Free Trade Zones

Free trade zone manufacturers warn of $4 billion export loss

  • Only Katunayake EPZ is exempt from power cuts while 14 other areas are in the dark
  • Free Trade Zone Manufacturers Association says failure to supply electricity and power will impact exports, the only stable source of foreign currency
  • FTZMA secretary Dhammika Fernando said the shutdown of the economy would be inevitable if the government. stay deaf and blind
  • Businesses begin partial shutdown of operations during power outage hours
  • Said the power outage is hampering manufacturing processes, timely delivery, putting future orders at stake
  • Employee income impacted without overtime or other incentives
  • Written requests addressed to the Ministries of Electricity and Energy, the CEB and the PUCSL remain unanswered
  • FTZMA says the government. has not provided an integral part of the infrastructure engaged in the IEDs signed with the BOI

By Charumini de Silva

Secretary FTZMA Dhammika Fernando

The Free Trade Area Manufacturers Association (FTZMA) yesterday warned that the country would lose $4 billion in much-needed foreign exchange inflows if the government failed to ensure uninterrupted power supply in an operating environment already affected by shortage of currency and fuel.

He claimed the economy is set to lose $4 billion or 30% of the country’s total merchandise exports for the year, hampering the only sector that has been generating a steady inflow of foreign currency since the outbreak of the coronavirus pandemic. COVID in 2020. .

Despite writing to the highest authorities about the worsening fuel and power shortages, the FTZMA said it had not received any positive response other than from the Board of Investment (BOI), which had handled all issues on behalf of its members for the past two years. month.

“Unavailability of fuel for emergency power generation, scarcity of fuel is hampering the supply chain, which is hampering container transport operations and our transport operator employees are struggling to refuel, which which considerably weakens the presence of employees. It also has a negative impact on the whole economy, our operations and employee income levels,” FTZMA secretary Dhammika Fernando told the Daily FT.

He pointed out that some of the companies have already started a partial shutdown of their operations during power outage hours, which has had a negative impact on manufacturing processes, credibility of timely delivery, placements for future orders as well as overtime earnings and other employee incentives.

“If the government continues to be deaf and blind to the pleas of exporting manufacturing companies, the shutdown of the economy will be inevitable,” he added.

The seven-and-a-half-hour blackout announced on Tuesday and for today was the longest blackout announced for Sri Lanka in 26 years.

With the interventions of the BOI, the Katunayake Export Processing Zone (EPZ) remains the only zone exempted from power cuts, while the other 14 zones experience daily load shedding, despite requests made to the Ministries of Electricity and energy, the Ceylon Electricity Board (CEB) and Public Utilities Commission of Sri Lanka (PUCSL). The most recent written appeal was addressed to President Gotabaya Rajapaksa.

“Those who can afford to use emergency generators will face an extraordinary cost of production, as their export products become more expensive, thus becoming uncompetitive on the international stage. Given the current situation, even to operate with a cost – there is no fuel to run the generators,” Fernando lamented, noting that they have received complaints daily for the past two months.

Last year, Sri Lanka’s annual merchandise exports amounted to $12.5 billion, nearly 45% of which came from the garment sector. FTZMA member companies earn about $3 billion or 30% of total export revenue, while the balance of 70% is generated by factories outside the EPZs. This includes industrial exports of clothing and non-clothing products.

“We were promised a lot during the discussions, but for practical reasons nothing is extended to exporting companies,” he charged.

Fernando also pointed out that the government has failed in its main functions of ensuring an uninterrupted power supply which is an integral part of the infrastructure committed to foreign investors in the country according to the agreement signed with the BOI.

“With the government failing to provide uninterrupted food and fuel to existing foreign investors, which is a basic requirement for attracting foreign direct investment (FDI), how are we even going to attract new investment?” he argued.

Currently, Sri Lanka has 15 EPZs operating in Katunayake, Biyagama, Koggala, Kandy, Mirigama, Malwatta, Seethawaka, Mirijjawila, Wathupitiwala, Horana, Polgahawela, Mawathagama, Wagawatta I, Wagawatta II and Bingiriya. There are 273 factories operating in these EPZs with nearly 140,000 employees, while 1,615 factories under the BOI which are located outside the EPZs where 580,000 are directly employed and around one million are indirectly employed through these factories. More than 70% of export revenues come from this workforce.