Order cancellations increase COVID-19 impact on apparel industry

• Impact from low demand expected to surpass supply chain losses
• Industry estimates total impact to reach $ 600 m
• Stakeholder discussions to continue once situation under control
• Industry may request Govt. assistance to SMEs to pay salaries

By Shailendree 

Wickrama Adittiya

The biggest exporter, the apparel industry, expects order cancellations to surpass that of supply chain losses due to the COVID-19 outbreak, with total impact estimated to be as much as $ 600 million 

Joint Apparel Association Forum Sri Lanka (JAAFSL) Secretary M.P.T. Cooray told Daily FT that the collapse of the total movement of people in Europe as well as the US has led to lower demand.

He said orders were being cancelled and the industry was estimating that the losses from the drop in demand would surpass supply chain impact.

On a previous occasion, Sri Lanka Apparel Exporters Association Chairman Rehan Lakhany told Daily FT that losses from the lack of raw material and effect on supply chain was estimated to be between $ 200 million and $ 500 million. Last year apparel exports amounted to $ 5.6 billion, up by 5.2% from 2018.

The industry had been positive about continuing demand for apparel orders but the rapid spread of COVID-19 in Europe and the US has posed a new challenge to the exporters.

In addition to the cancellation of orders, the Government announced a three-day special holiday on Monday, which is adding further pressure on the industry. 

While Cooray said it was up to the management to make a decision on closure, as the Government only requested the private sector to grant leave for their employees, factories have been shut down.

“We had the liberty of operating but then we have to take responsibility as well,” Cooray said, adding that if a company wanted to keep a facility open, they would be responsible for the wellbeing of their staff. “Any individual company can take that decision if they are comfortable their staff is well protected from COVID-19 and there will be no issue,” he commented further.

While suspension of flights to Sri Lanka was announced on Tuesday, it is not expected to have a direct impact on the industry, and Cooray said they received information that there would be no suspension of freight and cargo. However, the industry was expecting a reduction in aircraft, which could result in insufficient capacity for imports and exports.

There are also uncertainties regarding how long the situation will last and the industry cannot make any estimations or predictions in this regard. “The best judgments will be made by the authorities who are actually monitoring and controlling the COVID-19,” Cooray said.

He added that, at the moment, focus was on containing the spread of COVID-19 in the country and once the situation was under control, industry stakeholders would resume discussions on measures to be taken to reduce the impact on the apparel industry.

“We will be looking for Government assistance to pay salaries to the workers. SME and regional companies in particularly will have a problem with that, so we will request assistance from the Government,” he added.