Sri Lanka govt to buy shares in apparel firm

Nov 06, 2008 (LBO) - Sri Lanka's government will buy shares in apparel export firms under a support scheme to help them cope with a possible loss of duty free access to European markets, a senior official said. Ajit Dias, chairman of the Joint Apparel Association Forum, an industry umbrella body, said the government has offered financial support to exporters if the European Union does not renew the GSP+ scheme under which clothing is exported duty free to the EU.

Under the scheme, the government will give about 100 million dollars to exporters in return for preference shares in their companies, Dias told a South Asian apparel industry conference.

"They want you to re-organise yourself," he said. "This is not a grant but an investment.

"The industry is not being nationalised but a lot of us are going to have the government as a shareholder in our companies."

A preference share allows the holder to get a dividend before other shareholders. Preference shares are quite similar to debt and can usually be redeemed.

Details of the scheme are expected to be announced later Thursday when the government presents its 2009 budget in parliament.

The apparel industry, one of the island's main