Dhananath Fernando  00:10
Johan, welcome to Advocata Studios.

Speaker 1  00:13
Thank you.

Dhananath Fernando  00:13
Thank you very much for joining us. And we are recording this at a crucial time. I mean, we are recording this on the 28 th of July, we are supposed to get some notification on the new tariff structure by first of August. So by the time you watch this video, there may be a deal, there may not be a deal. But thank you, Johan, again for joining Advocata conversation and the studio. Just to understand, what is the situation or the status? How do you see, on the point of view of the Joint Apparel Association Forum, what is up? We'll discuss about also about Jaff in a bit. But I first wanted to straight jump to the point. Sure. What is the situation as we speak now,

Speaker 1  01:01
thank you, Lanath, and thank you for asking me. Always a pleasure. So I think for us as the apparel export sector, and this message is what we've been saying from day one, is that there are two things that are important. One is what that tariff number is, and second, and perhaps more importantly, what the variance is between what Sri Lanka receives versus our competitor countries, and in that bucket we would list our competitor countries for apparel as including India, Vietnam, Bangladesh, Cambodia, Indonesia, Philippines, less so, but probably those five. So I think what we've always said is that okay? Where we end up as an overall number is obviously important because that's going to have an impact on the U.S. customer, on on on inflation in the U.S. on demand in the U.S. And then the second point is, you know, what's the delta between us? You know, if you take those five or six competing countries, obviously everybody wants to sit at the bottom of that pile. Where do we end up? What's that differential, and is there a level of differential that is manageable? Is there a level beyond which we just have to throw our hands up in the air and say there is no way we can close it? So I think what is the context is obviously that you know when the 10% came in, a number of brands. I don't think I can say all brands, but a number of U.S. brands reached out to to manufacturers and said, "Look, there's an additional 10% This needs to be shared by you. You know, some gave two, some gave three, some gave five, some gave more. So that any any room that there was for giving has already been given, and I think this next challenge, and let's assume the differential between Sri Lanka and our competitors is let's say 10% There isn't 10% of FOB to be given from here. So this means either the brand is going to have to take it, or they're going to have to pass it on to the consumer, and both of those things have have obviously got you know implications from it. If they pass it on to the consumer, it's going to hit inflation. It's going to hit demand. If they take it themselves, it's going to hit their margin. So right now, and as you say, we are 28th of 28th of July. We're all sitting here hoping that any minute now we will have some finality, because until this is finalised and there is some level of clarity as to where we are, we live in this sort of you know uncertain world where brands are not committing or committing only as little as they want to commit. So there's this great uncertainty that's hanging over our heads. You know, people don't know. Do they can they sell capacity somewhere else? You know, it's this this state of you know uncertainty has been hanging over ever since the second of April thing, and you know we have the second of August now. So you've had April, May, June, July. You've had four going four going into five. You know, you need to have five months of complete uncertainty, and that's just not good for business. It's not good for employees. It's not good for companies. So there's a piece that says, you know, let's just get to the end of this. But will august 1 be the end? I don't think so. I think this is going to be a conversation that's going to be an ongoing conversation, particularly when you look at some of the conditions that that are in these, I mean, then now there are agreements, so there's no clarity. And but when you talk of the things that are being mentioned, you you've got to wonder whether countries can deliver in on these promises.

Dhananath Fernando  04:35
Yeah, just wanted for our viewers and the audience, they may not sometimes really know the specific details about the structure as well. I just wanted to understand first. Now, this already there is a 10% tariff. So, are we? I mean, people sometimes think we are already exporting to the U.S. as a as duty free with 10% On top of the existing tariff structure, or is it is it in total for the tariff structure, and also give a colour of like what how what is the variance of the apricot export duties to the U.S.

Speaker 1  05:14
So let let's talk of sort of three scenarios. One is pre August pre april 2, and the second is between the second of April and today, and then the third is the beyond. So prior to second of April, when this announcement of Liberation Day tariffs came, Sri Lanka, like all of these other countries that I mentioned, all competed on an even basis. Nobody had preferential market access, so everybody paid the duty that you will be payable on that product, what what's called an MFN duty. So that's determined by product. It on on apparel it varies. It can be as low as I think about six or maybe maybe even less than 6% up to 35% So that so the duty on a product depends on its own HS code and the US has a very complex way of defining it, and for each HS code there is a particular duty. So let's say a T-shirt was 15% duty. So up until the second of April, everybody paid 15% duty.

Dhananath Fernando  06:16
So regardless, you have it is coming from Indonesia or Bangladesh or India. Everyone paid the duty. Yeah.

Speaker 1  06:22
So if the if if a particular product was classified as 15, everybody paid 15. Were classified as 25, everybody paid 25. Then what happened was he had this whole thing about the tariffs coming on, and then they said, okay, from the fifth of April, I think it was, everybody would get a 10% So that 10% came on top of this. I think the exceptions here is China because I think China had its fentanyl tariffs and its Section 301. I think the tariff on China is very complicated, so we have to kind of take China out for this purpose of this conversation. But if you talk Bangladesh, Vietnam, Cambodia, India, everybody was getting the MFN duty plus an additional 10% So if a T-shirt had a seven and a half percent duty prior to the second of April, that went up to seven and a half plus 1017, and a half. And now what's going to happen from the first of August is that 10 number will change. So what will it change to? In Vietnam's case, we believe it will change to 20 in Philippines. We believe it will change to 19 for Sri Lanka. Unless something happens in the next however many hours we have, it will change from 10 to 30. So, post the first of August, everybody will then have paid the MFN duty rate and a country specific duty rate, and it is that country-specific duty rate and the spread of that that is of what is of importance to us.

Dhananath Fernando  07:46
Thanks, thanks, Johan. That I think that clears all the dust. Everyone now understand how how these works. Also, the second question again for the clarification purposes. Now, when the apparel export is selling a product to your buyer, Let's say probably the the market price in New York or wherever maybe it's a 10% garment, but what you are selling from here to the buyer is probably for a lesser price. And people get confused whether this is a price, the price increase would be actually on that 10% or whether is it the is the price increment from what you sell from here to the buyer? Also, there's an then the conversation. Okay, in that case, the increment would be very small. So why why we worry so much about the small increment? Because the U.S. people will not you know consider like a 10% garment, a $10 garment will go to like $10 $13. So what's a big deal? Is the question. So could you clarify on that as well?

