JAAF In Brainstorming Session To Tackle Electricity Hike

  • Industry Bills To Increase 20%

By Paneetha Ameresekere

There is at least one garment exporter who says that the industry will muddle its way through, the recent electricity hike notwithstanding, which however would result in electricity costs going up by 20%.

“This is because, despite a possible cost increase in garments as a result, buyers’ however will not want to put all their eggs in one basket; and elsewhere, among our competitors, in China for instance, other than in Bangladesh, costs are also going up,” the source who didn’t want to be named said, as, according to him, the authorized body to handle matters pertaining to the industry is the Joint Apparel Association Forum (JAAF).

“Bangladesh has other problems, the difficulty in coping with demand coupled with labour unrest,” he added.

The source said that prior to the increase, electricity comprised 7% of the industry’s total costs, but now it will go up to 10% with electricity bills to be inflated by 20% by this increase.

“In factories, the working environment is air conditioned, that’s the chief reason for the hike in costs,” he said.

A 10% hike would have had been sustainable, the source said.

“We shall have to cut corners, like what we did when we lost the GSP+ facility in order to survive,” the source further said.

“Buyers expect that from us, they don’t want to take the hit.”

“We also don’t want to make a hue and cry saying that Sri Lanka’s electricity price is one of the highest in the world as that would frighten buyers away,” he said.

“The industry is planning a brainstorming session early this week, as to how we could cut costs, similar to the way we tackled the GSP+ loss,” he said. “We have no plans to meet the Treasury, we met their officials a number of times, but nothing happened,” the source further said.
“We even stated our case before the regulator, the Public Utilities Commission, but all for nought.”

Garments and textiles are the island’s single biggest tangible commodity export, providing employment to some 350,000.
“In the case of textile manufacture the effect of the electricity hike is much severe,” the source said. Electricity comprised 30% of all costs prior to the increase in respect of fabric manufacture, he said.

The source further said that though garment exports dipped in January, it increased by 3% in February, on a year on year (YoY) basis.
According to Central Bank of Sri Lanka (CBSL), garment exports in January declined by 8.9% YoY to US$ ($) 333.9 million. However CBSL to date hasn’t released February’s trade figures.

Meanwhile, garment exports in the first two months of last year marginally grew by 1.5% YoY to $ 708 million.
The decline in garment exports to the EU last year is due to the recession that region is facing. It’s not due to the loss of the GSP+ facility, the source said.

Overall, garment exports to the region fell by $ 21 billion last year, on a YoY basis with China taking the biggest hit, the source said. Sri Lanka’s garment exports last year declined by 4.8% YoY to $ 3.9911 billion, CBSL statistics showed.

The loss of the GSP+ facility would have had wiped out a few hundred million dollars in export receipts to the EU, but the major hit was due to the recession in the EU, he claimed.

CBSL further said that garment export earnings to the EU which accounted for about 50% of total garment exports over the past five years declined by 9.2% in 2012, with exports to the UK, Italy, Germany and Belgium-Luxembourg, the largest markets for garment exports within the EU, falling.

Earnings from export of garments to France and several other countries within the EU had had recorded a growth in 2012.

Garment exports to the USA, the second largest market for garment exports, accounting for about 40% of garment exports over the past five years, declined by 4% in 2012, CBSL further said.

“Due to the impact of the recession in the EU, USA which previously was lagging behind has now caught up with EU,” the source further said.

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