Labour over laws?

Saturday, 31 March 2012 00:00 - - {{hitsCtrl.values.hits}}

As Expo 2012 winds down there is renewed interest in Sri Lanka’s investment opportunities, yet there is little or no discussion at policymaking level of how archaic labour laws are discouraging businessmen.

The majority of employers who took part in a recent survey have confirmed that current labour laws are a constraint on employment generation, thereby hindering the full harnessing of prospects for growth and development.

This revelation among several others is contained in the findings of the survey on ‘Impact of Labour Laws on Employment Generation in Sri Lanka’ carried out by the Employers Federation of Ceylon (EFC) with the assistance of the International Labour Organisation (ILO).

The survey had shown that 91% of respondents emphasised that labour laws were a constraint on employment generation in Sri Lanka. This included 94% from the manufacturing sector, 97% from the services sector and 96% from the plantation sector.

The survey had stressed that one crucial impediment to investment (both local and foreign) was the rigid labour market framework. The survey was done via a questionnaire to 525 members of EFC in March 2011 as well as a sample of 40 enterprises in the small business sector which are not members.

The 10 question survey sought the respondents’ opinions on whether or not Sri Lankan labour laws were enabling or obstructing the generation of employment within Sri Lanka. It sought specific opinions on the Termination of Employment of Workmen (Special Provisions) Act No. 45 of 1971, the Industrial Disputes Act, the Shop and Office Employees Act, the Five Day Week and Spread Over and the Gratuity Act No. 12 of 1983.

A total of 206 enterprises had responded, with 63% being large scale enterprises, 30% from the medium scale and 7% from the small sector. The service and manufacturing sector dominated.

EFC said the current labour regulatory framework consists of labour laws which have essentially existed prior to 1977, when the industry was heavily protected through stringent import substitution methods.

The free market economy introduced after 1977 necessarily requires a national economy driven by massive private sector investment. It is therefore paradoxical for Sri Lankan laws to remain in the statute books and expect investment and employment generation.

In one of the volumes of the International Labour Review published by the ILO, Geneva, an article entitled ‘Is Asia adopting flexicurity?’ featured six Asian countries, namely, China, Korea, Singapore, Malaysia, India and Sri Lanka. This article stated that these countries need to provide an adequate degree of labour flexibility to remain competitive.

In respect of India and Sri Lanka, the article stated that very few reforms to the labour laws have been introduced and these countries continue to rely on an older model of employment-based security. The Sri Lankan labour law framework is a classic example of a country having an economy of a developing country attempting to implement social policies of a developed country.

The EFC has also called on the plans of the ‘Mahinda Chinthana’ to be implemented, but with attention to efficiency and equity, which it insists are essential for progressive but fair labour laws. If the country’s economy is to really take off, then new frameworks need to be introduced after discussion with relevant stakeholders.