Archives

The local textile industry which had been set up to cater the 200 Million Metre annual requirement of the domestic market, is on the verge of total collapse. They have been fighting a loosing battle from the day the duty for import of textile was removed with no scope for survival. But with the change of the situation textile industrialists have placed their faith and confidence on the new government that they would take appropriate steps urgently to revive the industry.

The local textile industry was never a sick industry but it had got totally crippled after causing serious injury, due to the unplanned and ad hoc manner the tariff was liberalised.

First it was the reduction of import duty from 50% to 35% from the first budget of the previous regime in February 1995, at a time when industrialists were getting ready for the Sinhala New Year seasonal sale after building huge stocks of fabrics. The textile manufacturers could not dispose of their stocks, as the dealers preferred to import their requirements for the season at a reduced rate of duty. The manufacturers were compelled to sell their stocks after the season, at a price very much below the cost thus incurring heavy financial losses.

The details of profits earned and losses incurred during three consecutive years by three leading public quoted textile companies are given below as per their published accounts, to indicate the extent of the damage the unplanned reduction of duty has caused. Sadly these mills are not in operation today.Profits of these companies came down as at 31/03/95 due to loss of projected revenue after import duty was reduced to 35% in February 1995.

The said companies suffered huge financial losses in the following year (as at 31/03/96) as they were compelled to dispose off their stocks accumulated in the previous year at low prices. This was the beginning of the downward trend of the local textile industry.

Had the Government listened to the industrialists and postponed the effective date for duty reduction at least by three months this disaster could have been averted.

Removal of duty

Then came the deathblow of removal of duty for textiles in November 1997 when the industry was recovering from the earlier blow. Duty was expected to be gradually reduced to a lower level by the year 2004, but instead it was totally removed plunging the textile manufacturing industry to total disaster.

The apparel sector called for the removal of duty for import of textiles since they felt that the major obstacle for the growth of their sector was the protection given to the local textile industry.

Apparel industrialists expected a huge boom of their sector, after the removal of duty for textiles. They further expected a free flow of good quality fabric into the country so that apparel exporters would purchase their requirements of fabric from the local market.

They also had indicated to the Government that they would absorb the employees from the textile sector if they were given further concessions such as additional quota allocations. These expectations never materialised.

Instead of a growth the apparel sector has started to decline after duty removal. The local market is flooded with low quality imported fabrics which are not even suitable for domestic usage let alone apparel sector consumption. Thousands lost employment due to closure of many mills. An unknown number of small-scale unregistered operations had also perished in the process. There had been 41,821 people employed in the local Textile Sector in 1995 as per 1997 issue of textile statistics Sri Lanka. This has come down to 18,208 during 1998 when Ministry of Finance and Planning took the count for restructuring program for the textile industry. At present the employment level stands approximately around 10,000. The relief measures granted by then Government could not prevent the collapse of the industry.

Biggest problem

The biggest problem the local textile industry is faced with to compete in an open market is the large-scale dumping of imported textiles into the local market. The present situation is that all the existing mills are operating at very low scale even at a time the demand for textile is at its peak due to the fact that the local market is flooded with low priced low quality fabrics. At this rate the local textile industry may not survive any longer unless a remedial action is taken immediately. An industry should not be over protected but there should be a reasonable level of protection to protect the industry from unfair trade practices.

The local mills produced better quality Chintz, Pijamas and fabrics for curtaining, batik industry etc., than what is being imported today. The local textile industry is capable of competing in a liberalised market but in a level playing field.

Fabric for Apparel Sector

There is an annual requirement of more than 600 Million Mtrs. of high quality fabric for the apparel sector, in addition to the domestic requirement. What had prevented the local industrialist getting into that segment is the high investment cost involved in modern high tech machinery needed to produce superior quality fabric.

The cost of a moderate capacity state-of-the-art weaving and processing plant is approximately 20 Million USD. Hence, Government intervention is necessary in providing financial assistance at very low interest cost and to create a conducive environment to foreign investors to come in.

The indications are that the apparel buyers would be looking forward to develop their future contacts with the apparel producers in countries where the textile manufacturing bases are established in order to cut down the lead time of their orders. Thus the need arises to set up many world class textile mills in Sri Lanka in order to save the apparel industry.

In fact many studies done by foreign apparel experts urging the then Government to take immediate measures to set up high tech textile plants to support the Apparel industry have ended up in shelves. (Source: Ceylon National Chamber of Industries, Apparel and Textile Sectors)

News | Business | Features | Editorial | Security
Politics | World | Letters | Sports | Obituaries |

Produced by Lake House
Copyright 2001 The Associated Newspapers of Ceylon Ltd.
Comments and suggestions to :Web Manager