Bad loans to foreigners cost state banks Rs. 5 bn

By Norman Palihawadana

At least ten foreign entrepreneurs, who operated factories under the BOI, have fled the country without settling more than Rs. 5,000 million in loans obtained from the state banks.

Sources said that during President Jayewardene’s regime, which launched the free trade zones, there were restrictions on lending to foreigners by local banks, but such rules were relaxed over the years. Some banks did not even care to take adequate collateral for the huge loans they granted to some of those foreign owned companies.

Labour Relations and Productivity Minister Gamini Lokuge said that in addition to defaulting on loans those foreign entrepreneurs had left thousands of young workers jobless.

The Island learns that one such defaulting garment manufacturing company, situated close to Nittambuwa, threw a massive party for its employees on Dec. 14, at the end of which it was announced that the following day would be a company holiday and the workers were requested to go to their villages. Subsequently, they received letters from the company announcing its closure. They were asked to collect their last salary on Jan. 03.

In another company operating at Pamunugama, which was assembling bicycles for export, its owner attempted to flee the country early this month without paying the staff their salaries, but its local employees thwarted his escape bid when he suddenly stopped production on Dec. 20. Yesterday, they managed to get most of their outstanding dues through the intervention of the Labour Department.

Lokuge told The Island that the government had begun investigations at international level against the defaulters, but he refused to divulge their names or nationalities.

It is learnt that some of those companies have even defaulted on EPF and ETF payments to their workers.

Most of the defaulters are said to be Asian entrepreneurs.

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