Sri Lanka and the Free Trade Zones

At US$830 per annum, Sri Lanka’s per capita income is still low. The garment sector is the strongest part of the Sri Lankan economy constituting around 42%, yet workers have few rights. At present the garment-manufacturing sector accounts for approximately 69% of total industrial exports. Of the 7 million strong labour force, over 1 million people (80% women), are employed in the garment sector.

Although Sri Lanka has some of the most liberal labour laws in South Asia, they are under threat from employers pressuring the government to amend legislation to suit their needs. The sector is characterised by poor working conditions including long hours, low wages, denied legal entitlements, excessive fines, and so on. Neo-liberal economic policies underpin the government’s push to weaken the labour movement and ensure that Sri Lanka retains its ability to attract foreign investment.

Free Trade Zones (FTZs) or Export Processing Zones (EPZs) are a key aspect of export orientated development strategy, as promoted by the IMF and World Bank, which is seen as central to the industrialization or “liberalisation” of the economy of developing countries’. The first Sri Lankan Free Trade Zone was opened in Katunayake in June 1978, followed by the one in Biyagama in 1982. By 1992, the whole of Sri Lanka was considered one free trade zone. Currently a total of 830 garment factories employ over 300.000 workers directly and another 100.000 workers indirectly.

Garment workers have become increasingly vulnerable since the phasing out of the MultiFibre Agrangement (MFA), which took place in January 2005. Transnational brand and retailer companies did not move their production to the extent that was feared. This is likely for several reasons: the US embargo on increasing garment exports from China until 2008; the concentrate on niche markets or high end fashion production and the European Union Generalised System of Preferences (EU GSP). The Sri Lankan government and garment manufacturers are trying to promote Sri Lanka as an ethical place to source garments from, as their competitive advantage in the post MFA climate, in a similar way to Cambodia has done through their commitment to ILO standards. To this end Sri Lankan industry has launched a “Garments without Guilt Campaign” which is being opposed by trade unions and labour organisations on the basis that they are not a part of, nor have been consulted with on this campaign and workers basic human rights are not upheld in Sri Lanka. Nonetheless pressure on workers has increased with: more work operations expected; an increase in workload; a reduction in the workforce (especially of the lowest and entry level category of helper); longer working hours.