Budget to resurrect rewards scheme for apparel

A reallocation of funds is likely to be announced in the next budget for the Export Development Rewards Scheme (EDRS).

By Sunimalee Dias

This comes in the wake of an assurance by the Government given in this regard to the apparel industry, which has been incurring losses due to non-payment since Q1 2009.

However, uncertainty prevails concerning the amount of funds to be reallocated by the Government, Sri Lanka Exporters Association (SLEA) President Rohan Abayakoon said.

The Government has fallen back on its commitment to the apparel industry in handing out the rebate from the total previous allocation of US$ 150 million, the industry stated.

“It’s important for the Government to honour its commitments,” he said adding that “once people have complied, it’s a serious matter.”

It was pointed out that the Government must give confidence to the industries, Abayakoon said, expressing hope about the sufficient reallocation of funds to expedite the third and fourth quarter export documentation.

The major conditions stated for companies to obtain the relevant 5% rebate of the export turnover were to ensure full employment with no retrenchment and an export turnover at over 90% over the previous year.

In spite of the industry’s compliance in accordance with the conditions, all were only granted a flat rate of Rs. 10 million per exporter in the first quarter, irrespective of the qualifications.

In the second quarter of 2009 that is effective from 1 April to 30 June, a ceiling rate of Rs. 10 million per exporter was to be given although this has not been granted yet.

In respect of the third and fourth quarters, the Government has “not even considered paying it and they will not even process the applications,” he said.

An approximate rebate worth US$ 75 million has been paid to the apparel industry to date.

The Department of Commerce, acting as the regulatory body in this respect, has stated that it was unable to accept the applications by the exporters as no directives were made to this effect, Abayakoon said.

It was observed that even other relevant authorities were unable to give them any reason or a timetable when the payments would be made.

He noted that if the EDRS was implemented to its fullest, then the industry would be able to commit and move further in the future.

In view of the Government’s ambitious plans of expanding some of the apparel factories to the north and east, Abayakoon noted while a few big companies would be capable of moving in, most others would not be in a position to do so due to heavy losses incurred should the current situation continue.

With most companies sustaining losses due to the grave situation they were set into due to their need to comply with the conditions of the Government, the industry will be unable to ensure necessary development in the next five years.

The industry is targeting revenue of US$ 5 billion in five years with a 60% growth.

Already companies have moved their factories to Bangladesh, India and Vietnam in a bid to cut down on the risks.

Commenting on the “cool businesses” that have been in focus lately, Abayakoon noted that the apparel industry would continue to make a significant contribution to the economy.

In this respect, he explained that a 500 worker factory in Sri Lanka contributes a few hundred thousand dollars to the national economy, which amounts to about US$ 60 million to the economy in a month.

However, should the current situation continue, he observed that factories would be unable to sustain business and would eventually have to close down.