Economic cost

Thursday, 13 December 2018 00:00 -     - {{hitsCtrl.values.hits}}

People are busy readying to wrap up the year. Many are planning their holidays, sending gifts, planning charity events and shopping for the New Year. This surface calm belies the tense political undercurrents that have swept through Sri Lanka since 26 October but are unlikely to stay buried as the political impasse threatens to engulf the economy. 

Many pages have already been dedicated to the concerns expressed by various parties over public finance and how it can be accessed legally to repay large amounts of debt and fund public programmes in 2019. Much has also been written and said about the impact of Sri Lanka’s sovereign rating downgrade, the depreciating currency, and decline in tourist arrivals and its impact on the larger economy. 

The need for staying the course on structural reforms for the economy as well as the fiscal consolidation programme that was begun two years ago has been pointed out numerous times by economists and other experts. Sri Lanka cannot use its internal political crisis, created by a few selfish and short sighted politicians, to allow the country’s economy to be pushed into further constraints, as the consequences will be felt by those that can bear it the least. The danger is that if the economic situation worsens then that can feed into the political tension and this must be avoided at all cost.

There are also impacts to industries beyond tourism. Caught in the midst of a political paralysis the plantation industry is battling their own crisis over what it has described as an “unfair” wage hike demand by unions, who have struck work causing nearly Rs. 2 billion in losses per week, with more damage to follow if there is no solution. 

The ongoing union strike, demanding a 100% hike in basic wage to Rs. 1,000 per day, whereas the industry has offered a 20% increase to Rs.600 per day. The Plantations Association revealed that with attendance and productivity incentives and price share supplement, the daily wage will be Rs. 940 per day, and if 22 kilos are plucked per day, the workers stand to get Rs. 1,055 per day which is higher than unions demand. They have also pointed out that many of the workers already make more than Rs. 1,000 per day. 

Even at the lower pay level of Rs. 940 per day, the annual wage bill for the industry will be a staggering Rs. 27 billion, apart from Rs. 16 billion in gratuity. The strike action comes when the industry is tipped to miss the $ 1.6 billion export target for 2018, and production is likely to be 40 million kilos less. The plantations argue that at a time when production is dropping and Sri Lanka is losing market share in Japan, Russia and Iran, it cannot afford to assure the Rs. 1,000 work hike. They also allege they are receiving death threats and have hinted that unions are being spurred on by politicians linked to the Constitutional standoff. 

The livelihoods of thousands of people are linked to this wage battle and such vulnerable communities need to be protected. Politicians should not use these people as pawns in their battle for power. President Maithripala Sirisena needs to resolve the Constitutional deadlock in a democratically-accepted manner as soon as possible to enable policy decisions to be taken that would be for the benefit of all Sri Lankans.