28 November, 2021

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Coronavirus Crisis: The Apparel Industry Is At A Dead-End & We Need Help

By Chamila Samarakkodi

Chamila Samarakkodi

The clothing industry has consistently faced instability over the past few years after its slow recovery from the last global financial crisis. Economic headwinds have eroded even the mightiest industry participants globally. The UK’s most recent shockwave, Brexit, thrust both retailers and suppliers into new and uncharted territory – decreasing the buying power of clients and creating a ‘price-war’ situation for manufacturers in Sri Lanka.

But no event in modern history has caused implications as severe as that of the Covid-19 outbreak, which is in danger of tearing the very seams of the fashion trade. For the first time in memory, we have witnessed the effective cancellation of an entire fashion season: Spring/Summer 2020 is no more. As a result, there are unavoidable financial blows to every supplier involved. Finished garments have been cancelled, gathering dust in warehouses and retiring as dead stock.

Hard losses

Our clients are all closing down stores and cancelling all orders indefinitely, including those that are already a work in progress in our factories, as the UK goes into a lockdown state. Cessation of all trading operations until the health crisis situation is resolved – including the cancellation of all future contracts as our clients attempt to safeguard their business continuity, sustainability and resilience – puts all of us manufacturers in a period of great uncertainty over the next 6 months.

And there is no mercy from the desperate buyers either – a recent article off Drapers, the fashion retail sector’s premier magazine, evidenced the plight the local industry faces as follows:

“Industry-wide, suppliers are forced to absorb direct losses and accrued liabilities. Even the most trusted retailers are simply unable and unwilling to foot any part of the bill. … The devastating effects of these cancellations are being further amplified by forced extended payment terms – non-negotiable, of course. There is little concern for the suppliers that have been – and post-pandemic will continue to be – the mechanics of billion-pound retail businesses.”

Nation-wide impact

In an internal survey I set up, that was carried out among the members of the Sri Lanka Apparel Exporters Association (SLAEA) representing the island’s premier apparel manufacturers and exporters, it was made evident that there is already a struggle to service salaries and other statutory payments over the next 6 months at minimum – or even longer, depending on how the current unprecedented situation plays out – due to the non-availability of funds.

For a group of key players that have persevered through numerous challenges when apparels first kicked off in the country, there is an overarching sense of uncertainty around if there is even a future for the industry post-Covid-19 if adequate buffers aren’t put in place and support provided – and these leaders are certain ramping back up to merely the same scale and health their organisations used to be at will be a slow and tedious process, even after normalcy is restored.

For context, the apparel industry accounts for about half of our country’s total exports and employs over 15% of the local workforce. In fact, this is the only case in Sri Lanka of a single industry providing mass employment to its citizens (990,000+ skilled workers), in addition to being the country’s second largest FOREX earner for over 8 years with a 2025 target of $8 bn that is at risk – this is what’s at stake and why the government should be worried.

In speaking to many of my colleagues and peers in the industry, I have understood that the gravity of Covid-19’s implications to our organisations are far severe to what we make it out to be in our communications to the authorities, including the Sri Lanka.

Apparel Exporters Association (SLAEA) and Joint Apparel Association Forum (JAAF-SL) leadership.

Numerous manufacturers – majority being BOI-approved ventures – have already written to the Department of Labour, banks, creditors and so on but believes the urgency and severity of the situation has not been fully appreciated yet. This is an exceptional situation where the government must intervene to safeguard the continuity of one of its largest revenue and employment generators who are already at the point of bankruptcy.

Priorities

Traditionally, many organisations are in the habit of painting a strong and stable image of themselves – particularly true in our culture – but there’s nothing traditional about the challenges we are all collectively faced with today. Now’s the time for transparency and to be upfront on this evolving situation.

For my companies, right now our priorities are the well-being of our 2500+ people – our greatest asset – many of whom are the sole breadwinners of their family; and to keep our business alive until BAU can be resumed. We provide extensive vocational training and upskilling, employee benefits and other forms of social responsibility to our people, their families and the localities our factories operate in – including annual sponsorship of school stationary and other needs for the children of our staff, medical insurance and employee counselling, provision of visual and hearing aids, a death donation fund, free meals and transport, and many direct/indirect emoluments to the local citizenry.

