KAMALIKA  PIERIS

Revised 9.9.19

Yahapalana‘s main, if not sole, economic policy is to go for exports. Central Bank Governor Coomaraswamy pointed out that unless we increase exports, we will not get out of our debt problem, and we will not achieve sustained growth. Developing a national strategy for exports is a key component of the development agenda of the Government, Yahapalana said. The export market is the only avenue available to develop the country’s economy.

Yahapalana said, for the last decade or so, the governments of Sri Lanka neglected exports. Exports to GDP fell from 34% of GDP to less than 14% during this period. Yahapalana government plans to increase its export sector. We have set a target of boosting exports to US$ 20 billion by 2020, an increase in exports of nearly 80% during 2016-2020.. We plan to create an export market focused on Europe, China, Japan, USA and the crescent of markets around the Indian Ocean.  A well crafted export oriented service sector will   help to solve youth unemployment as well.

Yahapalana sees a rosy future for the export sector.  Yahapalana says Sri Lanka has completely ignored ‘it major competitive advantage,’ which is exports. The country had already proved its ability to do so in respect of the garment sector. However, Yahapalana is definite that export growth cannot be achieved through traditional export markets. Sri Lanka must go in for new exports and new markets we must diversify.  We must look beyond for new opportunities. Other countries have diligently developed new types of businesses and have successfully diversified its export base, said Yahapalana. However, Yahapalana is not quite sure what kind of exports we should go in for. Rich countries make the complex goods while poor countries produce Sri Lanka is somewhere in the middle.

Yahapalana wishes to make Sri Lanka ‘a notable industrialized country’   despite the fact that Sri Lanka only has a narrow industrial base and that too, at the very low end of the export ladder at present. Yahapalana intends to have three industrial zones in Wayamba, also industrial zones in Hambantota, Wellawaya,  Colombo region and Trincomalee .

Industrialization is to be achieved through Foreign Direct Investment (FDI). FDI is essential for economic development says Yahapalana.  FDI has played a key role in fostering development in countries throughout the world said Yahapalana  Industrialization will also help the creation of new employment   and generation of wealth. However, economists have warned against the heavy dependence on foreign investments and loans particularly from western sources, in view of the crisis in Greece. Sri Lanka was behaving exactly like Greece and heading for a debt crisis, they warned.  One expert  said Sri Lanka was  heading towards a crisis even worse than Greece.

According to Prime Minister Ranil Wickremasinghe, Sri Lanka is going to sign FTAs with every country it can think of. FTAs are going to be signed with Bangladesh, China,  India, Indonesia Japan,  Korea Malaysia, Myanmar, Pakistan, Singapore   Thailand  and USA. Also a single agreement with ASEAN rather than separate agreements.

We are negotiating an ECTA with India and a FTA with Singapore. Singapore already has a Comprehensive Economic Partnership Agreement (CEPA) with India.  The Singapore-India (CEPA), the Indo-Lanka ETCA and the Sri Lanka-Singapore FTA will create a tripartite arrangement for trade and investments said economist Harsha de Silva.  This bunch of FTAs will  give companies located in Sri Lanka preferential access to a large market of three billion or more.

Central Bank governor, Indrajit Coomaraswamy thought the idea of FTAs was good, particularly the formulation of trade agreements with regional economic powers. ‘The  government is looking to make important trade deals with China, India, Pakistan, and Singapore,’ he observed. The country already has a bilateral trade agreement with India, which it hopes to widen, and if it secures a similar deal with China, it would be the second country to have preferential access to both of these markets, he said.  

Yahapalana plans to have free trade zones all  over the island. They are not the usual sort of  FTZs.  Each FTZ will be owned by a foreign country which will install its own industries in it. Sri Lankans will be factory workers in them.

The media  reported that a Thai firm had arrived in May 2017, to build a 1000 acre trade zone in Kalutara, reported the media. This firm is ‘famous for setting up Economic Zones’ It will first obtain land from the government on a long term lease then set up  an international standard infrastructure . They will ‘bring in around 25 investors with them and will create over 5,000 employment opportunities from the day the Zone is opened.’ Said the media. There would be over 20 foreign investors doing projects. The government is ‘ in the process of identifying around 400 acres for this project in the Bandaragama area.’

The Hambantota FTZ  of some 15,000 acres will be owned by China. China will open up at least 300 factories including  an oil refinery, a cement factory, a dockyard, power plant and a steel factory said Yahapalana . Yahapalana was at present identifying land from Hambantota, Moneragala, and Matara  to hand over to this FTZ. Just outside Hambantota, there is another very good block of land, closer to Galle than Hambantota. We want to work on that together with the Andhra Pradesh Industrial Infrastructure Corporation, said Yahapalana .  

Yahapalana  has announced  repeatedly,  that  the Yahapalana  economy will provide thousands  and thousands of jobs. Industrialists wanted to know why  Yahapalana was talking of creating jobs for one million when there were only 400,000 unemployed in Sri Lanka. According to the Labour force Survey conducted by Department of Census and Statistics ,the estimated unemployment rate for the third quarter of 2016 was 4.5 percent. Our unemployment figures are the lowest in developing countries said experts. 

Yahapalana is obsessed with factories. Yahapalana assumes that Sri Lanka youth will be delighted to work in  them.  But analysts point out that there were at present (2017) 58 per cent vacancies in the apparel sector, 20 percent in food, and 33 per cent in other manufacturing sectors. 20,000 jobs are vacant in the garment sector while 700,000 vacancies exist in the private sector. There are huge vacancies in tourism with its increased rooms. Many manufacturing and service businesses already in operation, are hindered by shortages of skilled labor. Factories are operating below 65 per cent efficiency, due to labor shortage. Therefore, Sri Lanka must quickly devise a strategy to increase  the skilled labor group and   get   them employed on export related industries advised experts. 