Speaker 1  08:50
So if you take a product that say exported from here at what we call an FOB, so when we agree a price with a customer, we would agree that price FOB or FCA out of Sri Lanka, so that let's say a garment is $5 for argument's sake. It's very likely that what the price the customer will pay is probably maybe you know 3x that, 4x that. So let's call it $20 for for argument's sake. It's not going to be too far off. So you have two prices. You have the $5 price, which is the FOB price out of Sri Lanka, and you have the $20 price, which is the retail ticket price. Now, in terms of the duty, the duty is applied on the FOB value. So let's take that $5 garment, and then you said you have a apart from the MFN tariff, you have an additional 10% So 10% to $5.50 is the is the additional tariff that's payable? Now, two things we need to look at. Yes, in the scheme of a 20-dollar garment that is selling on the retail price for $20, you could argue that you know 50 cents is is not significant. And these are the sorts of numbers you're talking because that that variance is there. Obviously. There are a lot of costs in between the $5 and the $20 point, and the the point is that apparel in general is a high high volume low margin business. So when the when the brand was to say to the customer to the manufacturer here, hey guy, you know this extra 50 cents that I'm going to have to pay, you're going to have to pay half of it. It's a massive impact to the brand, to the bigger part, to the manufacturer here, because in that $5 price, there's not a lot. Yes, there's an element of profit. That's why the manufacturer is in business. But if you look at, and there are you know a couple of public quoted companies, you can see, you know, the margin on apparel is is is low single digit numbers, so there isn't the space. Can it all just be passed straight onto the customer? Theoretically, yes. You know, in Sri Lanka, this Temuin's case where you know this whole duty. So yeah, so theoretically, the the the supplier can pass the entire duty onto the onto the end customer, and you know, arguably on a high value item, the it's not much, but the market is also very price sensitive, and you know, anything that you do in the market, yes, it's only a small percentage. It's still an increased cost, and it's still something that I think customers will will push back against. They'll you know say, well, you know, why is this brand raising its price by so much? So yeah, in theory, you could just say, look, it's a small number; it'll get passed on. But I think the danger in that is the the brand will still want to buy it at the cheapest price. So let's say the differential between Sri Lanka at 30 and in Vietnam at at 20, there's a 10% on the FOB. So the buyer will still say, "Well, I'd much rather buy it from Vietnam because it's only an additional 20. Whether I pass that on to the customer, whether I take it, whether the manufacturer takes it, you know, we can debate that, but that the irony is a small amount at that bottom is still a significant number in the in the overall scheme of things, particularly to the view of the customer. So the customer will will rebel against it, and we've seen this. I think some of the online stores were showing this amount, additional amount, and you can see the reaction from customers saying, "Well, I don't want to pay, you know, an extra cent, an extra five cents on something. So unfortunately, the customer will still push back on

Dhananath Fernando  12:29
it. Also, people may also be confusing. Okay, you are selling it at like $5, just as an example. But you said it's actually the retail level; it will be at about $15 or $20. So there are other costs that is from from garment from from here from Kalambo Port to the store in New York or wherever. So what are the other cost component? Because people may think okay they are keeping like a super profit. So there is a higher chance that the brand will absorb it and keep either the either the the the label price as it is, or you know, what are the cost components?

Speaker 1  13:05
So, if you look at it, it's quite a long chain. So, so that cost is usually sort of at the point we would hand over to the buyers forward. So, buy will have a consolidation centre here. They'll take the goods over, they'll store them, they will arrange to ship it. You'll obviously have the cost of freight carrying it halfway across the world, you'll have costs of warehousing, costs of distribution, and then even you know the costs of advertising. You know, big brands advertise. You know, where where where do brands get the money to do what they do for advertising for everything? They get it in that differential between the in our hypothetical instance between the $5 and the and and the $20, so right through including maintaining of their offices, you know the the whole chain. Plus, we also have to accept that in a number of cases they're not going to sell 100% of the stock at that $20 price. You know that's why you you have you know Black Friday sales, you have Thanksgiving sales, you have all these things. So there's an element they have to discount as well. That obviously will vary from brand to brand, product to product. You have to build that in. You have to build the cost of returns. You have to, you know, there's a large portion of activities that happens. Do the brands make money at the end of it? I guess they do. I'm sure they do. You know, they're not in. They wouldn't be in business if they did. If they didn't, but it's not like they're making you know you know 20% 30% profit margins. So I think that that entire production, you know, the the storage in Sri Lanka, the freight, the distribution, internal transfers, you know, everything we ship to the U.S. will go to one port. The U.S. is a massive location. You then have to move stock from wherever that port is to all your distribution centres. You have to send it from your distribution centres to your stores. So there's there's there's a really long long chain of expenses that happen, including of course everybody everybody in that chain has to make make profit. You know the. The freight company has to, the trucking guys have to, you know. So, so there is an element of profit in it, but the thing is that if you identify, if you try to isolate any single element, then this becomes a large element in that. So that's where the challenge. And

Dhananath Fernando  15:13
also, I think we need to understand it's not this tariff is not only applicable for garments or apparels. U.S. has increased tariffs across the board. So basically, all the prices across all the goods that they import will go up. So absolutely,

Speaker 1  15:28
and if you look at how dependent the U.S. is on Chinese product, whether that's you know as you say, it's not just a baroque. It's food, it's clothing, it's everything you everything you can think of that that that the U.S. customer need you know spends money on every a lot of that has an imported content, and tariffs have gone up on on as you say everything. So the impact to the customer is is is going to be huge.

Dhananath Fernando  15:52
And also understanding from that $5 to $15 or $20, as you know, the real estate prices or the rent prices in US is quite high, and at the same time they get celebrities. I mean, globally renowned rare celebrities, and of course their stores are at like premium locations, not locally but globally. So which which incurs massive cost to to maintain that brand image as well as for advertising. So that's why if you wonder like how $5 became like $15 or $20. All those cost has to be absorbed, and that's why it's a low, low margin, high volume business. You have to sell the number of pieces in millions to get that profit. In this case, also then the next question. I'm just at the first phase. I'm trying to understand so then our weavers know when we get to the solutions or to understand the impact so then they understand. So the next question is why can't we can't we ship this? You know, you can you forget about the U.S. market and probably pivot to U.K. and the European Union or any other markets? Why is it difficult to do that?