This is not possible without a few sacrifices up front though, for which we need the support and approval of the government and its institutions. For instance, we really want to protect all of our employees and have them with us once business resumes – but we can’t do that unless we are allowed temporary lay-offs and other short-term measures.

My organisation alone works with six other outsourced manufacturing partners with a cumulative workforce of an additional 3500 employees – a demonstration of just how many lives could be changed forever, if we don’t take action.

Government bailout

It’s been almost a month since the more serious implications of Covid-19 kicked in, and after having really put in both individual and concerted efforts to try remediate the pitfall we are headed towards – if not already are in – it’s become apparent that the businesses can’t do this alone. While appreciating all the prompt, hard work the government is putting in to control the spread of the virus – an inspiration to the rest of the world – the post-Covid situation too deserves equal attention. Industries need to be safeguarded via a plan of action, or the country will collapse post-Covid despite having been saved from the virus.

By bringing together all the conversations I’ve partaken in recently, I have laid out the following straightforward requests and proposed solutions which my colleagues and I hope will ensure the industry has a future in the aftermath of the coronavirus crisis:

1. Salaries

1.1 All manufacturers have paid salaries for the month of March, due on 10th April 2020, by way of collecting all available cash-in-hand at their disposal. Even this required certain pay-cuts to have been made. 

1.2 Manufacturers have no means to provide for the remaining timeframe of 6 months at minimum until trading resumes and we are all back in business. 

1.3 As such, we request the Government to join hands with us and make arrangements to provide some form of allowance for our employees during this period.

1.4 We require permission to initially work on a pro-rata basis for less than the full work week, once we are back in business and are still ramping up to full capacity. This is because securing adequate work from clients will take time.

2. Statutory Payments

2.1 As we face difficulty paying core salaries alone, we request abolishing statutory payments – i.e. EPF and ETF – for the next 6 to 9 months.

2.2 Rescheduling ongoing non-payments of EPF to be paid back in 24 months, with at least a 6 to 9-month grace period and no penalties enforced. This is due to no trading taking place over the next 6 months, and an unclear landscape of how the business and the situation will progress during and after this period.

3. Employment Contracts

3.1 We request laying off a fraction of our staff for the next 6 to 9 months unpaid, i.e. on furlough.

Figure 3: A production floor housing over 1500 skilled workers in Anuradhapura

A small price to pay

If you are wondering if these concessions that are sought after will be a tough call for the authorities to make, to me, it’s a no-brainer. Real jobs of real people who need them the most, are at stake here – and we cannot look after them and protect their employment if we aren’t allowed to make some drastic changes in the interim to cushion the shock waves we are facing today. We need to be cautious of this fact.

There are a number of best practices my partners abroad and their governments have taken up, as well as plenty of examples of incentives similar to what I am proposing being implemented in other countries where the apparel industry is dominant, as illustrated.

Figure 4: Protective measures taken up by close competitors and key suppliers of the Sri Lankan apparel industry

Sri Lanka is already knee-deep in increasingly fierce competition with suppliers in Vietnam, Cambodia and Indonesia. This is no time to experiment, test your confidence and pride, or do nothing.

To end on a (potentially) positive note, however, I am sure the industry as a whole would be sincerely grateful if the above propositions are actioned. We are confident that, with the support of the right parties and if we work together to take the right approach, we will survive through this period and come out as preferred suppliers of choice once global trading resumes – and more importantly, enable all of our employees to resume working with us with minimal disruption to their livelihoods.

*Chamila Samarakkodi is an entrepreneur with 30 years of experience in the fashion and apparel manufacturing industry. Today, he leads Design Studio’s manufacturing plants in Anuradhapura and Kurunegala which are Board of Investment-listed companies that provide state-of-the-art training and employment to over 2500 rural employees, in addition to the group’s head office in Colombo. His end-clients are primarily UK high street retailers including Primark, ASDA, Topshop, Sainsbury’s, ASOS, River Island, Oasis and Urban Outfitters, exclusively producing high-end ladies soft and tailored garments.

