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The BooHoo scandal links Britain's freeports to the pain of Sri Lanka's IMF deal

Union leaders issued a stark warning for Britain: penniless workers in Sri Lanka's tax-free zones are getting their pensions slashed by a government seeking to remove what little rights they have, reports BERNY TORRE

THE plight of Sri Lankan workers provides a stark warning against the Tories’ push for freeports in Britain.

The country is the first to undergo “extremely tortuous” IMF restructuring after more than 50 countries the UN warned were in debt distress last year.

Union leaders described the devastating consequences for workers in so-called free trade zones, the country’s equivalent to Britain’s tax-free freeports which unions have warned could be used to circumvent workers’ legal rights.

At a TUC fringe meeting last week which heard how the BooHoo scandal in Leicester could help create an international template to tackle workers’ rights abuses in the fashion industry, Swasthika Arulingam, president of the Commercial and Industrial Workers Union, said: “Sri Lanka is only the first country to go through this extremely tortuous IMF package which is breaking our society. If the IMF is pushing us through this torturous reform process 53 other countries are also in the pipeline.

“Electricity tariffs have gone up by 200 per cent, and nearly 10 per cent of households don’t have electricity because of these high electricity costs.

“Water tariffs have gone up between 50 and 300 per cent and now working-class people are reporting that water bills are so high that even water connections are going to go off in the near future.

“It has come to a point where we don’t know who is governing us, we don’t know if it is the Sri Lankan government or whether it is the IMF looking after the interest of international traders.

“We had colonialism, then there was a time when states were pushing for international development and now we are in a state where we are debtor states, where we owe money to a certain group of individuals and entire countries are going into poverty and destitution.”

The human rights lawyer explained Sri Lanka is restructuring its $86 billion debt under an IMF deal after declaring bankruptcy last April.

She said under IMF pressure, the Sri Lankan government was looking to put the entire burden of restructuring its domestic debt on retirement funds instead of private bond holders or banks.

Nearly half a million manufacturing and servicing jobs were lost due to last year’s economic crash yet the IMF package also involves the privatisation of state-owned enterprises including transport, telecommunications, electricity and water services.

With workers’ savings also decimated after the pandemic and in the global economic fallout of the war in Ukraine, she said: “In another 16 years’ time the retirement savings of workers will fall by nearly 50 per cent if this domestic restructuring is done.

“We see that for instance food prices have gone up through indirect taxation, on top of that the government is already imposing direct taxation on workers.”

Labour reforms are being pushed by the government after international bank court filings against Sri Lanka revealed its previous administration had put its debt into offshore accounts.

Unions in Sri Lanka are trying to build an international solidarity movement to call on the IMF to carry out a debt audit to distinguish between funds that were used for the benefit of the populace or are “odious debt,” Swasthika said.

Anton Marcus, joint secretary of the Free Trade Zones and General Services Employees Union, told the meeting that 45 years after “free trade zones” were introduced to Sri Lanka, “privatisation has lost many jobs in enterprises, they have been privatised and the domestic industries have been closed, textile factories, handloom factories... because of free imports. Everything is imported, assembled and exported.

“Now because of the economic crisis, most of the garment factories don’t have overtime — now everything has been stopped because employer-suppliers are saying they don’t have orders. The main reason they are saying that is because of inflation in the north, Europe and America.

“In Sri Lanka, they are proposing that employers can sack any worker with 30 days’ notice.

“Now the eight-hours work is going to increase to even 20 hours — without overtime.

“We formed a union last week and when I was at the airport I got the message that the whole of the committee membership has been dismissed, it was a Pakistani-owned factory, they are producing for Nike.

“So that is the situation, of course, there are some suppliers they are claiming they are producing green clothes… but all these garment factories there are no unions, so we call on them: Come Clean before Green.

“Because without unions how can they claim it is clean? We know that environmentalism is the most important thing, but at the same time they should make sure that trade unions are there.”

Meanwhile, Britain’s first freeport, which exempts imported goods from taxes and allowing companies to claim lower property taxes, including on new buildings they buy, opened in Teesside in November 2021.

Announced at the March 2021 budget by the then-chancellor Rishi Sunak, sites across the country have been set up since, with firms in them also benefiting from lower rates of National Insurance if they take on new staff.

Unite’s East Midlands regional officer Paresh Patel warned the terrible working conditions seen in Leicester’s BooHoo factories in 2020 were “the type of image that you see happening in other countries” yet have been present since the first wave of Ugandan Indian immigration into the city in the 1960s.

He said: “It was quite stark the similarities that workers were experiencing in Sri Lanka and within the UK.

“It took a pandemic to really bring it to the fore and highlight the ugly side of UK Plc and actually big, well-known brands… [were] being produced in the streets of Leicester where people were being treated in appalling conditions.

“A free trade zone is probably akin to a freeport within the UK… these economic zones which pretty much prevent organisers of unions from organising and in the event that they even attempt to organise a trade union they will be sacked.”

Paresh added: “Because it was so entrenched within the local community, trying to get people from that community who lived probably five minutes up the road to do something about it was near enough impossible.

“If they raised their head above the parapet what would happen was the company would go into administration, shut down and pop back up again in a couple of months’ time. When we were taking claims to tribunals for unfair dismissals, the same thing would happen.”

In response, unions and the TUC managed to form a strategic forum to raise workers’ issues with brands directly. Paresh said it was a voluntary agreement and second to legislation to underpin their rights but “the next best thing we could try to get.

“It’s still a work in progress, there’s still a lot more to do,” he said.

He added: “Automation and AI are the biggest issues that are going to change the face of how we do things in our economy and workers are going to pay the price.

“It’s going to be bad enough in the UK economy but it’s going to be a billion times worse in places like Sri Lanka.

“We have to approach this as a global trade union approach because that’s the only thing that can deliver a global solution to this massive, massive exploitation that goes on.”

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