Float SL rupee, says exporters

Sri Lanka Garment Buying Offices Association (SLGBOA) and the Sri Lanka Chamber of Garment Exporters (SLCGE) have appealed to the Monetary Authorities to allow the Sri Lankan rupee to a realistic level so that garment exports and imports in general could remain competitive.

Sri Lanka’s competitors India, Bangladesh and China have floated their currencies to realistic levels posing a threat to our garment exports, they point out.

A statement issued jointly by the two organisations said: “With the advent of the post quota regime the Industry faced fierce competition from Bangladesh, China and India. Due to the dialogue of the Government of the day the commitment of the garment industry in marketing the ethical practices and the high compliance the EU accordingly granted the importation of Sri Lanka ready made garments Duty Free access under certain stipulated conditions which is commonly known as GSP Plus scheme.

“This gave the Sri Lankan exporter much fillip which helped the Industry to increase the exports to the EU since the scheme came into operation. Under the GSP Plus scheme the apparel industry is the main beneficiary but it also gave great opportunities or both the traditional and non-traditional exports.

“Due to very fierce competition since the post quota period many factories could not survive the highly inflationary environment in Sri Lanka when ad hoc wage increases, increase in factor cost and a very strong Sri Lankan rupee added to the woes of the Industry especially the small and medium (SME) sector.

“In addition to these factors the Banks who up to this time made good profits from the trade started to look at the very Industry they supported and thrived on a negative outlook.

“The Banks follow a policy of giving the customer the umbrella when the “sun was shining has taken it away when its raining” The garment industry which had about 800 factories until 2005/06 has now shrunk to less than 290 factories. The SME sector being the main casualty.

“The large Groups have survived (only a few had shut down) and the surviving have spread their risk by moving their operations to India, Bangladesh who will benefit at the expense of Sri Lanka. Hence there will be foreign exchange gain to these countries which will be a loss to Sri Lanka and unlikely to regain.

“Sri Lanka’s inflation which reached a record of almost 30% and currently stands at year on year inflation of 20.20% which is still high by any standard. Strangely and for inexplicable reason the Sri Lankan rupee has emerged as the strongest currency in the world today. In comparison, the currencies in our competing countries devalued realistically thereby making their exports remain competitive and Sri Lanka Apparel Exports made to struggle further.

“We urge the Monetary Authorities to be proactive like our competitors and allow the Sri Lankan Rupee to float to a realistic level so that our apparel exports in particular and exports in general can remain competitive and survive this crucial and critical period.”