Crisis at Sri Lanka’s industrial estates
Inconsistent policies on taxes, labour issues, high electricity tariff, lack of export orders, and high production costs are compelling many industrialists to close down their factories at Sri Lankan industrial estates countrywide, the Regional Industriaists Association (RIA) warned.
Managements have begun to shut the factories and fire thousands of workers, blaming the government’s action to impose 15 direct and indirect taxes through provincial councils, urban councils and the Urban Development Authority (UDA) in addition to regional branches of the Inland Revenue Department, a spokesman of the RIA told the Business Times.
The other issue was the imposition of a Rs.150,000 tax by the UDA on small businessmen who operate their offices in their residences located in urban areas; he said adding that this will hit a large number of persons engaged in self employment.
All these issues were brought to the notice of Treasury Secretary Dr. P.B. Jayasundera but no action has been taken as yet to remedy the situation, he said.
The industrial estate concept was introduced to provide opportunities mainly for local industrialists to manufacture products for foreign markets, But they have not been given tax concessions granted to foreign investors setting up factories in export promotion zones and industrial parks coming under the purview of the Board of Investment of Sri Lanka (BOI), he revealed.
Industries which were located heavily in Western Province have shifted to regional level with the development of 26 industrial estates throughout the country.
Suitable land for the industries are identified in the regions and developed by providing major infrastructure facilities required by the industrialist like roads, electricity and water.
At the end of 2012, 277 industries were in commercial production and 48 industries were under construction. Under this programme, 15,182 employment opportunities have been created, a senior official of the Ministry of Industry and Commerce disclosed. But the RIA spokesman said that one third of these factories have closed down and several others were on the verge of collapsing.
The axing of overtime, cutting of bonuses of workers and trimming of workforces are also taking place in most of the other factories in Industrial estates.
Small business people who survived by supplying services in and around the estate, such as boarding-room owners, food suppliers and shop keepers, have also been badly hit, he added.
Citing an example, he noted that at least 20 out of 30 factories at the Kalutara industrial estate have been closed. Most of them were rubber based industries and apparel factories, he revealed.
Many garment factories at the Katuwana industrial estate in Homagama, which were once regarded as a model “small scale industrial estate” have now been closed down.
Hundred and four people out of 315 industrial projects were not in operation at 18 SME industrial estates, island-wide managed by the Industrial Development Board, he disclosed.
These industrial estates serve as industrial hubs with infrastructure facilities to house small and medium scale value added industries that generate more employment and as such the industrial estates help to promote, attract and enhance SME investment opportunities.
But at present Sri Lanka’s see-saw policy ranging from labour, exchange rate, taxation and interest rates are challenging small and medium scale manufacturers operating in industrial estates making them un-competitive in the export market.
At the same time the Ministry of Industry and Commerce noted that the development work of the Mathugama Industrial Estate, Stage 2 which was initiated in 2011 is expected to be completed this year. More than 50 per cent of the infrastructure development work of Stage II of Trincomalee Industrial Estate, located in easyer Trincomalee was completed and preliminary works of new industrial estates at Batticaloa and Vavuniya are in progress, a ministry official said.