Industrialists sound alarm bells over China-Sri Lanka FTA 

• Concerned over possible reduction of negative list and removal of CESS within five years 

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 domestic industrialists leading to the collapse of a large number of industries. This will result in the 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 five years of implementing the FTA adds to the worry. As local industrialists point out, the potential free entry of Chinese goods will force domestic industries to close.  

Speaking on the issue, the President of the Association of Laminated Flexible Packaging Manufacturers, Anton Hemantha said: “‹Local industrialists have been a solid force in stabilising the country›s economy throughout the toughest of times. The sweat and tears they shed over the last few decades built successful local industries and created thousands of employment opportunities within Sri Lanka’s economy. We strongly oppose the signing of an 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 the benefits of economies of scale, local industrialists already struggle with multiple challenges such as high energy costs, high labour costs, bloated raw material costs and Sri Lanka’s lack of economic fundamentals to develop and safeguard 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, urged the Government to consider the potential disastrous impact the FTA could impose on local industries and take measures to safeguard them.