The apparel sector, the country’s biggest exporters and the largest employer in manufacturing, says the government needs to focus urgently on safeguarding jobs from global recession impacts. The industry says the government should directly link its rescue package to safeguard existing jobs and to generate new jobs.
According to industry estimates, global purchases of apparel from Sri Lanka will drop by 10%- 15% in 2009. Sri Lanka’s two main apparel buying countries - the US and UK – are officially in recession by now and so are many other western countries. This is expected to reduce orders in 2009, increasing pressure on factories to downsize. But large scale job losses may also fuel economic and social problems in Sri Lanka by reducing incomes of families and retarding economic growth.
“The biggest problem, due to the global situation, will be workforce layoffs. So the main criteria the government needs to look at, is preventing employment losses,” said the Chairman of the Joint Apparel Association Forum, the trade representative body of the apparel industry, Ajith Dias, speaking at a seminar on the global financial crisis, organised by the Institute of Chartered Accountants of Sri Lanka, last week.
To help industries hit by the global downturn, the government announced a Rs 16 billion economic stimulus package in December 2008. The apparel industry says the government aid should be directly linked with maintaining current levels of employment. At this point the industry estimates that it employs about 270,000 people directly. “We have suggested that the government look at the level of employment in September 2008 and give incentives based on maintaining the same level of employment,” said Mr Dias.
However, employment figures may already be dropping. Earlier this month, Sinotex Lanka, a large and long standing apparel manufacturer, announced that it was closing down two of its factories in the Katunayake Free Trade Zone. The reason given was that it could not get enough orders from the US, its main export market, to sustain itself.
No new hiring
Most garment factories have by now secured orders for the first quarter of 2009. However, these orders were captured in 2008 and the situation is expected to change in 2009 when the global recession deepens. Given the uncertainty, many small and medium factories are expected to either shut down or “consolidate” with larger factories. Garment factories are already adjusting to the crisis. To survive reduced order quantities factories are following a ‘no-new-hiring’ strategy. Instead of firing workers, factories are simply not re-hiring when workers leave. The sector anyway has a high attrition rate of around 4% per month and the cut-down on re-hiring is automatically expected to adjust the workforce.
New jobs for North and East
The garment industry is also looking at expansion in the North and East. With the war coming to an end, the North and East offer new opportunities for businesses because of the availability of large amounts of low-cost labour.
“We are told that in the East alone, there are some 13,000 young widows in urgent need of gainful employment. We are willing to train them and provide jobs for them,” said Mr Dias.
The industry is already setting up training centres in the East, with assistance from USAID.
“We started a USAID funded training centre in Samanthurai and we are also looking at Batticaloa,” said Mr Dias. The industry says it needs more funds to expand these employment generation activities and says government aid should be linked to such ventures.
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