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Sri Lanka apparel industry may lose 30-40,000 jobs
21 Jan, 2009 18:11:15
Jan 21, 2009 (LBO) - About 30-40,000 people employed in Sri Lanka's apparel export industry may lose their jobs this year owing to a slow down in orders because of recession in key markets, a senior official said.
Ajith Dias, chairman, Joint Apparel Association Forum, said the industry is also facing a brain drain with the loss of middle level management people to other countries with garments industries.

He said he expects the downturn to result in the closure of many factories and more consolidation in the industry with the bigger companies taking over smaller ones.

"Survival of SMEs (small and medium enterprises) is the biggest problem," he told a seminar organised by the Institute of Chartered Accountants of Sri Lanka.

"A lot would depend on SMEs. We may have about a 10-15 percent drop in labour, which means about 30-40,000 jobs."

Last week, at least 2,000 workers lost their jobs with the closure of Sinotex (Lanka), one of the oldest apparel factories in the island's free trade zone set up 27 years ago.

The company attributed the closure to lower orders from the US market.

About 100 factories account for over 80 percent of the island's apparel exports and another 200 factories for the balance 20 percent, according to an industry survey done over a year ago.

But Dias said he believes the number of factories would have come down and would fall further because of the global downturn which means fewer orders..

"Very soon, the way things are going those numbers are going to decline. So the challenge is to see if there can be consolidation - whether bigger factories absorb smaller ones. JAAF is working on smoothening the transition."

The loss of jobs is a key issue in the garments industry.

"What are you going to do with all these people - mainly females working in rural areas?" Dias asked. "You can’t pack all of them off to the Middle East (a key employer of female migrant labour)."

Dias said apparel exporters have already cut staff at management level but have still not had to lay off factory floor workers, partly because of natural attrition.

"Now there have been cuts at the higher levels - executives - but not too much retrenchment in lower levels.

"The garments industry has a natural attrition of about four percent a month - about half the factory turns over every year. Workers either go home for various reasons or move from one factory to another," Dias said.

"Now the industry is not reemploying people and hoping at least 25 percent would have voluntarily left."

Then companies can merge factories and close down one plant till there is an upturn in the market.

Brain drain is another issue the industry is grappling with.

"We're having a serious problem of losing middle managers," Dias said. "Today about 1,000 Sri Lankan middle managers are in Bangladesh and other countries like Thailand and Indonesia."

The loss of trained talent is going to adversely affect the industry, a key source of foreign exchange earnings and employment for the island, he said.

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