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‘Free Trade Agreements essential to enhancing Sri Lankan apparel’s resilience’

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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.



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MN Group becomes the Best Business of the Year at Pinnacals Awards

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The MN Group won the Best Business of the Year Award at the Pinnacals Sri Lanka award ceremony at the Waters Edge Hotel, Battaramulla. Managing Director of MN Group of Companies (www.mngroup.lk), Roshan Wewage accepted the award on behalf of the organization. MN Group of Companies has previously won many awards including Lanka Business Awards (LBA) and Shramabimani.

Customers can obtain any construction related service from MN Group at a reasonable price. The company is also willing to finish half completed houses and commercial buildings at agreeable terms. MN Group understands that the tough economic circumstances have placed great pressure on the people and the company is committed to understanding their needs and to provide a warm and professional service. Roshan Wewage invited those who need to renovate their buildings to reach out to them.

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Dilmah Adjudged Best Corporate Citizen for the Third Consecutive Year

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Dilmah was awarded ‘Best Corporate Citizen Sustainability’ in the category of Businesses with Less than Rs. 15 Billion Annual Turnover, for the third consecutive year at the Best Corporate Citizen Sustainability (BCCS) Awards organized by the Ceylon Chamber of Commerce; recognizing that Dilmah has successfully achieved a sustainable balance between social, environmental, and economic performanc, a company news release said.

Evaluated by an independent & expert panel of judges, the awards are Sri Lanka’s most prestigious, scrutinizing and recognizing ethical and sustainable businesses. Dilmah was honoured as one of ten ‘Best Corporate Citizens’ of Sri Lanka, won the Award in the Environment Beyond Business Category, and was lauded for continuous commitment to the environment surpassing the realms of business.

“The annual BCCS Awards is the premier corporate citizenship award, highlights sustainability champions in the national corporate arena. The awards promote corporate citizen sustainability ownership and initiatives that deliver social and environmental benefits while pursuing profits. This recognition validates Dilmah’s emphasis on delivering social and environmental impact by sharing earnings through the work of the MJF Charitable Foundation and Dilmah Conservation,” the release said.

“In 1988, Merrill J. Fernando founded Dilmah, a family business, to serve humanity with kindness to people and nature, while sharing his passion for taste and goodness in tea. Over the years Dilmah has delivered over Rs. 7 billion for humanitarian benefit through the work of its charitable arm MJF Foundation and environmental arm Dilmah Conservation.

“Ensuring economic, social, and environmental sustainability exists at the heart of its operations and is integrated to every operational aspect of the business, Dilmah’s purpose is further extended through the work of the Merrill J. Fernando Charitable Foundation (MJF Foundation) and Dilmah Conservation (DC) by driving life-impacting initiatives.

“The MJF Foundation works directly with estate workers and underprivileged communities to uplift lives and empower them to pay-it-forward to their communities. Some of its core initiatives are the countrywide MJF centres, small-medium enterprises with over 2,000 small entrepreneurs, ‘Empower’ Culinary & Hospitality School, and ‘disABILITY’ teletherapy app.

“The sustainable development of people goes hand-in-hand with the planet. Dilmah Tea is a carbon neutral product manufactured at a carbon neutral facility. Further, Dilmah has pledged to achieve zero-emissions for its manufacturing process by 2030 through science-based targets. Dilmah Conservation functions under three main categories: environmental sustainability, biodiversity conservation, and education and awareness. As such, Dilmah Conservation initiatives range from butterfly to elephant conservation, climate research, adaptation and mitigation, rewilding tea gardens, conserving mangrove forests, and promoting nature-based entrepreneurship through seaweed cultivation and empowering agro-entrepreneurs.”

Winning the Best Corporate Citizen Sustainability Award 2022 is considered a top honour in the Sri Lankan corporate field. Each year, submissions are evaluated by an eminent panel of local experts, thought leaders, and academics. Dilmah considers receiving the Best Corporate Citizen Sustainability Award 2022 an important milestone in its journey as a truly sustainable brand with a purpose beyond profit.

Across the shores, Dilmah has been recognized for its attempt to take Ayurvedic wellness and goodness to the world with the help of tea. The Arana Range of Herbal Infusion Teas was voted the Product of the Year 2022 in Australia. Meanwhile, Dilmah on its 7th Consecutive Year was awarded Most Trusted Brand in New Zealand in 2022.

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DSI Tyres bags two awards at SLIM Brand Excellence 2022

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Sri Lanka’s premium tyre brand, DSI Tyres won two prestigious awards at the SLIM Brand Excellence Awards 2022, held recently in Colombo. DSI Tyres, who has already made a mark in the international markets too, won the Silver Award under the Product Brand of the Year category and the Bronze Award under the Local Brand of the Year category. These mark another important milestone in the company’s journey spanning three decades. DSI Tyres has also remained within the top three brands in Sri Lanka for three consecutive years, a significant achievement in a very competitive arena.

DSI Tyres’ role as a leading local tyre manufacturing company that continues to promote its brand in an eco-friendly manner through the use of state-of-the-art technology and continuous research and development which enables them to identify customer needs in a timely manner is the key reason behind its continuous achievements. DSI Tyres has been able to place its products optimally among the local and international customers using the latest marketing strategies. The company also places great emphasis on sustainability and has been able to expand its local and international market share maintaining continuous customer loyalty even at the most difficult periods. DSI tyres are becoming increasingly popular in the online sphere as well, due to the facilitation of online orders at the convenience of customers as well as the use of attractive digital marketing. “DSI Tyres has a special place in the people’s hearts.

We have won the people’s trust and it is the highest award we can receive. It is a great privilege for us to receive these awards, which a mark of appreciation for the work we do to maintain customer loyalty,” Managing Director of DSI Tyres Kavinda Rajapaksa said. SLIM Brand Excellence Awards is the Sri Lanka’s premier celebration of Sri Lankan brands that rewards the outstanding efforts of marketers. This gala event for this year was held at Grand Monarch Hotel, Colombo. The Chairman of DSI Tyres, Ranatunga Rajapaksa received the two awards on behalf of the company. Previously, DSI Tyres had won SLIM Turnaround Brand of the Year, Product Brand of the Year, Local Brand of the Year and many SLIM DIGIs awards.

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