Speaker 1  16:58
So I think the reason it's difficult is because of the sheer volume, so if you look at Sri Lanka's apparel exports, we ship roughly 40% to the EU. I think about 30 35% to the. I beg your pardon. Start again. We ship about 40% to the US. We then ship about 30% I think, to the to the EU. About 15% to the UK, and the rest to everywhere else. So, and actually, with the U.S. it's bigger than the 40% because if you take a U.S. brand that's manufacturing a T-shirt in Sri Lanka, and that's being sold in their warehouse, in their store in China or in Japan or in or in Australia, in a number of cases, that product goes from Sri Lanka direct to that location, so the size of our U.S. business is actually bigger than the 40% It's probably closer to 50% because those brands are buying 40% is shipped to the U.S. but everything that is shipped, you know, east east of us, is shipped directly. Everything, you know, a U.S. brand that is shipping to Europe that will go from Sri Lanka to Europe. It won't go to the U.S. and get reshipped from there. So that actual number is, I would guess, it's probably closer to 50%

Dhananath Fernando  18:11
So if you lose the order, basically we are losing. You actually lose more than that. More than more than

Speaker 1  18:15
the U.S. order because you lose the order to China, to Hong Kong, to wherever. So in that context, that size of market. So just in terms of numbers, if you say apparel is 5 billion, about 2 billion is to the U.S. So it's significant. The other challenge, and this is the the reason the U.S. is as big as is, apart from the actual size of it, is as I mentioned earlier. You know, we in the into the U.S. with a lot of those competing countries, we compete on even terms. If nobody had a free trade, had free trade benefits on nothing significant anyway. So you competed shoulder to shoulder. If you take the EU, the UK, yes, Sri Lanka does have some. Those countries have some schemes that Sri Lanka benefits from. But right now, as it stands, countries like Bangladesh have much better access. So to give you an example, if a garment is made out of fabric, out of if the garment is made in Bangladesh, it doesn't matter where the fabric comes from. The garment is duty free into the EU. If the garment is made in Sri Lanka, it matters very much where the fabric comes from. So even in those markets, we don't compete evenly. If you look in other areas, you look at Japan, you get Australia. In all of these countries, our competitor countries have some sort of free trade, some sort of market access. So, a we can't pivot because you know the markets just don't have the the size, and b even to say fine, an X percentage of ours we can go up, that won't work because if we can't compete evenly with with our competitor countries, we're back to the same problem. I mean, the reason this is why other countries have a bigger presence in those markets because they have better market access. So that same argument is going to apply. So if, for example, Vietnam is 20% that 10% differentially. Is is just going to wipe us out? You also have the issue that you're going to have is that, like Sri Lanka, there will be other countries who may be at our level or higher, and here you probably put China into that pot as well. They will also pivot into those countries. So you know, if if China stops, you know, cuts its apparel into the U.S. You can bet they're going to look to ship more into into the EU, into the UK, into the other markets. So the fact is that pie is suddenly going to get smaller because that American piece. Taking that out, you can't just replace it. There isn't nobody has that size of market. Every other country is going to be looking to do the same. A number of other countries already have better market access into those countries, so you know you might be able to score some wins here and there. But is it going to change the needle? Not unfortunately, not.

Dhananath Fernando  20:54
So from from that, Johan, is it reasonable to assume actually, while the tariff rate is important that the delta can actually create more winners. Like countries like Vietnam can emerge as total winners because in case okay U.S. has a demand which will to an extent contract, but with that 10% margin actually overall what is shifting out from China, whether whether some countries may emerge as a overall shifting some orders from here or Bangladesh to US is is is it a is it a feasible scenario or is it too too much of optimism?

Speaker 1  21:33
So so you you touched on the needle right? It's this delta. What is the delta that is going to be there and that is going to drive? And this is why we you know one of the good things as the tariffs have kind of like moved, if you look at where it started, is that the average tariff number is coming down, and that is good because that is going to have less of an impact on market demand. But as you absolutely said, it is that delta that's going to determine where it goes. And the thing about I use Vietnam as an example. The thing about Vietnam is that it's already an established source. Some of the biggest brands source as much as 30% of their product from Vietnam. They source probably three, 4% from Sri Lanka. So to make that switch is going to be so easy. It's it's a no-brainer. You know that tariff differential. The moment if the tariff differential is you know two 3% you you could probably live with that. You know there would be some tightening of belts that you could do. There would that be something you could do. But I think once you start getting to five and certainly beyond, then unfortunately that's just going to change. You know that's just going to move business away, and this is where Sri Lanka's the size of Sri Lanka is is important because the apparel industry, yes, it's the biggest industry in our market, but on the global scale, it's tiny. So you know, Sri Lanka is depending on how you draw the numbers between one and 2% of global trade. So for country for a brand to source what they're buying from Sri Lanka from another country is very easy because it's not a huge volume. The reverse isn't true. Let's say again, let's take Vietnam. Let's say Vietnam was 50% and Sri Lanka was zero. Yes, we grow, but you know Sri Lanka can't take all of that business in. Sri Lanka has its own limitations in where we can grow, so unfortunately, that so so so you know even at a say a 50% tariff on Vietnam, Vietnam would still companies would still have to buy from Vietnam because they can't get it from somewhere else. Sadly, the size of our business in Sri Lanka is such that for brands they can get it from somewhere, and there will be plenty of countries who would be eager to have a crack, crack at that, and and and look at taking it over. So it is disadvantageous to us in that respect, unfortunately.

Dhananath Fernando  23:52
Thanks, Johan. I think that that's a quite a fresh insight because people think, okay, whether we can, whether what's the delta, and whether we can get an advantage. But I think Johan clarified it very nicely. Also, Johan, now some may ask now. Apparel industry has been there for decades, isn't there even like sometimes you know when you trade with the same manufacturer, there's an emotional bonding. Like, okay, I really cannot take it out from you know Sri Lanka because I have been dealing with these guys for so long, isn't it a factor? So, do you still think they will actually move, or how do you how do you evaluate at least that? Because Sri Lankans are quite emotional at the same time; they always think, no, no, no, they have been we are doing this for a long time. No, no, this won't happen. These two shall pass. So, what, what, what, what? How do you see it?

