Big guns go north

Top apparel companies plan billions in investment; initiate discussions with Govt. officials; four sites earmarked.

(By Uditha Jayasinghe)

Hobbled by the loss of GSP+ and rising costs, top garment manufacturers are moving north to gain an edge with lower labour costs and fast tracking development in the process.

Brandix Limited, Hidramani Limited, Timex Garments Limited, MAS Holdings and Omega Line Limited are some of the companies keen on investing in the north.

The officials of leading garment factories who are willing to set up their factories in the Northern Province visited Vavuniya on 28 October and had a discussion with Northern Province Governor G.A Chandrasiri at the District Secretariat, Vavuniya.

The investors said that they were willing to set up factories in Omanthai, Nelunkulam and Cheddikkulam areas in order to provide employment opportunities for the youth in the Northern Province.

Of these companies, Timex and Fergasam are considering establishing a factory in Mannar at an investment of Rs. 1.5 billion next year.

“We are focusing on constructing the buildings in six months with another three months allocated for staff training. So at the moment we are hoping to start business during the latter part of 2011,” company representatives noted, adding that once the factory was established, they would consider moving to Achchuveli with another Rs. 1.5 billion venture.

“We are keen on this because of the tax advantages and the shortage of labour we face in other regions. The initial investment will be comparatively small, but in another two years we are hoping to expand with a Rs. 3 billion venture.

Brandix already has a garment factory in Punani in the Eastern Province and is eying the north as well. However, the company was reluctant to divulge details until the project was finalised. When contacted, Hidramani officials also preferred to remain tight-lipped.

Meanwhile, MAS Holdings sources revealed that the project was currently on hold but confirmed that their representatives had discussions with Government officials for a proposed venture.

Joint Apparel Associations Forum (JAAF) General Secretary Rohan Masakorala told Daily FT that the move by large scale apparel companies to take advantage of the Government’s tax incentives and infrastructure development in the north made perfect sense given the fact that Sri Lanka’s top foreign exchange earner had had a lacklustre run of earnings lately. He also remarked that “substantial” investment could take place.

“There is nothing thrilling about our export numbers,” he admitted, noting that they had posted a consecutive decline in the third month in a row. “Volumes remain the same and the number of orders is good, but when it comes to prices, profit margins and overall turnover, the industry is hurting.”

However, experts are optimistic that the third quarter will be positive since Sri Lanka’s key competitors, China and Bangladesh, are seeing an increase in labour prices.

“In the JAAF three year strategy we clearly marked the north and east as well as other economically-underdeveloped provinces as an option because costs in the Western Province are too high. While we can get better production costs in these newly-opened-up areas, the companies can also assist livelihood growth and grass root level development as well. It’s a good move,” he added.

The investors visited the sites at Omanthai, Cheddikkulam and Nelunkulam in the Vavuniya District. Government Agent of Vavuniya P.S.M. Charles and officials from the Sri Lanka Board of Investment, the Department of Environment and USAID also participated in the event.