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Could Sri Lanka’s Political Crisis Affect Bangladeshi Exports?

Sri Lanka’s top garment-industry group issued a call for political stability in the island nation, where the prime minister’s resignation has failed to quell anti-government protests raging over the deepening political and economic crisis.

Mahinda Rajapaksa, whose brother Gotabaya serves as president, stepped down Tuesday after violent clashes the prior evening resulted in the deaths of eight people, including a ruling party member of parliament. His departure followed a pre-dawn rescue by Sri Lankan troops, who fired warning shots in the air to disperse a throng of demonstrators who had breached his official residence in Colombo and were lobbing petrol bombs.

The country quickly plunged into curfew, though Thursday saw a few hours of respite. Tanks are still patrolling the streets and police and soldiers have orders to shoot anyone damaging public property or causing a disturbance.

“The violence that erupted on the streets of Colombo and in other parts of Sri Lanka on Monday, and the resultant loss of life is both unfortunate and deeply saddening. We empathize with the people’s distress over the extraordinary adverse impact of the economic crisis on their lives and livelihoods,” the Joint Apparel Association Forum (JAAF) said in a statement last week. “However, violence that costs precious human lives deserves our utmost condemnation.”

The organization, which represents apparel manufacturers in Sri Lanka, said it is critical that a new government be appointed “urgently” to fill the current political vacuum. Though Mahinda’s resignation was meant to make way for a new cross-party government, the newly appointed Ranil Wickremesinghe, whose return as prime minister marks his sixth term, has struggled to establish a unity government. He is viewed as being close to the Rajapaksa family, and several opposition leaders have said that they will not settle for less than Gotabaya’s abdication.

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“We call upon leaders and authorities to immediately restore political stability across the country,” JAAF said. “They should also ensure a safe living and working environment for all people, as we collectively navigate through this very difficult crisis. By the same token, we strongly support the efforts taken by the Bar Association of Sri Lanka to ensure a peaceful, democratic transition of power.”

Yohan Lawrence, secretary-general of JAAF, told Sourcing Journal that the “instability of the country and the lack of a stable government” has caused Western brands and retailers to place lower volumes in their upcoming spring/summer buys.

“Our call to the buying community is to continue to support Sri Lanka at this time as the apparel export sector is a crucial part of the economic recovery of the country,” he said. Besides the protests, the South Asian nation has been plagued by fuel shortages, which could hobble production if they continue. Garments are the island nation’s single-largest foreign income earner, contributing 6 percent to the country’s overall gross domestic product while providing 350,000 people with direct employment.

MAS Holdings, one of Sri Lanka’s largest apparel manufacturers, said that buyers have raised concerns over the current crisis and are following developments closely but that no ongoing orders have been canceled to date.

“MAS’ operations in Sri Lanka have not been measurably impacted by the ongoing protests, and as exporters are permitted to continue operations during travel restrictions, they have not caused an impact on production timelines,” a spokesperson told Sourcing Journal. “Buyers have confidence in the Sri Lankan industry because of its resilience in the past as well.”

Similarly, Brandix, Sri Lanka’s largest exporter, is continuing to navigate the challenges of the crisis, said Natasha Boralessa, its group director. “This is imperative to preserve the livelihoods of our team members, protect the industry and contribute to the country’s export earnings,” she told Sourcing Journal. “We have always maintained strong and trusting relationships with our buyers, which have been built over decades. We are confident that this sentiment will continue as Sri Lanka moves forward from the current crisis.”

Some suppliers in Bangladesh have raised concerns about a possible spillover effect, since 40 percent of apparel shipments use the port of Colombo as a transshipment hub to reach the United States and Europe. Shipping executives told the Financial Express that more than 10 feeder vessels carrying export goods are either waiting at or on their way to Colombo to connect with larger vessels destined for ports in the West.

“We have talked with the buyers’ forums and shipping executives on Tuesday on how to avoid the Sri Lanka crisis that may affect the country’s shipments,” Nazrul Islam, first vice president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), told the outlet, adding that they are also looking at alternative routes via China or Singapore.

Miran Ali, vice president of the BGMEA and managing director of the Bitopi Group, told Sourcing Journal that the implications of the Sri Lankan crisis on Bangladeshi exports will come into clearer focus in a few days. He conceded, however, that “potential disruption” is possible. Yohan said, however, that the port of Colombo is “operating well at the moment and there’s no impact on the movement of cargo.”