandeur, wealth and value. They are absolutely versatile as they can be worn as a grand long centerpiece or by detaching the tassels that can be worn as a pair of matching earrings, and even by detaching the pendant to wear with a plain chain. They are 22 karat solid gold creations, Pure Brilliance SWAROVSKY Cubic Zirconia or genuine coloured stone encrusted necklaces that come with a 1 gm branded gold coin. Royal Majestic Collection with many designs. Ideal for gift giving, to pass on to the next generation and as a sound investment, these masterpieces are absolutely stunning creations.
Vogue Lace Collection, inspired by the traditional Beeralu lace is an intricately hand-crafted Diamond and Pearl encrusted 22 karat fine jewellery. As delicate as lace in their appearance, the luxury collection of necklaces and choker necklaces are truly exotic. Handcrafted to perfection, every necklace of this signature collection reflects mastery in design, craftsmanship and sheer elegance.
The newest array of Diamond Necklaces and Earrings released at the Vogue jewellery show brings a distinctly modern point of view to Diamond jewellery. Inspired by Vogue’s rich heritage in Diamond jewellery, the newest Vogue Diamond Collection comprises necklaces and earrings, accented with white gold, and in the case of some, rose gold, for that touch of colour. Each creation offers optimal style versatility with maximum sparkle.
In addition to the three new collections that were released at the jewellery show, the complete set of the 22 karat Kandyan Bridal Jewellery was paraded. Inspired by the much-revered Lotus, the divine symbol of purity, resilience and faithfulness, the Vogue collection is a made-to-order complete set of Kandyan bridal jewellery that includes the headdress and its accompaniments, earrings, seven necklaces, waist chain and the bangles. Available as a complete set or as individual items, it is a collection for those seek evolved designs in keeping with local traditions.
The jewellery show was choreographed by renowned Designer and Fashion Consultant, Michael Wijesuriya. Channa Wijewardena’s dance troupe lead by Aseka Wijewardena and Opera singer Stephane Siriwardhena added colour to the event. An elegant coffee table book was introduced to the distinguished invitees. The Kandyan bride was dressed by the popular bridal dresser, Mr. Dhananjaya Bandara.As with any item available at Vogue, the new collections too come with a lifetime guarantee. Visit the Vogue flagship store at Colpetty or any of its branches in Nugegoda, Kandy, Negombo and Kurunegala.
How global MNCs can help bring USD into Sri Lanka
Lanka IOC shares shoot up; turnover hits Rs. 4 billion
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