Speaker 1  24:40
So, so you're right, and there is. And I think one of the biggest examples of that was during COVID, because during COVID, none of the brands cut Sri Lanka, or you know, you had a number of other countries saying, oh, you know, the brand has just cancelled, the brand has left us with these liabilities, you know, this sort of thing. You never saw that in Sri Lanka, and the reason we didn't see that. Is because that relationship is there with brands, and you're you're correct. You know some of the brands have are heavily invested in in all senses of the word. You know they've they've partnered with factories here, they've built development centres, they've worked with them over the years. So there is a certain amount of flex that you can give, but the market is a brutal market. You know, and you might the best that that might do is you might be given some time because I will sit you down and say okay guys again let's take you know there's a 10% price differential on this garment that's a price you're going to have to do something fine we'll give because of the relationship we'll give you a season to work it out you know go back see where you can see what cuts you can make. See how you can come up with something. So I think that that relationship that you talk of will mean that you know it won't just literally stop overnight, but it will mean though that you will be given that hopefully some time to say, look, can you see what you can work out? Can you come back to us? We want to keep this order with you. We like your company. We like all of this. We appreciate the relationship. We want to keep it, but the differential is too much. And this is where I think that delta is going to come into play. You know, one 2% you could easily live with. Everybody would live with that.

Dhananath Fernando  26:14
So I think that's a that's a quite a important factor. So that was absolutely leading to my next question. When you look at the impact, we really do not know the numbers yet. But in case if it comes fairly about 10, I mean, if it's anything above five to 7% then Vietnam, how soon that we have to expect that impact, and what is like the magnitude of that impact? The IMF report has said it will be a 3% on exports compared to GDP.

Speaker 1  26:50
Yeah,

Dhananath Fernando  26:50
that's a big number. And at the same time, economic growth-wise or size of the economy, they have projected from 0.25% to 1.5% But the industry terms, in terms of numbers, like employees, or in terms of size of the market, how what are the estimations? Or Jaf has has it done any analytics on on on the so we we've

Speaker 1  27:12
done a bit of work on this to kind of look at this, and I think the problem that is that right now there are just too many variables in in you know because it's you know what's the delta? What are those countries? What are the conditions that these?

Dhananath Fernando  27:24
And they all are also negotiating exactly. Everybody's fine, but

Speaker 1  27:28
I think what we're saying is you're you're absolutely right. Certainly, the moment you go around above the 5% you're going to start seeing business move. Our U.S. business, you know, let's say you ended up at a seven to 10% differential. I think that would take a significant chunk of our U.S. business out, probably 50% or so of our U.S. business, because we still do product that can a lot of our product can be made in other countries, and if there is a big price differential, it will move. So I'm I'm reluctant to put a number on the table now because there are just too many variables, but all things being equal, you know, if you had a seven to 10% it's not unlikely that you will see, as I said, you know, probably 40, 50% drop in turnover, and that has massive implications not just for employees and the company, but the moment you come down to that size, how do you manage as a business, right? You you still have your fixed costs, you still have your overheads. That's the point where it'll get really sad, and you will see, particularly the smaller companies falling by the wayside. Because you know, how do you how do you survive? You know, the moment you lose that sort of level of your turnover, you don't you don't have the volume. It will vary. There are some companies who are more heavily based out of out of the U.S. There are some that are you know we have some in our membership. We have some companies are 70 80% U.S. business. So for somebody like that who is a small to medium company, it's very difficult to see how they will survive. So I think you'll see this across, and you'll see this across the patch. You'll see somewhere it's a lot worse off, and somewhere it's not not so bad, because they might have you know lesser of an exposure to the U.S. at that individual company level.

Dhananath Fernando  29:11
Yeah, and with that, also I think it's important that we explain what what's the role of the Joint Apparel Association Forum as well, and because people may be wondering if you are new to this conversation, if you are not following this conversation for some time, okay. What is what is the role of Johan and the Joint Apparel Association Forum? And when you mention about the membership, like who are the members, why it is important? So would you would you mind giving us a quick overview on what's the role of Jeff and and what is the role in this process so far by your membership and association? Sure.

Speaker 1  29:46
So Jaff is we call ourselves an apex body of the industry. So we cover anything connected to the export of textile and apparels as as a body. You can kind of equate us to a. Of a trade association, if you like, but our members are actually individual trade associations. So the over the years, the industry has had multiple associations. So you have you know guys who do the raw materials, you have guys who represent the buyers here, their interests, you have people who manufacture product, and what Jaft does is it brings together five associations, all of whom have some element of interest in the apparel export sector. If I look at companies who are exporting textile and apparel, I would say probably 95, if not 97% of those companies are connected to Jaff. Connected meaning they would be members of one of the associations that is part of Jaff, and we're about 20 odd years. I think in in in been around for about 20 years, and the reason we came together as a single body was exactly that: so that we the industry speaks with one voice, and this is important because when we are talking to whether it's a stakeholder at government level, whether it's an international stakeholder, it's important that they just hear one voice from the industry. So you're not having, you know, some association saying one thing, another association saying something else. So our whole agenda, our whole priorities of things we work on, are all determined by the chairpersons and of those five associations, they give us the direction. We then agree on what is important at at a country level. Jaf has always had a country first attitude, so any problem that we look at, we say how big is this is this for the country. So that gives us that kind of one voice to talk to the industry. Our role and my role in particular is to make sure that we service the needs of these individual associations. We understand what is important to them and their members, because you know somebody who is setting up a textile manufacturing plant in a remote location will have a different set of challenges to an SME who is in some other location and is struggling to get product out. So it's important for us to kind of distil these and you know target primarily the issues that are of national importance. So in terms of this conversation about tariffs, it's obviously one of the biggest conversations. It's ever since actually even before second of April because we kind of saw this was coming. We've been involved in getting talking to our members, talking to stakeholders, trying to say what do we do, what if this happens. So even as I said, even prior to the second of April announcement, there was a group brought together by with government by the government through with various organisations, government departments. We were involved in that conversation, and then on the second or third of April, when the Liberation Day announcements came, the government very quickly put together a task force to look at how we would deal with that. Jaff was the only non-government entity in that in that conversation, and that was for two reasons. Obviously, one is apparel is a significant part of what we do our U.S. business. So I think of our U.S. exports, probably 70% must be apparel. You would know better than me, but it's a significant factor, and and obviously again because we come with that one voice where we will look at it from an industry perspective. So we've had interactions. We've been part of that committee. We fed back into people who are involved in the negotiations. Jaf has not been party to any, not been at the negotiating table. And I don't, you know, for me, that's something which is a G to G initiative. We are where they are to help support. We've fed into that. We've we've had dialogue with them. You know, offline to understand to put down our needs. What is important to the industry? What can we live with? What can we live without? How much tariff differential? What does it mean on rules of origin? You know, what is the impacts on other markets? What are the brand? You know, what are brands thinking?

