Strengthening Sri Lanka’s apparel industry and social security
View(s):The Sri Lankan apparel sector has faced many challenges in recent years. As international demand wanes, many manufacturers, especially small and medium-sized businesses, have been forced to reduce operations. However, outdated termination laws in Sri Lanka have hindered local industries’ ability to adapt, leaving many with no choice but to shut down their factories entirely, according to a statement by the Joint Apparel Association Forum (JAAF).
Noel Priyathilaka, Past-Chairman of JAAF argues that reforming these uncompetitive termination laws is crucial not only for the survival of businesses but also to boost investor confidence and increase export revenues, perhaps the most reliable long-term solution to Sri Lanka’s dollar shortage. In 2023, Sri Lanka’s apparel exports generated US$5.42 billion, a critical source of foreign exchange. However, stringent employment laws relating to termination have prevented the industry from maintaining operational flexibility in times of crisis, risking the closure of several factories and the loss of all associated jobs and suppliers to such factories.
Mr. Priyathilaka emphasises the need for a balanced approach that protects both employees and employers. He proposes the introduction of a social security programme for private sector workers which would complement the existing Employee Trust Fund (ETF). Under his plan, an additional 1 per cent contribution from each employer and employee would fund a new safety net for private sector employees. Through this effort the total ETF contribution would rise from the current 3 per cent to 5 per cent thus, ensuring workers are protected and are able to tide over during economic downturns without stifling business operations.
This reform, he says, would allow businesses to make crucial decisions in times of economic hardship while providing employees with financial security during layoffs. He emphasised that under current laws, businesses, particularly small and medium-scale manufacturers, struggle to make timely decisions in times of crisis, such as the economic fallout from COVID-19.
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