Thursday, March 23, 2017

Negative impact on domestic industries due to China-Sri Lanka FTA

A group of local industrialists have expressed strong concerns over the proposed China - Sri Lanka Free Trade Agreement; pointing out that the FTA could have serious and detrimental effects on the country’s domestic industries, if implemented.

The Association of Laminated Flexible Packaging Manufacturers, a body of local entrepreneurs representing the packaging industry, stated in a media release, that if implemented, the proposed agreement will have an adverse impact on the domestic industrialists leading to the collapse of a large number of industries. This will result in loss of jobs and livelihoods and inevitable economic chaos.

The Association points out that most industrialists are unaware of this grave danger and urges all domestic industrialists to unite and safeguard their industries and businesses.

The proposed Free Trade Agreement (FTA) between Sri Lanka and China became a serious concern for the local industrialists when the government recently disclosed the requirement to reduce the Sri Lanka negative list to 10% as opposed to the 30% initially agreed upon. Furthermore, the government’s requirement to phase out the import CESS (a tax imposed to safeguard local industries) within 5 years of implementing the FTA adds to the worry. As local industrialists point out, the potential free entry of Chinese goods like tsunami waves will force domestic industries into closure.

Speaking about the issue, President of the Association of Laminated Flexible Packaging Manufacturers, Anton Hemantha said, “Local industrialists have been a solid force in stabilizing the country’s economy throughout the toughest of times. The sweat and tearsthey shed over the last few decades built successful local industries and created thousands of employment opportunitieswithin Sri Lanka’s economy. We strongly oppose the signing of FTA with a 10% negative list as indicated by the recent agreement with china but urge to cover the original 30% negative list as agreed earlier.”

Unlike large economies that enjoy benefits of economies of scale, local industrialists already struggle with multiple challenges such high energy costs, high labor costs, bloated raw material costs and Sri Lanka’s lack of economic fundamentals to develop and safeguard the local industries. The majority of the local industrialists have invested all their assets in their respective industries for borrowings. Their bank loans and overdrafts run into millions and as such their collapse will certainly lead to disastrous economic situations.

The packaging industry together with other local industrialists strongly urge the government to consider the potential disastrous impact FTA could impose on local industries and take measures to safeguard them. 

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