Speaker 1  33:55
So we can feed all of this back in, and I think our role in the kind of negotiations has been to support the government, and I have to, you know, say we were very. The government was very prompt. We, you know, the Liberation Day thing came on the morning of the third of April. I think by the fifth, the first letter had gone from president of Sri Lanka to the president of the U.S. I think that, you know, commitment to come to the table to to say we're willing to to talk, we're willing to do a deal. I think all of that has paid off up to now. That's where we are. Where we are, agree we still have a long way to go. But I see Joff's role in this is being the support that we're there to make sure we give the policymakers the right view of things. We give them what is important to the industry, and then we support in terms of trying to make sure that the information they require is given is given on time. So I think that's kind of our role, more as a support piece.

Dhananath Fernando  34:48
Johan, in the thank you, thank you. So now I think our viewers understand what's the role and how Johan and his team connects to this formula in the in the in the delta that you mentioned. Few you mentioned few countries: Vietnam, Cambodia, to an extent Philippines. What is the role of India? Are we competing for the same products in India, or how does it work?

Speaker 1  35:12
So India is big. India is big into the US, much much bigger than us. Right now, the way stands on a product to product basis, I think there's there's fair amount of differentiation. India tends to look at, you know, obviously things that have a lot more. India has its own handwriting, its handwork, and so on. But India is also making great strides in this. We have obviously we have some of our companies have already set up in India, so India would be a big player in this, I think. Out of the countries that we are, should we say, most concerned about this delta, the way things stand at the moment, it's Vietnam and and India. Vietnam is an immediate switch. India, again, depending on the product, is a sort of shorter to medium term switch. But India is a parallel into the U.S. I don't have the numbers with me offhand, but it's significant. It's you know it's it's it's way bigger than ours, and it's an area which India has also identified as an area for growth. There's a lot of initiatives being given in India to help to to push this agenda. So India is is going to be a key key player in this in this equation.

Dhananath Fernando  36:16
And also just to understand, since you mentioned, we also aware that some of the companies, the Sri Lankan companies have expanded to India. I think also to other parts of the world. How? What is our presence? Actually, the Sri Lankan companies in Vietnam or in Cambodia, because we are some companies moved to Africa, Bangladesh. Even most of our apparel sector professionals were located in Bangladesh to build that industry in that in in Bangladesh. So, what are the do you have like any indication on how diversified are we? I mean, I understand the the money will be basically the benefit for that country, but at least the Sri Lankan. I mean, if you have some presence regionally, at least you can you know manage it to at least your probability of managing it higher than without having any presence. So how true? So I

Speaker 1  37:05
think, and I think this is something that, as you mentioned, not all some of the big players have been able to make this transition, and that's been important up to now for a number of reasons. One is you know because of the scale of Sri Lanka, we can't offer everything that the customer wants because of the way trade arrangements are in place. Certain countries are preferred for certain locations, and that has caused for Sri Lanka industry to look at you know being. So we have companies who have a presence in Vietnam, in Cambodia, in Bangladesh in a big way, as you say, in India, in Africa, and this thing has always been there for the industry that you know brands want to this sort of one-stop location. They don't want to buy this from this country, that from that country through another vendor. So, so what Sri Lanka has done over the years is grown into something where you kind of do your central design and product development, all of that here, and then you manufacture in the location that is the most beneficial location for that customer for that product, you know. And again, the U.S. is big on this, right? So you have have Agua. I know you know. So so you have various pockets that are important, and I think you're you're right in that the in the fallout of this is going to be different. You know, for companies who have a footprint in other countries, it gives them some sort of flexibility that they can leverage on. For for companies who don't, you you don't have that flexibility. So yeah, I think the the handful of bigger companies who have their footprint in other countries, you know, that will be something to offset. But those companies have a huge footprint here as well, and I think you know obviously, if that goes or if that gets scaled down, the impacts on Sri Lanka are significant. So it's it's one we're going to have to keep an eye on and see how how how things happen.

Dhananath Fernando  38:56
Johan, also on the now on the industry point of view, also at the same time, I mean, apparel industry went through different phases. I mean, when there was COVID, it was a big challenge on how to operate, and I think the apparel industry successfully navigated through that crisis. I think even before that, when I was a schoolboy, that was this garment without guilt concept came in on paying. There were concerns about whether are we underpaying employees, conditions, so on and so forth. That was also navigated. In fact, we made it an opportunity in the past, and also generally there was a social perception that the apparel sector leaders are quite visionary and with all for their credit, because they navigated all these difficult times quite successfully, and they went from strength to strength. With that, as usual, Sri Lankans always think this too shall pass, and they will do something to turn it around. What is the conversation from your membership? And like, how are they preparing? As that now, okay, let's say the worst case scenario is okay. Earlier, the worst case could have been 44. At least now, the worst case should be will be 30% unless President Trump gets annoyed with something else. And again, if he increases the tariff, but in this 30% worst case scenario, what's the preparation from the industry?

Speaker 1  40:18
So I think that, and you know, the the challenge is this is a global one, right? This so this is one that you know we it's affecting every single manufacturer, every single brand. If you know every there's nobody who is completely insulated from this. So I think the conversation. You're you're right that resilience has been there, and sometimes you kind of think people say, you know, as you said, this too shall pass. Or don't worry about it; they'll find they'll find a way. I think what we have to be careful is that you know. I think this is this is bigger than anything we've seen before. This is one where the impact is going to happen very quickly. You know, and and there's so much that's outside our control. If you take you know right through the war, if you take right through the COVID crisis, right through our own economic crisis, there were a number of things that could be done locally, working with government, working with other stakeholders. You could find solutions to to offset the challenges, this one I don't see what we can do. You know, there isn't the you know we we're not we we know the position of the state, we know the position of the government of the government finances. You know, and we're not in favour. We we know that subsidies don't work. They don't. So so there's there's no there's no tools in the toolbox here right now, you know what? What can anybody do? And I think the challenge on this one is that it's going to hit. It's going to hit fast, and as always, it's going to hit the smaller companies first. So the smaller companies are particularly worried. I mean, literally every hour, I will have a call from somebody. Have we heard? You know, have we heard? Where are we going to end up? You know, my brand, my customer wants wants to know. My customer hasn't placed his orders as yet. He want. He's waiting to see what's happening. So this is going to, you know. And I said that this one is going to have winners and losers. There's no, you know, COVID. Everybody lost. Economic crisis. Everybody in Sri Lanka lost. This one is going to have very clear winners and losers, and where you stand in that is all down to what's happening in Washington right now. And I think it's that sense of hopelessness. I think you know this is not a problem of our maybe it is our creation because we export so much to the U.S. But you know this is not a problem that we have a solution to in our toolbox, and it's you're not talking of you know 2% 3% you're not talking of you know manufacturers agreeing to hold some stock because the market has turned and the brands want us to hold something. This is going to change fundamentally the way the business model works because the U.S. market, which as I said up to now we competed on an even basis, that whole fundamental changes, you know. And as you rightly say, this this is not going to be a first August end conversation. Countries are going to do things that please the U.S. countries are going to do things that displease the U.S. Each time something on that happens, there could be a move on tariffs. Now that this is on everybody's radar and everybody's agenda, Sri Lanka, as every other country, is going to see what it is they can do to make sure that they get a continuous better deal. You know, we know that Vietnam is not happy with the 20. We know that, you know. So, so therefore, there is going to be this constant push to to to get slightly better, to do something to to to get some favour with the U.S. so you get a better deal to to buy more to support more U.S. companies whatever whatever it is. So I think this is the challenge for us. Then, as I said, there are going to be clear winners and losers, and I think that winner or loser is going to be determined by what that individual country has to offer. You know, you look at the EU deal was announced, the Japan deal.

