Sri Lanka export factories face labour crisis as FTAs open markets; hails new strategy

ECONOMYNEXT – Investors at Sri Lanka’s main export industrial zone have hailed a new export strategy but said there were critical labour shortages, which may require foreign workers to fill as free trade deals opened new markets.

Free Trade Zone Manufacturers’ Association (FTZMA), representing investors in Sri Lanka’s Katunayake export processing zone said the country’s National Export Strategy was launched on July 19, following consultation with over 750 private and public stakeholders.

"We think the National Export Strategy is a timely intervention and we salute the government for this step in the right direction," President of the Association Fazal Abdeen said in a statement.

"However, one of the biggest issues faced by most exporters especially in the Katunayaka Export Processing Zone is the severe shortage of labour which we urge the subject minister, Malik Samarawickrama, to promptly intervene and help solve.

"There are about 5000 vacancies currently and we think in order to meet this high demand, we might have to look outside of Sri Lanka for labour."

The association said consistent policies on foreign investment facilitation, tax rules and free trade deals will help bring more investments to exports.

But to make use of FTAs a solution was needed for the labour shortages, the association said.

Critics have said that since independence, expropriation has driven out investors undermined property rights, land reform has taken from the people and vested in the state, regulations like the paddy land act has prevented best use being made of factors of production, making Sri Lanka a lagging nation.

The creation of a central bank in 1951 also brought currency depreciation and inflation, depriving workers of a living wage, leading to political unrest strikes and mass-migration of workers to the Middle East.

In sharp contrast to Sri Lanka’s depreciating rupee based on an inflationist philosophy of unsound money, Singapore and Malaysia shifted parity from Sterling to the US dollar when the sterling fell in 1967, and when the dollar fell after the break-up of the Bretton Woods, floated away from the inflating US currency.





Japan’s Yen which kept parity at 360 to the US dollar, during the Bretton Woods, has appreciated to around 100 to the US dollars after that.

Korea briefly tried a permanently depreciating currency in the early 1980s, but tightened policy and kept the exchange rate strong following the Great Workers Struggle in 1987 that came with the wake of a weak currency.

Both Indonesia and Philippines, which have bad central bank banks, also export labour to countries with stronger exchange rates and higher labour productivity, has somewhat similar inflation-depreciation cycles to Sri Lanka.

Analysts say depreciating currencies also result in high nominal interest rates, discouraging capital investments which are required to boost labour productivity. (Colombo/July19/2018)

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