By: Staff Writer
November 04, Colombo (LNW): In recent years, Sri Lanka’s apparel industry has encountered numerous challenges, exacerbated by both local issues and external factors.
The Covid-19 pandemic and subsequent economic uncertainties, along with geopolitical tensions, have complicated global maritime logistics, impacting Sri Lanka’s attractiveness as a manufacturing hub
As international demand decreased, many manufacturers, particularly small and medium enterprises, had to scale back their operations significantly. However, the outdated termination laws in the country have impeded the ability of local industries to adapt, forcing many to permanently shut down their factories.
Noel Priyathilaka, former Chairman of the Joint Apparel Association Forum, highlights the urgent need to reform these restrictive termination laws. He believes that such changes are essential not only for the survival of businesses but also for boosting investor confidence and increasing export revenues, which could be a long-term solution to Sri Lanka’s ongoing dollar shortage.
In 2023, the apparel sector generated $5.42 billion in exports, a vital source of foreign exchange for the country. Nevertheless, the stringent employment laws concerning termination have hampered the industry’s operational flexibility during crises, threatening factory closures and the loss of jobs along with suppliers associated with those factories.
Priyathilaka advocates for a balanced approach that safeguards the interests of both employees and employers. He proposes establishing a social security program for private sector workers that would supplement the existing Employee Trust Fund (ETF).
His plan suggests an additional 1% contribution from both employers and employees to create a new safety net for private sector workers. This initiative would raise the total ETF contribution from the current 3% to 5%, ensuring that workers are better protected during economic downturns without crippling business operations.
This reform, he asserts, would empower businesses to make necessary decisions during tough economic times while providing employees with financial security during layoffs. Currently, existing laws make it difficult for businesses, especially smaller manufacturers, to act swiftly in crises, like the economic impact of COVID-19.
Priyathilaka stresses that potential investors conduct thorough risk assessments before committing to investments, and offering an unemployment insurance scheme would signal Sri Lanka’s commitment to institutional reforms. This move could bolster foreign investors’ confidence, making the country a more attractive destination for investment.
Supported by the Joint Apparel Association Forum, this proposal is gaining momentum as a possible lifeline for the apparel sector and beyond, potentially benefiting over 3.5 million private sector employees.
As Sri Lanka endeavors to revitalize its economy, revising termination laws and establishing a comprehensive social security program could pave the way for sustainable growth, ensuring the long-term viability of industries while protecting workers’ livelihoods.
