Unskilled labour shortage biggest hurdle for industrial sector

From Left to Right: CHEC Port City Colombo Head of HR Dr Giovanna Ying Wang, Chamber of Construction Industry President Dr Surath Wickramasinghe, ADB South Asia Human &Social Development Director Sungsup Ra, Esquel Group Associate Director-HR Timmy YAK WAN, University of Moratuwa former Vice Chancellor Prof. Malik Ranasinghe, Ministry of Skills Development & Vocational Training Advisor Prof. Dr. Markus Boehner, NEM Construction Chairman/MD Raja Nanayakkara, DIMO Group Chairman Ranjit Pandithage, Hirdaramani Group Director Ranil Pathirane, Access Engineering PLC Managing Director Christopher Joshua, United Motors and Watawala Plantations Chairman Sunil G Wijesinha

By Devin Jayasundera

Manufacturing and construction are the bedrock of a thriving industrial sector of a country and no developed economy has reached upper income status without experiencing a sturdy dose of industrialisation. 

Sri Lanka’s industrial sector is currently transiting from a factor-driven to efficiency-driven model. However, the rate of transition is progressing at snail’s pace despite the criticism of industry experts. One key factor is the quality of the labour force. A recent report from the International Labour Organization (ILO) indicates a drop in the labour market efficiency level compared to five years ago. The problem is more acute when it comes to unskilled labour in the industrial sector. 

At the Sri Lanka Human Capital Summit held last week, Government and private sector stakeholders from the industrial sector reached a common consensus that the industry needed to think afresh with regard to attracting unskilled labour and further propelling investments in R&D. 

Unskilled labour 

“Construction in Sri Lanka remains wasteful, tradition-bound, plagued by delays, cost overruns and contractual disputes,” said Chamber of Construction Industry President Dr. Surath Wickramasinghe during his keynote address.

In addition to these multiple woes, the local construction industry is facing a severe blow with regard to the recurring labour shortage. In sharp contrast to the booming city and apartment projects popping up all over the country, the construction labour force contracted by -2.6 % in 2015. 

A study conducted by the Colombo School of Construction Dean Prof. Chitra Wedikkara projects that by 2020 the industry will need to accommodate 750,000 unskilled workers compared to the current 600,000. As a result the industry is also under pressure to import labour from neighbouring countries if a quick solution is not found in the local labour market.

Wickramasinghe identified two shortcomings as key reasons for the labour scarcity - lack of job security and dignity in construction work.

“This may be due to a lack of security and safety with regard to working in it for fear they may be laid off during a slump in the economy or have to face physical dangers. The other reason is that there is no dignity of labour as the work they do is not respected by the public. This has especially affected young school-leavers who have opted to seek blue-collar jobs.”

A better incentive scheme and image marketing is essential to attract youth towards construction jobs to sustain the growth of the industry. In South Korea construction wages were deliberately set higher than other professions, in addition to apartments and other perks being provided to entice prospective candidates. 

“If this happens, even a reverse brain drain could happen and those who have left the country for better prospects may be encouraged to return,” said Prof. Wedikkara.

In the panel discussion, Watawala Plantations and United Motors Chairman Sunil G. Wijesinha, echoing the sentiments of the keynote speaker, shared his experiences of encountering difficulty in attracting people to manufacturing jobs. “In the 1990s in a company I was in we had 1,000 unsolicited applications to join the company. We interviewed them, conducted tests and put them in tough jobs and still we would retain them. At the time I retired from the company in 2012 the only thing we didn’t do was to beg people to come and work in the factory.”

Wijesinha outlined the current strategies to overcome the deficiencies of the local manufacturing industry. “The industry is migrating from a factor-driven economy to an efficiency-driven economy. In the past the industry was competitive, based on cheap labour, subsidised energy and abundant raw materials which are no longer available. Therefore industries at the low-tech level relying on cheap inputs are finding it more difficult to survive,” he said.

In this context manufacturing companies are increasingly moving towards niche products that are based on customised orders of smaller quantities. Wijesinha suggested that the industry should consolidate so that companies could benefit from the economies of scale.

The country only accommodates 7-8 large-scale contractors with necessary in-house infrastructure (machinery, heavy duty equipment, financial resources and technology) that is capable of handling mega industrial projects. Wickramasinghe forewarns that these companies are unduly stressed as they are already operating at full capacity. “If the industry is to maintain a level of self-sustainability we need to add another 20 mega firms,” he said.

Private sector responsibility and formal qualification

With the establishment of the DIMO automobile training school, the company has been able to strengthen its workforce in terms of quality and supply. Taking that experience into account, DIMO Group Chairman Ranjit Pandithage said: “We must build our own capacity and make it very attractive for them to join and then train them.” 

In reference to the large pool of underutilised labour in the country, Pandithage said: “It was mentioned that there are 1.4 million three-wheel drivers. How are we going to make it interesting for them to become painters, mechanics and welders?”

According to a report by the International Labour Organization (ILO), the unskilled labour sector has one of the highest labour turnover rates in the country. 

“The bigger problem is in the vocations,” says Access Engineering Managing Director Christopher Joshua. “For skilled labour there are qualifications that are needed to be obtained prior to employment. For vocational skills no qualification is required, you can even employee a farmer,” added Joshua. 

As a solution he recommended that the industry should enforce a policy for companies to hire masons, plumbers and welders based only on professional qualifications. 

Technology and R&D-based growth

Speaking at the event, ADB Human and Social Development Director Sungsup Ra said a low-cost labour intensive strategy would not take Sri Lanka to the next level of industrial growth. “Pouring cheap labour and relying purely on capital investment is not the solution,” he said.

If the country is to become one of the strongest economies in Asia by 2023, technology and R&D investments are an essential part of the equation. Ra compared the GDP contributions in a timeline of the industrial sectors of Sri Lanka and China and showed how China’s tech industry had evolved over the years to become the largest sector. In contrast Sri Lanka’s industrial portfolio remained unchanged with the continual dominance of the apparel sector. 

Ra illuminated the audience on the Government’s role in R&D by pointing out an example from Taiwan. “Motorola started setting up assembly line facilities for the production of semi-conductors in Taiwan and several other countries including Malaysia. But it was only Taiwan that eventually moved up the value chain to design semiconductors while other countries still remained in the lower end (assembly line).” 

Ra explained that the reason for Taiwan’s success was the foresight and proactiveness of the Government in setting up an R&D facility next to the assembly line factories. 

Ra professed that Sri Lanka should identify the priority areas that it should focus on and come up with necessary strategies to achieve them. 

Pix by Lasantha Kumara