Speaker 1  44:08
You know, and you look at, you can see there's a there's a large amount of give and take. These are mature economies which have large trading volumes. There are things you can do. Sri Lanka is a small economy. There's with limits to what we can do, we have to abide by WTO rules. We have to abide by the IMF guardrails, you know. And I don't know that even if you didn't have those those things in place, that there was there is much we can do. So I think this is the problem. I think there's a there's an element of helpless helplessness. What more can we do? I mean, we, you know, with the NDAs, we don't know the detail of what has been discussed and offered, but we are confident that the government has explored every single opportunity. I don't think any stone has been left unturned in this. But there are challenges to what we can do, and you know, if you look at what Japan has promised, what the EU has promised. You know, there are big ticket items there which we don't we don't have to play with. So that, you know, I think right now there's a I think one of the statements from from the U.S. says that you know the small countries will all, and I read something that you know small countries will all end up in a 10 to 15 band. Do we end up in that? Hopefully, we'll all know. We'll know soon enough.

Dhananath Fernando  45:21
We also want to understand now. I don't want to hold the minister or his statement responsible for it, but also now, since I think you mentioned, I think for people to understand, it's very important to understand the fundamental difference when you impose country-wise tariffs. Because earlier we were now the entire structure, the rules of the game has changed drastically. Earlier, everyone like had a equal tariff rate when you are entering the U.S. border. Everyone is competing on the same price structure, and now you have just made it very. I mean, you have changed it all over. Where now that delta is going to be a critical factor? In that sense, is there is there a global way of negotiating actually based on the HS codes? Because there are maybe there may be certain products which may be a country wise tariff may make sense with USS geopolitics with the current geopolitical order, but since understanding that this is a very price-sensitive market and how these changes again change everything, isn't it a better deal for everybody? Or is there a way that, as a from the buyer's end, that you convene the? I know I'm not sure. I'm just imagining. I know it is how complicated it is, but to at least to on this certain sector that you go on a HS code tariff. Okay, if you really want to make it high, you make it high. That's fine, but at least to keep it in an equivalent manner for all the. Is it a is it is it a way to look at it, or is it like just just so?

Speaker 1  46:58
I I think the challenge to do it that way. Is okay. So let me wind it back. Firstly, I agree with you, right? Because if you look at apparel, the average tax on apparel is apparel is taxed relatively highly compared to certain other products. Apparel is also, and I think the U.S. is also recognised. Apparel is not something that can be made economically in the U.S. So you're not trying to, you know, to raise tariffs to be able to to have more product made in the U.S. That's just not going to happen. And apparel is already taxed quite highly, and I think a number of the brands and the brand associations in the U.S. have been highlighting to the White House that you know apparel is taxed fairly heavily already. You go and add this on top, it's going to pass on to the consumer within those tariff bands, and as I said, we we look at this. If you take tariffs in the U.S. at product line level, it can be as low as two to 3% I think right up to 35, 36% So in that box, there are many many different tariffs. The problem is there are just too many to be able to deal with the U.S. so so just to get a little technical, you you have what you call an HS code or an HTS code, which which is a code for every single product, and that code at the U.S. the U.S. duty it's it's at a 10 digit level. So you know obviously so we have certain chapters. So 61 and 62 are the apparel chapters, and within that you have it's then broken down by the type of product, the type of fabric that's made in it, the end use of it. So you're just you have such a large data set that it's just not viable. You know, short of saying okay, our top tariff is on apparel codes is going to be X, so you know this would be one way you could deal with it. So so you would say fine, the US would say fine. We're going to do these countrywide tariffs on our apparel codes. Anything over 20% right? That was the 20% is going to be the maximum. So at at MFN level, nothing is more than 20. You could do something like that, but I think the challenge is when you're trying to do you know 90 trade deals with 9090 deals in 90 days across multiple products, there just isn't the room the the the space to do all of this, and I think the logistical part of negotiating all of that, agreeing it, building it into your custom systems, or you know, I mean that's a Herculean task. Even right now, I don't know how U.S. Customs will manage on Friday morning when suddenly all of these changes are going to have to hit. So I think that challenge is there. I bet I agree with your notion, Ali. That would be the sensible thing to do because we know the U.S. is looking to raise revenue from this. We know that you know. So bringing everything down doesn't really work. But I think something like that in an ideal world would have been the better situation to do.

Dhananath Fernando  49:51
But I understand the complication at the systems level at the border because imagine like how many product categories are we talking about? It's millions. It's millions. It's literally. You know,

Speaker 1  50:00
as I said, you know, even you take what you and I would look like a standard T-shirt could have six different coats, depending on what fabric it's made of, of you know whether it's got a certain percentage of wool, as it got. So if it's you know, so there's just too much variable, too many variables in the mix for this.

