-By A Special Correspondent
(Lanka-e-News -13.July.2025, 11.10 PM) At a time when Sri Lanka’s fragile economy clings desperately to the lifeline of export earnings, the once-celebrated apparel sector has found itself embroiled in a storm of allegations, investigations, and uncomfortable truths. The industry's elite—long hailed as the country’s export champions—now face uncomfortable scrutiny both at home and abroad.
This week, in a rare move, President Anura Kumara Dissanayake met with a delegation of Sri Lankan apparel manufacturers who arrived at his office—not to celebrate growth or innovation—but to lament the rising import tariffs imposed by the United States.
Having already faced a tariff hike to 44%, and recently reduced to 30%, these exporters are now lobbying Colombo to intervene diplomatically in Washington to push for a preferential tariff of 5%. But the government response has been uncharacteristically blunt: Fulfil your responsibilities first.
For decades, Sri Lanka’s apparel manufacturers were granted what many would describe as a "golden ticket." Duty-free access to imported materials, vast tax holidays, lands leased at symbolic rates, and even the luxury of duty-free car permits were afforded in return for promises of jobs, foreign exchange, and economic upliftment.
Instead, critics argue, the industry has delivered “peanuts” to the average Sri Lankan worker and far too little to the national treasury.
Transparency International Sri Lanka has called for a full-scale audit into the conduct of the apparel industry from 1980 to July 2025. Questions abound. Did the manufacturers repatriate the billions in export earnings? Did they pay fair wages and uphold basic labour standards? Or did they, as whistleblowers suggest, funnel profits into offshore accounts, pay bribes to Customs and Board of Investment (BOI) officials, and finance political campaigns to maintain regulatory impunity?
Sri Lanka’s top apparel manufacturers control nearly 45% of the nation’s exports. They own posh apartments in London, Geneva, and Dubai. Some even chair international panels on sustainability. Yet, factory workers—predominantly young women from rural areas—continue to earn subsistence wages without maternity benefits or union protections.
What’s more, leaked documents now suggest that several leading firms may have failed to repatriate export revenues back to Sri Lanka in compliance with Central Bank regulations. If proven, this could constitute not only a violation of domestic law but a serious breach under US Foreign Corrupt Practices Act (FCPA) and UK Bribery Act provisions.
Washington, which currently reviews tariff privileges through the US Congress’ Ways and Means Committee, is expected to hold a hearing this autumn where Sri Lankan exporters will be scrutinised. The Department of Homeland Security, together with the US Office of the Trade Representative (USTR), is also reportedly reviewing whether certain apparel exporters violated FCPA rules by bribing public officials to obtain tax concessions or circumvent customs controls.
If proven, the consequences would be disastrous.
“Any Sri Lankan exporter involved in bribery or fraudulent trade declarations risks not only losing their access to the US market, but could also face criminal charges under American law,” says James Cantor, a Washington-based international trade attorney.
UK authorities have also begun parallel inquiries. With the introduction of the UK’s Developing Countries Trading Scheme (DCTS), apparel exporters have gained access to generous tariff preferences. But these come with strings: demonstrable compliance with ethical sourcing, transparency, and repatriation of export earnings.
The controversy has taken on an uncomfortable ethnic undercurrent. Critics allege that a significant proportion of the apparel industry’s leading families are second-generation migrants, some originally from India or Pakistan, who were naturalised under lax post-independence citizenship regimes.
“Let’s be clear—this is not a question of ethnicity,” insists Dr. Asanga Dharmaratne, an economist and advisor to the Ministry of Trade. “But if these industrialists have reaped trillions of rupees in tax breaks from the Sri Lankan state, while treating workers like disposable assets and shipping their profits to tax havens, then there’s a legitimate question of loyalty to the country that made them billionaires.”
The concern is not new. Back in the late 1990s, the Auditor General flagged the misuse of duty-free facilities granted to export-oriented firms. The BOI, set up to promote foreign investment and ensure regulatory compliance, has long been accused of serving as a facilitator for elite privilege.
“No other industry in Sri Lanka has received such a combination of incentives—tax holidays, subsidised land, and logistical support,” notes Nalaka Samarasinghe, a former BOI director. “And no other industry has so completely evaded accountability.”
Beyond the boardrooms and profit margins, there lies a darker story—one of sweatshops and silent suffering.
A recent independent survey conducted by the Women’s Labour Welfare Trust found that more than 68% of female apparel workers were paid below the living wage threshold. Nearly half reported being denied basic entitlements such as paid leave, while 37% stated they were subject to some form of verbal or psychological harassment in the workplace.
In response, the Ministry of Labour has proposed a Minimum Worker Welfare Charter, mandating fair wages, maternity protection, grievance redress mechanisms, and access to financial literacy tools for all workers in BOI-approved industries. But manufacturers have already begun to push back.
“The compliance costs will cripple us,” claims one factory owner based in Katunayake. “We’re already struggling with tariffs, high electricity prices, and global market downturns.”
Yet many observers are unconvinced.
“If you can afford to buy properties in London, then you can afford to pay your workers a living wage in Gampaha,” retorts Niranjala Silva, a trade union organiser with 25 years in the industry.
President Anura Kumara Dissanayake, whose administration has declared war on corruption, appears unfazed by the threats and theatrics of the industry.
“There will be no free ride,” a senior official at the Presidential Secretariat told The Sunday Times. “If apparel exporters want diplomatic support in Washington or London, they will first have to demonstrate to our people that they are ethical, compliant, and transparent.”
The Ministry of Finance is reportedly preparing a white paper on the cumulative tax concessions granted to the apparel sector over the last 45 years. Early estimates suggest a staggering figure—nearly Rs. 2 trillion in fiscal giveaways.
“That’s Rs. 2 trillion funded by the ordinary citizens of this country—teachers, nurses, farmers,” notes Dr. Dharmaratne. “It’s time the industry shows what the public got in return.”
As the apparel sector scrambles to defend its case before US Congress and UK trade monitors, a simple truth looms large: credibility is no longer negotiable.
Either the industry embraces radical transparency and genuine reform, or it risks being shut out of its most critical markets. And if that happens, the consequences will be severe—not just for factory owners, but for the hundreds of thousands of workers who depend on them.
The apparel exporters, many of whom have grown fabulously wealthy thanks to Sri Lankan taxpayers and lenient governance, now face a choice. They can either stand as proud national entrepreneurs, or be remembered as offshore profiteers who betrayed the country that built them.
The choice, and the clock, are ticking.
-By A Special Correspondent
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by (2025-07-13 19:02:16)
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