By Mandana Ismail Abeywickrema

Weeks after the government announced its 'economic stimulus package' to cushion the economy from the global economic crisis, the industrial and export sectors lament about the failure of the promised relief.

The tea, rubber and apparel sectors have expressed concern over the delay in receiving the benefits proposed through the relief package. The economic stimulus package for consumers, industrialists, exporters and the plantation sector, worth a total of Rs. 16 billion, was announced after a special cabinet meeting was summoned by President Mahinda Rajapakse on December 30, 2008.

The apparel sector, one of the largest revenue earners for the country, states that the benefits announced in the stimulus package needed to be in place by the second month of this year if the industry is to stay afloat.

Badly hit

The apparel industry has been badly hit by the global economic crisis and the uncertainty regarding the GSP+ facility offered by the European Union has in no way helped the cause.

"The key focus in the apparel sector now is to survive and it is important that the main stimulus package, which has not come out yet, be put in place soon," Secretary General, Joint Apparel Associations Forum (JAAF), Rohan Masakorale said.

Given the present global conditions, analysts have warned that the country would be hard pressed to keep the economy ticking. Already, out of the original 800 garment factories set up in the country only around 275 are in operation as at end 2008.

Apparel sector experts have said that while 60 to 70 garment factories have closed down since 2007, many of them were trying to consolidate. It has been pointed out that while there were over 350 garment factories operating as of 2007, there are now around 265 to 275 factories 'operational.'

According to Masakorale, the workforce in the apparel sector that stood at around 300,000 in 2007 has now declined to about 280,000.

He said that apart from one major factory eight to 10 other factories have either closed down or merged this month alone, in order to survive the current crisis.

Masakorale said that contrary to the shortage in the workforce experienced about two to three years back; factories could no longer take in new employees due to the present conditions.

Benefit

Referring to the proposals in the economic stimulus package, Masakorale said that the apparel sector has already received the benefit of the removal of the 15% electricity surcharge and the reduction of VAT from 15% to 12%.

However, he pointed out that the sector could benefit only from the main proposal in the stimulus package of providing a 5% rebate on exports as manufacturing relief to the apparel and leather product exporters, which has not yet been implemented.

"We hope it would be implemented soon, as it would be the main relief expected by the industry," Masakorale said.

He expressed concern over the survival of the apparel industry given the present internal and external conditions and sought the quick implementation of the proposals in the relief package.

Analysts have already warned that 2009 will be a decisive year for the export industry and some of the affected industries have already sought state intervention to overcome the crisis. The export sector - tea and rubber industries have sought government assistance.

The tea and rubber small holders have become very vocal in expressing their displeasure over the delay in receiving the so-called relief offered by the government last month. They say that the badly hit export sector would have a negative impact on the country's growth.

Standstill

Rubber small holders say that due to the government's delay in providing the promised relief, rubber tapping has come to a standstill.

Convener, Joint Association of Rubber Milk Manufacturers Gamini Ratnayake said that while 64% of the rubber manufacturers were rubber small holders, they have completely stopped tapping rubber due to the low prices offered for their produce.

He also said that the fertiliser provided to the tea sector at Rs. 1,000 was not granted to the rubber industry.

He added that although the government promised a fixed price of Rs. 150 for a kilo of crepe rubber in its stimulus package to save the rubber industry, the price remained between Rs. 110 and Rs. 130 per kilo.

"The rubber industry has not received the relief proposed in the package," Ratnayake said.

He said that with the negative impact on the rubber industry, a large number of people have been left unemployed as a result. He went on to elaborate that a greater part of  the rubber tapping and maintenance of the rubber plantations were done by daily wage earners and with the rubber small holders deciding to stop work in the plantations, a large number of people have been left without a livelihood.

Ratnayake charged that the government's relief package that was announced at a 'late stage' has still not materialised to provide relief to the rubber industry.

Fixed price

Meanwhile, the tea small holders have also come out strong against the government's failure to provide the promised fixed price of Rs. 45 per kilo of raw leaves.

Convener, Tea Small Holders Joint Forum and JVP Parliamentarian Chandrasena Wijesinghe noted that the government's proposal to provide fertiliser at Rs. 1,000 to the tea small holders was included in the 2009 budget.

"The proposal to give fertiliser at Rs. 1,000 is nothing new as it was by then included in the budget," he said. Besides, he explained that the fertiliser could not be used on the trees till April. "It has to be used during the rainy season and the trees have not received any fertiliser since last July."

Wijesinghe said that the delay in using fertiliser would result in the production of poor quality tea leaves. He said that the issues faced by the tea industry remained unresolved.

Avert crash

The leisure industry that is in the doldrums has also sought government intervention to avert a complete crash. Hoteliers have also aired their confusion over the relief package offered to the leisure industry.

"At the moment the industry has hit rock bottom and unless the government intervenes, the industry would collapse. It was a relief to the industry when President Rajapakse promised to provide assistance to the industry but neither the Treasury nor the Central Bank has so far told us as to what the industry would get," President, Tourist Hotels Association of Sri Lanka (THASL), Srilal Miththapala told The Sunday Leader's sister paper, The Morning Leader last week.

He had also said, "I have written to the relevant departments as to what we should expect, but no one is ready to give any details in writing. Although we are yet to be informed officially about the intended relief package, we are thankful to the President for assisting the industry even in a small way."

Eyewash

However, soon after the announcement of the relief package in December, economic analysts who had a close look at it called it 'eyewash' presented to mislead the public, especially given the downward trend in the world fuel and food prices.

They say that the reduction in local fuel and other commodity prices do not in any way reflect the huge decline in global prices.

On the other hand, exporters and many industrialists lamented that the relief offered was too little too late and insufficient, given the massive downfall experienced in many export related industries due to the government's delay in addressing their issues.

As pointed out by industrialists and exporters, the relief offered too little too late is also not forthcoming to the crisis-ridden sectors.

Meanwhile, the apparel industry said last week that if devaluation of the rupee is not possible, it should be allowed to depreciate to a realistic level.

"If it is not possible to devalue the rupee, then the rupee must be allowed to depreciate to a reasonable level," JAAF Head, Ajith Dias had told journalists last week at a seminar organised by the Institute of Chartered Accountants of Sri Lanka on the 'Global Financial Crisis.'

Uncompetitive

Exporters have said the high rate of inflation in Sri Lanka, together with currency devaluation by buyers of Sri Lankan goods and also competitors, have made Sri Lankan goods uncompetitive in international markets.

The head of the Hayleys Group, one of the largest Sri Lankan exporters accounting for 2.6% of total national export revenue, had also expressed similar concerns.

"Relaxing the exchange rate will help the situation, but for whatever reason, if the government cannot do this, then we need to find some other solutions," Chairman and CEO, Hayleys PLC, N. G. Wickremaratne has said.

"If the rupee can reach Rs 118-Rs 120 to the US dollar, that will mitigate many of our problems. But this must happen immediately, not by the end of 2009," Dias has reportedly said.

However, problems remain to be tended to in many local sectors affected by the global economic meltdown and as pointed out by many, the sooner it is done, the better it will be.