Sri Lanka’s knitwear industry is insisting that despite the country’s current political turmoil over who should lead its government, its business is operating smoothly, noting that it had managed to maintain commerce during the country’s 26-year-long civil war that ended in 2009.
“I don’t know if the political situation here is being exaggerated,” says Joint Apparel Association Forum Sri Lanka (JAAFSL) secretary general Tuli Cooray.
“We had a serious civil war and the garment sector [including knitwear] still survived,” he says, adding that the industry does not anticipate a significant drop in knitwear exports in the short term because of the crisis – although there could be some impact due to a number of travel advisories being issued by foreign governments against visiting Sri Lanka.
The crisis began on 26 October 2018, when Sri Lankan President Maithripala Sirisena abruptly dismissed the country’s prime minister, Ranil Wickremesinghe, and replaced him with former president Mahinda Rajapaksa. But Wickremesinghe, whose party (United National Party) and other supporters still command majority support in the country’s parliament – refused to leave his post and his official residence – calling Sirisena’s decision unconstitutional. And with Wickremesinghe and Rajapaksa both claiming to be the country’s lawful prime minister, President Sirisena then moved to dissolve the parliament and called for fresh elections on 5 January 2019. But the country’s Supreme Court has suspended the president’s decision. Since then, parliamentary sessions have been marred with lawmakers clashing violently, blocking business and triggering a constitutional crisis. A Supreme Court’s final ruling on whether the parliamentary dissolution is lawful is due in December.
Given the scale of this unprecedented political mess, Cooray’s apparent optimism is not reflected in concerns raised by the international community, including jurisdictions such as the European Union (EU) whose preferential GSP+ trade access is of critical importance to Sri Lankan knitwear exporters.
“The sudden deterioration of the situation in Sri Lanka over the weekend puts the country at risk of instability and unrest,” says Maja Kocijancic, European Union spokesperson for foreign affairs and security policy in a statement on 29 October, after a meeting with President Sirisena.
The importance of the EU to Sri Lankan exporters of both knit clothing and accessories is borne out by trade data. In 2015, Sri Lanka sold €930m worth of knitwear and accessories to the EU, according to data from Luxembourg-based EU statistical agency Eurostat. In 2016, Sri Lanka’s knitwear exports dropped slightly to €890m before sales picked up again in 2017 to €930m. And the total garment exports for this year looks promising, too. Sri Lanka is set to cross a US$4bn global garment (knitwear and woven) export target for 2018 and anticipates US$5bn garment sales in 2019, says Cooray. The government and clothing industry wants to double these exports to US$8bn by 2025.
The EU’s GSP+ status, which helps to promote these exports, depends on the country’s human rights and good governance, however. And next year, “a mission from the European Commission is scheduled to conduct the next assessment exercise,” says a spokesperson from the EU executive. “As a beneficiary of the EU GSP+ trade benefits, Sri Lanka has committed to uphold and effectively implement 27 international conventions on human and labour rights, environmental protection and good governance.”
However, according to Cooray, the industry is more worried about the impact of Britain’s impending March exit from the EU on garment exports, which could push Britain outside of existing trade relations between the EU and Sri Lanka, potentially creating new trade barriers.
“With nearly 40-43% of [EU] exports going to the UK, the possibility of a deal or no deal at Brexit is going to impact Sri Lanka’s garment exports,” says Cooray. As for the crisis at home, he adds that the industry hoped it would be sorted after the Supreme Court ruling.