The Garments industry provides a good case study.   The garments industry has been experiencing a labor shortage over the years, especially in recruiting women for the position of machine operators. Wages paid to machine operators  have increased 300% in the past 10 years from Rs 12,000  to Rs 35,000. But factories cannot find skilled operators.

Young girls eagerly joined garment factories as machine operators in the early stages of the apparel industry,  but  today these positions are  no longer able to attract young women, said researchers. Today most young women have obtained basic educational qualifications such as G.C. E. Ordinary Level. Along with higher level of education, their career aspirations have also changed. They tend to perceive garment factory work as low skilled. Also  machine operators have to work very hard and achieve set targets. Instead, these girls seek  more prestigious ‘computer based jobs’ where they can enjoy more flexibility and social interaction. The issue of labor shortage has become so severe that the garments industry is contemplating automation.

 The construction industry also complains of serous labor shortage. The arduous nature of the work and the poor starting salaries  discourage youth from taking up job in the construction industry, said analysts. Youth prefer to be three-wheeler drivers or security guards, rather than work in the construction industry. Driving a three-wheeler is easier, unlike working as a mason or helper, they said. Nobody is willing to learn a new trade, construction authorities complained. Skilled workers go overseas, while others choose to operate a three-wheeler.

These  trishaw drivers have been targeted by Yahapalana , for capture  as factory workers. As soon as the Yahapalana  government  took office, there were complaints about trishaw drivers. It was pre-planned.  People would jump up   at meetings and say there were  too many trishaw drivers and they were all idling.  The trishaw drivers parked at the top of my road are always  busy. They are never there when I need them.

 There are 1.5 million  trishaws  in Sri Lanka , driven by youths between 18-35,  said Yahapalana . After leaving school they do not take up any training, they choose the easy option of buying a three wheeler on credit. They get only three to four hires a day, said one. They probably only work two hours a day’ said another.

The number of Trishaws in the country is  excessive said Yahapalana , confining  a considerable portion of  youth to a single trade. Yahapalana  will discourage newcomers, the old ones will still continue. There will eventually be a glut of three wheelers, but Yahapalana ,apparently, cannot wait  that long.

The best way to steer youth    to seek employment  elsewhere is to regulate three wheelers, decided Yahapalana .  Yahapalana issued regulations and the media announced, ‘Tuk-tuks which are used for hiring are required to have a fare meter and must issue receipts. They can carry only carry  a maximum of three passengers. Trishaws cannot be used for political propaganda work hereafter. The new regulation bans the distribution of leaflets or any other material from a three-wheeler while it is moving.’

The most important move to strangle  the trishaw trade  however, was  the regulation on leasing. Before Yahapalana came to power,  those intending to purchase a three wheeler had to pay only 10 per cent of the value of the vehicle, the balance was through leasing. From January 2017  the 10% was increased to 25%.

Yahapalana ‘s emphasis on factory work is out of date. Sri Lanka is now  a middle income country   and the workforce has now moved away from factory work. Youth are not willing to  do blue collar jobs in factories. They would like to be self employed, to freelance and have their own business someday.

Human resource officers note that there are other considerations as well, such as the quality of life. Workers  have  left better paying company jobs and  gone to work from home for lesser pay. Many workers had left en masse from jobs which paid Rs 20,000 when the government  created  teaching positions for Rs 10,000. There were hidden benefits in teaching. Teacher-parents had  priviledged information on secondary education which would help their children through exams and of course, there were the school holidays. Factory production  is no longer labor intensive  as Yahapalana seems to imagine. Modern industries use automation, robots, 3D printing and the modern factory needs computer savvy workers.

Appendix

Institute of Policy Studies (2019) did a study of three wheeler drivers. The study found that only 47 percent of the over million registered three-wheelers are used for hiring. This meant that only around half a million tuk-tuk drivers providing a taxi service in the country – much less than the one million figure that is often quoted the report said. “This indicates that around six percent of the national labour force are tuk-tuk taxi drivers.” The youth who are driving three wheelers are attracted by better earnings and attractive working conditions such as flexible hours and less stress.

Labour force survey data show that the largest share of three-wheeler drivers is found among middle-aged (30-40 years) individuals  Middle-aged drivers seem to choose driving a three wheeler after quitting formal jobs, due to low responsibility, not being confined to one space, and more free time for family.  “Some three-wheeler operators have tried other occupational avenues, such as working in factories and as helpers in shops, before becoming tuk-tuk drivers,” the report said.

Middle-aged drivers seem to choose driving a three wheeler after quitting formal jobs, due to low responsibility, not being confined to one space, and more free time for family.  “Some three-wheeler operators have tried other occupational avenues, such as working in factories and as helpers in shops, before becoming tuk-tuk drivers,” the report said.

For 12 percent of them it is a secondary occupation, three wheeler operators are among the top ten secondary occupations in Sri Lanka.” .Three wheeler drivers are some of the highest monthly income earners among low-skilled workers, taking home around 30,000 rupees on average. Only shop managers, masons and heavy vehicle drivers earned higher, the report said.

In August 2019 it was reported that   Yahapalana government was delaying the regulatory system which three-wheeler drives want implemented. There was a Fare Review Committee established in the 2013 but the Transport Ministry dissolved it in 2017, leaving three-wheeler operators without a say in the fare increase. ( continued)