A free trade zone (FTZ) or export processing zone (EPZ) is an area of a country where some normal trade barriers such as tariffs and quotas are eliminated and bureaucratic requirements are lowered in hopes of attracting new business and foreign investments. Beginning in the late 1970s, free trade zones were promoted in Sri Lanka as essential to economic development. These specially designated manufacturing areas were set up to attract foreign investment to the country with the promise of low or non-existent taxes.
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 “liberalization” of the economy of developing countries.
Like FTZs in other countries, Free Trade Zones in Sri Lanka provided modern infrastructure, a broad range of services as well as generous economic concessions to foreign investors. The zones absorbed labor from the urban and suburban districts around the metropolis and in areas with high levels of unemployment.
Companies in FTZs are expected to boost export earnings since they together with licensed enterprises, export no less than 90 per cent of their production. Companies in the zone must also bring in the necessary working capital from foreign sources and all export earnings must be brought into Sri Lanka within 180 days from the date of export. This would increase the foreign capital inflows and enhance the country's balance of trade.
The oldest free trade zones in Sri Lanka being the Katunayake and Biyagama Zones, located north of Colombo near the Bandaranaike International Airport. Another free trade zone is located at Koggala on the southern coast. Three other mini export processing zones are located north-east of Colombo in Mirigama, Malwatte and Wathupitiwala.
The creation of Sri Lankan free trade zones, especially in the textile and clothing sector, has had disastrous consequences for Sri Lanka's workers. It is becoming increasingly apparent that the factories in these industrial areas fail to respect basic labor rights and have led to job insecurity, declining working conditions and downward pressure on wages.
This resulted in the founding in 1982, of the Free Trade Zone (FTZ) & General Services Employees Union (GSEU), which has worked diligently to fight against violations of labor rights in the workplace and the government's attempts at suppressing workers rights and freedom of association.
Last Updated on: 19-05-2010