Temporary boost for apparel sector

• Finance Ministry allows BOI-approved manufacturers to subcontract from local retailers or suppliers for three months as post-COVID support measure

By Charumini de Silva

 The Finance Ministry has allowed the Board of investment (BOI) approved apparel manufacturers to engage in local sales or to undertake sub-contracts from retailers or suppliers for three months starting from 10 September subject to conditions.

The move was both an outcome of a request made by the Joint Apparel Association Forum (JAAF) and a result of the consequences of the COVID-19 pandemic.

BOI approved apparel manufacturers can undertake sub-contracts to the domestic retailers to manufacture apparel products using duty paid fabric (raw material), supplied by domestic retailers/suppliers. 

This will be subject to payment of relevant taxes on income generated from such contracts as per provisions of the BOI agreements and the Inland Revenue Act.

“We are extremely happy with the decision taken by the Finance Ministry,” JAAF Chairman A. Sukumaran told the Daily FT. 

“There are factories registered with BOI which have excess capacity, but to manufacture apparel products case by case approval is required. Therefore, JAAF requested a blanket period from the Government,” Sukumaran explained.

JAAF had made this proposal with the objective of utilising the excess capacity available at these BOI-approved factories and to generate an extra income for them during these trying times. JAAF Chairman also said that if the industry calls for the blanket period to be extended, the association was ready to shepherd fresh discussions with the Government and other relevant authorities.

According to the Central Bank in the first seven months of 2020, textile and garments exports were down 25.5% to $ 2.4 billion. Of that textiles were down by 29% to $ 2.13 billion. Other made up textile articles (such as Personal Protection Equipment) increased by 130% to $ 142 million.

As per data released by the Export Development Board (EDB), in August export earnings from Apparel and Textiles declined by 11.99 % to $ 438.34 million compared with $ 498.03 million a year earlier. Despite the decline in the sector, earnings from exports of made-up Textiles (PPE) increased by two-hundred-fold in August from a year earlier.