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Latest comments

  • 9
    2

    Dear VIEWERs,
    not just apparel industry but tourist industry as a whole would be in danger this year. I heard German News y day that there would be much less people that would travel out of the country this year. Yearly like 40 millions of people travell to asia alone from Germany. Most that arriving in SL are germans.
    :
    They have been very upset the manner that POOR people of the country are not given the due by the current govt. They were also resounding even if the world OIL prices are 50% cheaper today, srilanken govt has not yet reduced the prices, if done so, whole lot of concessions could have been offered to the poor in SL.
    .
    And many are in the view, as an ISLAND nation, with ONE main entrance into the country, President and his brother Primier could close down the AIRPORT much earlier but they did not care of the people and nor had they a proper plan but people arriving in the country were in a mess due to President ‘s lack of maturity in people s friendly politics.

    If NEPAL, VIETNAM AND FEW OTHER COUNTRIES in asia could control it … being non-island nations, but SRILANKA to fail to do the due, is connection with the INABILITY of the govt, according to them. ::: latter is right I guess.. TOday, they have abued the RATION-DISTRIBUTION in order promote their images for upcoming general election. That is no right, but BASIL RAJAKASHES AND MAHINDA RAJAPAKSHES WOULD NOT find it unfair.

    Coming colour IS no good for our mother lanka. But what to do ? Brother duo will have to go around with a begging bowl sooner than later.

    • 8
      0

      “Traditionally, many organisations are in the habit of painting a strong and stable image of themselves – particularly true in our culture – but there’s nothing traditional about the challenges we are all collectively faced with today”
      It is about time someone exposed the sunshine stories that are being circulated by the government and its pliant media. This article points out the real situation in the garment industry. Let’s not start on tourism. The slump in oil prices will cripple the Middle East, which will start sending back workers. Other exports like Tea will suffer low demand. The economy is about to crash around our ears, with literally millions out of work. There will be starvation, because people without money can’t buy anything.
      As I see it, there is only one solution
      We have to integrate with the giant Indian market. Start with an EC style currency union, so that at least we will have a stable currency. It is true the Indian economy is in trouble too, but they can afford to take a hit because they haven’t been recklessly spending borrowed money.
      Free movement of people should be allowed, so that labour can move where it is needed. This may be a bitter pill for outfits like the GMOA, but desperate times need desperate measures. The alternative is mass starvation.
      To the idiots who will surely comment that kallathonies will bring the virus here, check the stats. The number of patients per million in India is 4 times less than here.

    • 6
      1

      Sri Lankan Watchdog,

      Why prostrating to saffron clad monks, chanting Pirith to go away the China virus, accusing the innocent Muslims of the China virus, when in fact it was the Chinese who introduced the China COVID-19 virus, won’t solve the virus problem for the Sinhala Buddhist racists?
      //
      Appeal to the Chinese. After all it is the China virus, the COVID-19.
      //
      The Trump administration has halted US funding to World Health Organisation (WHO), which, it claims, has not got tough with China in trying to prevent the spread of COVID-19.
      //
      This is evidence-based, fact-based.

  • 8
    0

    Chamois Samaracodi,

    Who introduced the Wuhan China19, renamed COVID-19 virus to the land and the World? The Chinese. That is the CAUSE.
    Get the help from those who caused the DAMAGE, the CHINESE.
    //
    America has cut off funding to WHO, because they were in cahoots with the Chinese. The WHO should get the funds from the Chinese.
    //
    Now the former PM , leach Ranil W, is making a request to the US to restore the funding to the WHO.
    He should be making a request to the Para-Sinhala Buddhists to stop the racism against the Midlims, and go after the True Culprits, the Chinese.
    //
    This China virus, has caused the US, $4 Trillion. A lot of damage to other countries as well. The monks Pirith and the Pope’s prayers are going nowhere. The virus is calling their BLUFF and they are STOMPED.
    //
    Now can you explain to Amarasiri and others with common sense, how the China corona virus became a Muslim virus for the Para-Sinhala Para/“Buddhists “?
    //
    Is it because of the implicit racism of the Sinhala “Buddhists” , following “Buddha -Agama”? An Insult to the Buddha?
    //

    • 3
      0

      Amarasiri – Be that as it may, all the saffron-clad “viruses” will adorn the Islamic garb worn by Muslim women, especially Venereal Gandasara and Athana Methana Rathana!

