[caption id="attachment_20069" align="alignleft" width="300"] Sri Lanka Apparel Exporters’ Association (SLAEA) Chairman Rehan Lakhany. (File photo)[/caption]

By Madhusha Thavapalakumar

Cash-starved apparel companies are desperately awaiting the concessionary working capital loans announced for their industry by the Government, as their survival beyond August and September hinges on these loans. Speaking to The Sunday Morning Business on Friday (12), Sri Lanka Apparel Exporters’ Association (SLAEA) Chairman Rehan Lakhany stated that so far banks have either rejected or kept loan requests from the apparel sector in the pending list. “Working capital loans have not been given to the factories. Only one factory has received the confirmation for the working capital loan. Everybody else is just waiting,” Lakhany noted. A working capital loan at a 4% interest rate per annum was announced soon after the nationwide curfew was imposed in March in order to help businesses pay their employees. The apparel sector is one amongst five sectors that have been granted the Government’s six-month moratorium and working capital loan. However, the sector has been struggling to obtain the said loan for weeks now. Due to the failure in obtaining the working capital loan, the sector is urging the Government to issue proper direction on this loan scheme. Lakhany noted that they have raised this issue even through the Joint Apparel Association Forum Sri Lanka (JAAFSL), but there has not been any positive response so far. He added that several small-scale factories have closed down their businesses while a number of factories are on the verge of bankruptcy, adding that the worst is yet to come. “We are expecting the real downturn from August and September onwards. All of this is minute compared to what we will go through. We all talk about small factories suffering, but even the large factories are struggling now. It is going to be difficult. We have to find ways of surviving through this. We need the loan immediately,” Lakhany stressed. President Gotabaya Rajapaksa on Thursday (11) said he will remove officers from public and private banks if government relief measures are not transmitted to businesses. “Private and state banks have been criticised severely for not executing Covid-19 relief measures taken by the Government,” Rajapaksa said during a meeting at the Presidential Secretariat. Worsening the struggles further, personal protective equipment (PPE) orders that kept several factories up and running despite lockdown is coming to an end, now with only few orders being left to complete in the next two weeks’ time. In the backdrop of such situations, apparel businesses have had no option but to layoff their employees. However, that too is a challenge according to the country’s labour laws which cannot be adapted in an exceptional situation like the ongoing pandemic, according to Lakhany. He stressed the importance of bringing in new labour laws and introducing a completely different system where employers do not need to award large compensation for layoffs, pointing out that some countries have introduced new labour laws following the Covid-19 pandemic. According to news reports, India has proposed amendments to its labour laws after considering the impact of Covid-19 on their country. “The Government has to allow layoffs. Companies can’t keep paying big compensation packages for laying off their employees under these circumstances,” he added. On a further note, Lakhany stated that even though a slight improvement has been witnessed in new orders, there is a huge drop in the number of orders and therefore factories are finding it extremely hard to retain 100% of their employees and pay them salaries. “If factories face a massive shortage of orders and still keep their workers, without doubt they will end up bankrupt. Some of the companies keep 70% of their employees and pay salaries with the hope of getting new orders in the next three months, but there will be a percentage they have to lay off because there is a reduction in orders,” he added. Apparel manufacturers were evaluating whether they should adopt the prorated salary scheme formulated by the Government or choose to pay their employees in full, as The Sunday Morning Business reported on 31 May. Nevertheless, as Lakhany noted, the scheme too has been tough on employers given that the promised working capital loan is yet to reach them. The apparel sector is the largest contributor in the country’s export basket. It is estimated that the apparel sector provides for the livelihood of around one million employees and contributes over 44% of the national export revenue. The sector has been severely impacted due to the prevailing pandemic, with JAAFSL foreseeing an immediate contraction of $ 1. 5 billion in Sri Lankan apparel exports during the three-month period ending in June, compared to the previous fiscal year. The apparel sector showed a 41% decline during the month of March 2020 compared to the same month in the previous year. There have been tax cuts across the industry, mainly for employees above the lowest pay grades.