Dhananath Fernando  50:16
So, is it reasonable to assume on that delta, like we have to make at least Vietnam and India. I mean, do we have to fall between a 5% variance with delta value of India and Vietnam? Is it the reasonable benchmark? So

Speaker 1  50:32
I I think the point is today it's India and Vietnam, but we don't know who's going to be next, right? Bangladesh might pull something out of the hat and come out at a at at a 50. But let's let's do this, okay? The the UK has a 10% tariff. I think that's now clear that that is very much the absolute bottom. If you look at the big trade deals, Japan, the EU, those are all around the 15% So you can kind of start seeing something that's happening, and I think that the challenge for us is to you know is to be we within around 234, percent of that. That you know, the moment that delta goes, as I said, today it's Vietnam and India, but that could be Indonesia or Cambodia. Could be, you know, it could be Bangladesh. Bangladesh is trying desperately. I think we, you know, Bangladesh had been held two rounds of negotiations. They haven't made much progress. They've offered to buy so many Boeing aircraft, and you know, so they're doing. You know, everybody, all of these countries are all doing whatever they can to try to put forward a valid argument. So it would be two to 3% of whoever is at the bottom of that pile. That that would be our hope.

Dhananath Fernando  51:41
Also, want to understand. Okay, let's say we can we we manage to get into that range of of two to 3% of that you know the the least tariff receiver in this game. How does the China factor impacts? Because from the little that I know, we source a lot from China at the same time, and in particular with the Vietnamese deal, I think there was a special statement from President Trump that okay, 20% for Vietnam, but if it comes as I think he used the word transshipment, I think probabilities like the the the the value addition or like the the the sources has to be if it's less than if it's higher than 40% then I think that's what I gathered. I'm not sure whether I got it right. How does it impact on Sri Lanka's apparel? So I mean, China, how big are they, or do we have to also look at changing our sources as well? How does it work?

Speaker 1  52:38
So you're right. China is the biggest into the U.S. I think, as a country, and they're also probably our biggest raw material supplier. This word transshipment, and you know, there's so much that's been written about it, and so on. I think the devil is going to be in the detail. I mean, one of the things I do every morning is just check the U.S. government websites to see, you know, is there any detail behind the deal that anybody has got? Because to be honest, I think those are going to be there are going to be some common themes you're going to see. But this question of transshipment, and I tend to agree with you. I think that's not transshipment in terms of bringing a finished good from country A into one country and you know sending that out as something else. I think that's to do with raw material sourcing, and this is going to be the challenge. You're absolutely spot on. You know we do probably 50% of our raw material comes from China. Now, whatever happens in that, I think we can assume will be the same for everybody. I can't see a situation where one country has one limit on raw material and another has has a different one, so in a sense there'll be a leveller there. But that could, depending on what that is, that could throw the rest of the argument just out of the box. You know, it could be academic by that point, because if, for example, you know, and again, there's been talk of you know, if you look at even the letter that came to Sri Lanka, it's talked of that if goods were transshipped through into Sri Lanka, the duty would be applicable on the original country. Now, what does that actually mean? I don't know. And there's a range of things that it could mean. And if it means what I think it might mean, it's it'll be a big problem for Sri Lanka. But it'll be a big problem for other countries as well. But of course, if you take again, if we talk of Vietnam, Vietnam has a much more advanced fabric base than Sri Lanka does. So, if that same restriction came in, then arguably more than the delta difference of the delta, the difference would be the fact that you know they had access to to raw materials, and Sri Lanka is making movement on this. But this is not thing; these are not things you can do overnight. Fabric mills are not easy to set up, and you know. So, so that is the other problem: is that that level of detail isn't there. And this is what worries me about the first of August, because this is the rules. Whatever comes out now is going to be in effect for goods being cleared. You know, there's there's vessels sitting outside U.S. ports. Right now, that are going that the duty on those products is going to is determined by this. So it's how you're going to build all of this into a system and track it and manage it. Honestly, I don't know. But yeah, to ask to to come back to your original question, yes, Sri Lanka is dependent on China for its raw materials, and anything that compromises that is going to add a further challenge into the into the equation.

Dhananath Fernando  55:23
Also, want to understand like what how possible it is to shift the orders between the region. For an example, let's say Levi's. You you touched upon it. For for example, Levi's may have a certain demand in the U.S. market at the same time they have a certain demand in the in the U.K. market. So in that context, as a as a as a brand point of view, would they consider? Okay, we have a certain demand for US. We have a certain demand for UK. Okay, for US products, Vietnam is the lowest as at now. So we'll move all the orders that is going to UK from Vietnam and park it in Sri Lanka, and we you we load it up everything which is going to the U.S. in Vietnam because price wise that makes sense because you get a better rate when you're sending from Vietnam to U.S. but you get a better rate probably when you're sending from Sri Lanka to U.K. Is it a feasibility or am I becoming too optimistic? No, I think

Speaker 1  56:22
so. I think that is already in play, right? So the you know we talked about why companies have operations in other countries. It's exactly for this reason. So use your example. Yeah, Levi's will look at the particular product and say, well, this product is best made in this location because it's going into this market, it's going into this customer, and you know the best rules of origin are there. So in a sense, that that drives where product is placed. And you're right. If you know when we get to this end, and you know there will be some losers, whichever the whichever way you look at it, cut it. There are going to be some losers in this. You would then look to that to kind of say, okay, well, hang on. And this is where that relationship with the customer comes into play to say, fine, okay, let's see what we can do. We have, we still have access to the EU. We still have access to the UK. So, mr. Brand, can you kind of do see what you can reshuffle around in your mix? The problem there is that, as I said, there there are very few countries that Sri Lanka can compete on the same terms as many of these other countries. You know that that's the challenge. As I said, you know, both into the EU and into the UK, you have a restriction on where you're using the fabric from. So if the if the fabric is being used and it doesn't qualify, then that argument's dead in the water, so this is the challenge. But yes, you're right. In principle, that will continue, and that that that drives product even today. You know, where is where is the end where is the end product going to be? I think certain products are much more easier split in that sense. Maybe things like jeans, where the product is less complicated, less standard, is more standardised. It becomes easier. In others, it might be slightly different. If you take lingerie, you know the U.S. customer has a different handwriting to what the what the U.K. customer has or the EU customer has. Sometimes the product doesn't automatically switch. But yeah, these are all things that we will have to explore to see how we, how how how we, you know, claw back some of the some of the loss that will happen.

Dhananath Fernando  58:27
Generally, in a in a crisis in that magnitude, most of the time the governments intervene. And as a think tank, of course, we do not recommend that approach. But there are instances when there's a banking crisis, when there's automobile crisis, or when there's a manufacturing crisis, governments announce some subsidy scheme or something for looking at the greater optics of the economy because it's not only the 300,000 or 400,000 workforce. There's a secondary economy: the transport guy, the canteen guy, the boarding houses. There's a massive impact. Is there any support that your, I mean, your association expect from the government, or is there a way that you can work it around? Maybe I don't know whether whether there's a budget relief or employee salaries, or whether there's electricity-wise, whether there's a of course no differential tariffs between electricity, but of course, is there a way that you have been discussing, or whether the government has offered, in case of, in case of a, in your example, a higher delta above five 7% with the with other with the with the regional? How what what what is the expectation?