  • 4
    0

    Many industries, and tourism, will be hit badly. There will be a depression around the world, and we will all get hit by this disaster. It is vital that the government unite this country, and have a disciplined plan, to meet this challenge. Setting one against the other, and causing more friction, violence, and financial setbacks, will only WORSEN the situation. We cannot afford it, and we cannot depend on handouts by international agencies to see us through this crisis. There will be other poor nations in more need than us. We have to act wisely.

  • 0
    1

    The way you explain it is a problem unique to apparel Manufacturers. But, the whole world is closed. How come it is unique to you.
    I do not think, you will pay wages or salaries to girls who stitch cloths.
    It is hard to believe that a recession caused changes in the apparael industry, when people do not have money they go for cheaper stitched overseas (from many third world countries). The truth should be sales should go up. But, importing countries make it harder for some countries by imposing various ridiculous rules such as in order to provide cheap cloths, even when they do not manufacture because of the high cost of production (their workers were paid high or the manufacturer wanted a bigger margin of profits).
    One good thing would be train your work force very well, and establish manufacturing sites in every village or every district.
    Otherwise, Sri lanka is a has a crazy every thing. businesses wants money, money and money as aids. Then trade unions need more money or salaries. but, how do you compete with the world, where people accept low salaries and where it can not they go high mechanization. workers of the chinese Iphone plant committed suicide because of the low wages. From Developed countries companies moved overseas.
    govt should not go for giving hand outs to companies because of the covid-19. It is every where in the world.

  • 1
    1

    Annually abut five million people are affected from seasonal flu . Well over
    fifty thousand died in the US in 2018 according to reports and around
    650,000. worldwide according to WHO . This does not justify Covid -19 is
    any less in importance and undermines its dangers ! Now , back to the
    essence of this weeping and wailing of Apparel dilemma in the country ,
    if you pick up from somewhere down the middle of the story , this
    gentlemen tries to tell us that they are very concerned about the
    ‘ bread winners’ of the industry in top priority ! I am just wondering why
    this industry is called ” Sweat Shops ” by the consumers in the West !
    Moving on to the next vital part is not very difficult , this industry didn’t
    start with Srilanka as a pioneer export project , it went round many
    countries before them , Morocco , Tunisia , Egypt , Turkey , Indonesia ,
    Singapore , Taiwan , Honkong , Malaysia and Macao to mention a few !
    What happened to those markets ? The markets moved out from those
    old markets in search of new cheap markets and that is how the global
    supply market operated and still operating . So , don’t cry foul in an ever
    changing world ! In 1999 , the German retailer C & A pulled down the
    shutters of nearly 450 clothing outlets across Europe and complete
    closure in the U K . Just last year B H S in U K had to go bust , just a few
    instances ! Nothing to do with Covid – 19 . Thousands lost jobs ! The
    story is long , the truth is PEOPLE NOW SPEND LESS . The story in Sri
    Lanka is , the other way round ! People blindly spend as if there’s no
    tomorrow and building hopes that they can buy the world in Auctions !
    Stupidity at its peak !

  • 6
    0

    Srilanka already sold part of Srilanka to China for getting loan to fund Hambantoda airport, cricket stadium, Lotus tower and many high ways. Tourism is completely out because western tourists and Srilankan born diaspora will go through financial crisis for few more years. The anti tamil and anti Muslims and Tamils oppression by current dictators means business sector of the country will suffer. The presidnt’s promise of free fertiliser, Rs. 1000/day pay will never ever going to happen considering the downfall of economy. Continued oppression of Muslims, Tamils and UNP supported Sinhalese means unrest in the country along with struggle of citizens against military regime means more bloodshed.

