Sri Lanka joins Asian lands luring West with free-trade zones

By , Business correspondent of The Christian Science Monitor

Dozens of young women, dressed in blue uniforms, sit at long tables, piecing together electric appliances such as hair dryers and orange juice squeezers for Western buyers. They earn less than a dollar a day -- a wage more than double that of their fathers.

This scene could have been in Japan 20 years ago, or Taiwan 10 years ago. But it is in modern Sri Lanka, the latest Asian nation to lure foreign investors with tax ''holidays'' and low wages into a development area known as a free-trade zone (FTZ).

Opened in 1979, the zone was designed to attract labor-intensive, export-oriented industry to a nation where 1 out of 7 people is jobless; where the balance-of-payments deficit is worsening; and where the average income is less than $250 a year. Today, it is considered the most attractive site in Asia for businesses seeking low-wage workers.

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Carved out of an isolated coconut grove, the 260-acre zone north of Colombo is home to more than 50 factories. There, some 21,000 workers -- mostly young women -- stitch or assemble products for export.

One of the latest foreign investors is the Seirindo International Company of Japan, which opened a home appliance factory in 1981. With about 300 women assembling electronic parts, Seirindo at first had difficulty training the rural workers.

''In Japan, even children know what a soldering iron is. Sri Lankans do not know,'' says Seirindo manager I. Nemoto. Six Japanese managers spent half a year training the workers to ensure quality production. ''Compared with Hong Kong or Taiwan, the workers are better in Sri Lanka,'' he adds. ''The (workers) there talk too much on the job. Here the girls pick up the work very quickly and do not need prodding.''

''Thirty years ago, Japan copied America on how to industrialize,'' Mr. Menoto sayd. '' Now we show countries like Sri Lanka how to do it.''

Free-trade zones (sometimes called export processing zones) are spreading in Asia. Japan, Taiwan, Hong Kong, Singapore, and South Korea were in the lead. Now Malaysia, Indonesia, India, Sri Lanka, the Philippines and -- the latest, the People's Republic of China -- have jumped into the battle. Usually each new FTZ ''member'' lures foreign investors with offers of lower wages, more tax breaks, and better communications and transport facilities. Older FTZ members find their wages rising and thus turn to capital-intensive industries, such as electronics, where skills may be more vital than wages.

Following the success of zones in Far East nations, Sri Lanka may be leading the way for the poverty-stricken Asian subcontinent. Bangladesh recently launched an FTZ after consulting Sri Lanka. Pakistan likewise plans a zone. India's FTZ remains somewhat curtailed by government policy, and Sri Lanka has been able to lure two Indian companies to its zone.

Since 1977, when a new government under the United National Party threw off three decades of semi-socialism in favor of free enterprise, Sri Lanka's gross national product has jumped 5 to 8 percent a year. The FTZ was a welcome mat for overseas companies, and last year the level of investments outside the zone was greater than inside.

To compete in Asia, Sri Lanka offers generous incentives. The zone, run by the Greater Colombo Economic Commission (GCEC), gives a 10-year tax exemption, with further concessionary periods. There are no import or export duties, and no limits on equity holdings by foreigners. As in most zones, the enterprises must be strictly export-oriented with no domestic sales.

A second zone 15 miles east of Colombo is planned for 1985, and the GCEC is taking bids from private investors to develop the infrastructure -- a novel approach. The first zone suffers from slight transport delays and a power shortage caused by low water levels in hydroelectric power projects.

Although the zone hardly makes a scratch in Sri Lanka's unemployment, it serves as a catalyst for industrialization. The first wave of investors was mainly Hong Kong textilemakers seeking to get out from under US and European Community quotas. But now Sri Lanka hopes to attract shoe companies and more electronic firms.

Eight of about 90 textile products produced in Sri Lanka's FTZ now come under US quotas. The zone's shift to electronics has attracted two US companies, Motorola and the Harris Corporation.

Like more advanced Asian nations, Sri Lanka knows it faces social adjustments. The new life style for Sri Lankan women working in the zone stands out as they flock in and out of the factories, wearing blue jeans and other Western clothes. Only a handful wear the traditional saris seen on their mothers in the surrounding rice fields of this lush jungle island. Yet many of the women hand their paychecks over to their fathers, an indication of the tight family structure that still prevails here.

Also, more young rural women are turning to urban jobs. As a result of these changes, the GCEC has sponsored a study on the family.

The longer-term spinoff of the new factory work, says N. Wimalasena, deputy director of GCEC, is the training of managers and technical workers. But ''we have not come to that level yet,'' he adds.

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