Speaker 1  59:38
So I think our ask has been to say actually let's focus first on the tariff thing. Let's you know we've said to our advice has been let's open that box when it's absolutely necessary because right now we have to accept that you know there is a limit of focus that people can have on what things we want to look at. We don't think it's the right thing to dilute that. By going and saying, you know, can we do this? Can we do that? So the message, our message has been: let's focus on this current crisis, and we'll deal with that as and when it comes. But I, you know, as as Jeff and we, I think you know, I are both aligned on this. You know, we don't believe in subsidies. This aren't, you know, it's not the right thing to do. I think that the ask is going to be in terms of you know what can be done if companies have to downscale if companies have to have to retrench and you know here we kind of maybe draw some parallels from what happened in COVID when we came to arrangements with government to to look after people I think that's my gut feel would be that would be the box that we would have to look at because as you say you know you know EDRS is long gone in history. You know differential tariff rates. None of these work in the long term, and and we also have the IMF guardrails within which we have to work. And you know as I said, we we're not fans of subsidies. I'm not going to come here and say, oh yeah, you know we want you know this and we want that. We we know that that's that's a short that's a sticking plaster to to you know to something that's just going to blow up in your face in in in due course. And as a country, we've been there, we've done that, we've learned the lesson. So I think that's that's not something we're particularly looking at. If and when it comes to it, I think these are the things that we will have to look at, particularly around employee support, my second favourite topic of SFAT, maybe, but we'll save those conversations for a for for a time when it actually becomes relevant to have that. Right now, we want the focus to be on the current tariffs thing and finding a solution in the next three days.

Dhananath Fernando  1:01:41
Yeah. So before we wrap up, I I would I also like to touch upon the SWAT. But at the same time, is there anything that I I did not ask, but you have a comment, or you think that our audience and the and the Sri Lankans should know about this game, which we could not touch upon so far?

Speaker 1  1:01:57
No, I think we've covered it. I mean, as I said, the key issues are you know understanding what these numbers mean, understanding you know what options Sri Lanka has as a as a country. So I think we've covered pretty much everything in the. I think you know we've talked about all of the important factors. You know, at the end of the day, there's things outside of this conversation. You know, Sri Lanka has to be the competitive place to be. We have to be, you know, we have to be the place that attracts the right investment. All of that. There's all of those things. But I think in terms of the tariff conversation, I think that's that's clear.

Dhananath Fernando  1:02:29
Now let's come to Swat. I think this conversation has been. I mean, since this announcement came that they're going to abolish the Swat scheme, and there's a new scheme which we yet we are yet to be known. Now, generally, in my knowledge, the IMF also have consultations from the industry. Wasn't it? I mean, wasn't this discussed, or why all of a sudden that this shift? And what is the expected impact on the industry? This is like you know you you you can get a double whammy because at the I mean at a time that you have a massive global crisis on the sector and now you have to also keep your capital tied up without getting reclaimed. So how how does it work? And didn't you express this issue with the inland revenue or at the consultations?

Speaker 1  1:03:18
So we we have this has been as you say a topic that's been on our on on our agenda for probably the last couple of years now, I think, and and and our position on this fundamentally our position remains the same: is that we don't believe that the SVAT system has caused leakages in the tax system. If there are, and this has been our argument from day one, which was to say, well, if there are leakages. Let's a let's prove that there have been, and b let's find a way to make those people accountable for leakages and deal with that. Don't throw the baby out with the bathwater. Unfortunately, it's all got bundled in this whole reform of taxation and the view that you know Sri Lanka has too too many tax, very complicated tax system, and this I think it falls more in this administrative piece of of the IMF in terms of saying you know we just want to have you have an easier system it's easier to administer, but fundamentally our position still remains the same. We don't believe that doing this will bring any additional revenue to the government. That you know, and therefore, you know, in principle, we don't think it was a good idea. That said, the legislation has been passed, so we have moved on from that conversation and our discussions with all of your stakeholders now has been that it is absolutely vital that we have a digital transparent refund mechanism in place. We we've talked of things like invoicing, which will take away the need for manual matching of invoices, speeding the process up. There are you know the debates over you know who an eligible exporter is or not. We have some issues with those lines that have been drawn. Why why should somebody have to wait? Up to six months. Why should only why should only some people get it in 45 days? If you know our position is, if a refund is due, it's due. Whether you're a local trading company or whatever it is, if the refund is due, you need it, you know, as soon as you can get it. So I think our focus from the export sector has now been to to work with the authorities to say, look, fine, if we're going to do this, let's do this, but let's have a clear digital-based refund system set up and proven to work before we pull the plug, because our worry is that if the plug is pulled and you don't have that in place, then that will have a massive impact. Now, credit to the authorities. We've had this conversation with the government. We've had this conversation with the IF as well, the assurance is there that before this is pulled, there will be a system in place. We we are just conscious that we're now at the end of July, as that is due to come out. I think the first of October, so the time is timing is of the essence. And you know, if you look at how much movement there has been from when this conversation started today, versus what has to happen between now and the removal, it is concerning that there is just not enough time to get this sorted. So our ask has been, as it has always been, to say if you're going to refund it, that if you're going to pull the system and go to a cash refund system, you have to make sure that there is an electronic digital system in place for refunds that has minimal human intervention; otherwise, you will just end up in a worse position than than you are. And as I say, credit to the authorities. That's that assurance has been given to us that that will happen. There will be a system in place. As I say, we've got August and September to go now before this is all done. So timing is looking very tight.

Dhananath Fernando  1:06:42
Johan, thank you very much for joining the conversation. I'm sure we have a lot to discuss about creating a better investment environment and what other reforms that we need to do. But since we get some news on this first of August, and probably it will continue further, and we hope that we will get a better deal, as you mentioned, at least if we can stay in that, you know, variance like the range with our competing countries with a 5% margin, probably we would be we would be able to contest better, compete better, and take the industry forward. Thank you very much, Yohan, for joining this conversation, and wishing you all the very best at these challenging times, and also your association and the members.

Speaker 1  1:07:25
Thank you, Lara, and thank you for asking us. It's been an absolute pleasure as always.


Transcribed by https://otter.ai