    • 0
      1

      ajith ,

      Exactly ! We have formed a major political party to exist on racist
      votes ! This is a challenge to the economy of the country which
      fully depends on Foreign remittances , Apparel and few other small
      exports and tourism which hundred percent private owned . There
      is a saying ‘ Don’t put all your eggs in one basket .” If all these
      revenues get hit by something like this or a world war situation , the
      country stands naked ! Nothing can be done in a country where
      rulers mindset is fully occupied with cheap and inhuman racist
      and stone age concerns ! Being poor is constantly overlooked by the
      rulers to show off very expensive heroism to win cheap votes that is
      sold off for a packet of stale rice and most of the time a bottle of
      Arrack . People must stop undervaluing the power of their votes .
      If their votes are so cheap and any rogue can buy it then that is the
      price for their life ! Now back to this Apparel plight , normally in
      many countries , it had a shelf life of about 25 years before moving
      on to a new destination but luckily Srilanka is well past its shelf
      life and now about 40 years . Contd…..

      • 0
        0

        Contd….

        The US has already supplies coming from Mexico to reduce lead
        times and more South Americans are entering into the fray !
        The U S is our main Apparel buyer ! The country quota facility
        was abolished in 2005 eliminating U S guaranteed buying of our
        exports of Apparels but continued buying . So , we had a clear sign
        about our future vulnerability to our main destination ! we had 15
        long years to divert our attention. New markets from Vietnam ,
        Cambodia and Myanmar from Asia also sprang up ! Western retail
        rails are now full of Made in Vietnam or Cambodia alongside China
        and Bangladesh ! So , Covid-19 plays only a tiny part like the last
        rituals before burial !

  • 1
    0

    Government needs to bail out the private sector as done by all other countries. Bangladesh is pouring USD 9 billion as stimulus. How much is our stimulus?

    What do they need?

    1.Wage subsidy
    2.Deferment of of EPF and ETF
    3.Low cost working capital funding
    4.Flexible Labour laws which allows temporary lay offs and wage reductions

    Largest and most competitive industry in the country which is accounting for 50% of our exports. Also they compete with the rest of the world for business and without any help.

    • 2
      1

      Nihal Ranjith ,

      “How much is our stimulus?”

      “What do they need?”

      Will 50 percent go to the Rajapaksa Mafia’s pockets. like the Tsunami Funds, where the percentage was much higher?

  • 2
    1

    Moody’s once again downgraded Lankawe credit rating to B2. A Punnakku eating pig while depositing $18 B in his foreign accounts, sold the country to white elephants projects like Sooriyawewa Stadium, Matala Mahinda Bachan Naked International Airport, and Hangbangtota Port…. Now the foreign debt severing is the largest problem the country is facing. There is good chance that garments industry facing a slum until Christmas comes and people look for new cloths. Spring is on the way out while shopping malls remains closed. Summer and Fall cannot make any change this time. School kids and women may rough out until the fall end. Men workers are not going to generate any new demand for cloths.
    When they come back after the fall, Western malls may not come back at the same strength they were earlier. They may change their Avatar. This will turn into a wind fall to mail-order houses & on-line stores of China and India. This is going to bring another aftershock wave of blow to the garment industry of Lankawe, after Covid-19 direct hit.
    These girls, who had jobs and their own incomes, cannot be easily rented to Middle East until they suffer much more and ready to give up their self-respect. Until that country’s income will keep falling down.
    Very few countries’ macro economy is beaten down like Lankawe by Covid-19. But Lankawe has not faced much death like other countries faced (or at least Lankawe hid the true number).

  • 2
    1

    Asking for govt hand out is a cheap business tactic. Eventually, it fails because you are not thinking about other developing countries which have lower wages. Many countries are willing to produce cheaper. Sri Lankan has lot of manipulation, exploitation and man handling the govt.
    You guys can decentralize the industry into smaller units and then training about quality, and good practices must be the key words.
    I think if the women come daily from home, they will go for lower salaries. Govt eventually set up a UNemployment scheme. If not you guys cheat both the govt and the worker. Because, most what you have written is lies, in brief.

  • 4
    5

    Chamila please sell some of your luxury vehicles & pay your salaries on time

    • 0
      4

      Best comment for the year.

    • 0
      4

      Best comment for the year. Well said sarong.

  • 1
    0

    How interesting is it to see the difference between the amount of traffic to
    controversial and racist issues vs other development and economic issues ?
    It shows the obvious pattern of Patriotic tendency towards reading and
    writing !

  • 1
    1

    Have you thought of manufacturing and exporting PPE, personal protection equipment, which are in short supply?

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