Labour Issues in Development - Naturesl.lk

Labour Issues
In
Development
National Association for Trade Union Research and Education
Colombo.
1

Labour Issues In Development
August 2009
ISBN: 978-955-51887-0-8
Published by
National Association for Trade Union Research and Education
(NATURE)
No. 225 2/1-D, Dr N M Perera Mawatha, Colombo 08,
Sri Lanka.
Tel : 011 2682121
Fax : 011 4614791
E-mail: naturese@sltnet.lk
Printed by
Star Publications
47, Jayantha Weerasekara Mawatha,
Colombo 10.
Tel : 011 2347477
Fax : 011 2436600
E-mail: starpbl@gmail.com
2

Preface
This volume deals with issues of concern to the labour movement in Sri Lanka. It
primarily consists of Papers presented at a Seminar held to mark the 10 th anniversary of the
National Association for Trade Union Research and Education (NATURE).
The papers discuss issues in the context of socio – political and economic background of
the country. The authors are responsible for the views expressed in their respective articles.
NATURE is grateful to authors for their contributions. We have included in this volume an
article by Dr. E.A. Ramaswamy, Visiting Professor of the Institute of Social Sciences, the
Hague which was first published in 1994 by the FES in Delhi with due acknowledgement
to the author and the publishers.
NATURE is the acronym of the association of 19 national trade unions functioning
independently advancing the interests of labour and active in the field of trade union
education, training and research. NATURE came into being in 1998.
The changing world of work has made us realize that there is a need for trade
unions to come out of their traditional role and take active interest in the formulation of
policy designed to enhance their position in society, strengthen their union organization on
a sustained basis and also ensure the basic needs of the individual in rapidly changing
society. This situation requires that trade unions adopt an informed and integrated
approach to problems relating to them as part of civil society. It is in pursuit of this
endeavour that the present publication is being brought out.
Our special thanks are due to Mr. Joachim Schlütter, Resident Representative, FES
for the support given us to bring out this publication. I must also thank my colleagues for
encouraging me to publish these papers.
T.M.R. Rasseedin
General Secretary,
NATURE.
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Dr. Saman Kelegama
Executive Director, Institute of Policy Studies
Contributors
Dr. Nisha Arunatilake
Senior Research Fellow, Institute of Policy Studies
Dr. Athula Ranasinghe
Head, Department of Economics, University of Colombo
Dr. E.A. Ramaswamy
Visiting Professor, Institute of Social Sciences, The Hague
Mr. Shanuka Senarath
Tutor, Department of Demography, University of Colombo
Mr. K.M. Rathnapriya Wickremasinghe
Systems Analyst/Programmer, Department of Census and Statistics
Mr. W.A. Jayasundara
Consultant, Sri Lanka Institute of Development Administration
Dr. N. Yogaratnam
Chairman, Tree Crops Agro Consultants
Former Deputy Director, (Research) Rubber Research Institute of Sri Lanka
Mr. Leslie Devendra
General Secretary, Sri Lanka Nidahas Sewaka Sangamaya
Mr. T.M.R. Rasseedin
Deputy President, Ceylon Federation of Labour
Mr. S.H.A. Mohamed
Attorney at law
Mr. Gerald Lodwick
Deputy General Secretary, National Workers Congress
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Preface
Labour Issues in Development
CONTENTS
5
Page No
Development Patterns in Sri Lanka and challenges posed by globalization 01
Dr. Saman Kelegama
Challenges to the Sri Lankan Labour Market 29
Dr. Nisha Arunatilaka
Inflation and Real Wages: Sri Lankan Scenario 43
Dr. Athula Ranasinghe & Shanuka Senarath
Working Poor (An analytical view at poverty and inequality of working 62
Population in Sri Lanka)
Mr. K.M. Rathnapriya Wickremasinghe
Quality Public Service through Good governance, industrial peace and 72
Social dialogue
Mr. W.A. Jayasundara
New Management Strategies and their impact on Trade Unions 82
E.A. Ramaswamy
Social Issues and worker Productivity in Plantations 91
Dr. N. Yogaratnam
Challenges facing trade unions in Sri Lanka 98
Leslie Devendra
The Evolution of the Ethnic Problem and the Labour Movement in Sri Lanka 101
T.M.R. Rasseedin
The Right to Strike: the Applicability of international standards in Sri Lanka 112
S.H. Mohamed
Report of the ILO Committee on Freedom of Association 128
Case No.2519 November – 2007
International Trade Union Confederation and its role vis-à-vis Sri Lankan Trade Unions 140
Gerald Lodwick

APPENDICES
Appendix I 146
Trade Unions and Labour Reforms
(Extracts from General Secretary‘s Report to the Biennial General Meeting of NATURE - 2007)
Appendix II 154
Consultative Workshop Recommendations on the ―Ten Year Horizon Development Framework‖
2006 – 2016 of the Sri Lankan Government
Appendix III 157
Trade Unions and the Ethnic Problem - Report of meeting held on 17 th November 2005
6

Development Patterns in Sri Lanka and Challenges
Posed by Globalization
Saman Kelegama
This paper examines Sri Lanka‘s integration with the global trading environment and
relevant policy issues. A brief survey of economic and political developments during the
last five years (Section 1), growth patterns (Section 2), and poverty trends (Section 3) is
made before embarking on this topic in Section 4. Some concluding remarks are made in
Section 5.
1. Economic and Political Developments: 2001-2006
Sri Lanka has now experienced almost 30 years of economic liberalization however its
path of liberalization has been very uneven. The first wave of liberalization in the late
1970s lost momentum by the early eighties due to two key factors: (1) overheating of the
economy resulting from an ambitious public investment programme, and (2) North/East
crisis and escalation of the war in that region from 1983 onwards. A Southern youth
rebellion in the late-1980s further slowed down the liberalization programme. A second
wave of liberalization was unleashed in the early 1990s with some degree of normalcy in
the political front. The unfinished agenda of the first wave of liberalization was extended
to FDI liberalization, capital market liberalization, in particular, measures relevant to
reviving the stock market, initiation of privatization, etc. In the mid-1990s there was a
change of government where the emphasis was on an open economy with a ‗human face‘.
The thinking was that corporate interests were given too much emphasis over and above
human needs. Thus the deepening of economic liberalization was slowed down but the
liberalization programme was broadened to cover more sectors such as public utilities.
By the year 2000, Sri Lanka had just completed 23 years of economic liberalization and
still grappling with a war situation in the North/East of the country that had been
continuing since 1983. The ruling party that was in office from mid-1994 to mid-2000 got
re-elected in late 2000. Oil price hike and escalation of the war in North/East made serious
in-roads to economic management in 2000 although the year recorded a 6 per cent growth
rate. The impact of these adverse events was seen in early 2001 when there was a foreign
exchange crisis where steps were taken to arrest the situation by introducing a free float
exchange rate, tariff surcharge, and signing a stand-by agreement with the IMF. These
initiatives were diluted by many external events in 2001 (IPS, 2002, Kelegama, 2006a, and
others) which culminated in the economy recording a growth rate of -1.4 per cent (Table
1). An unexpected poll in late 2001 rejected the government in office. The new
government that assumed office gave top priority for economic revival and for this purpose
a cease fire agreement (CFA) was signed with the North/East rebels in early 2002.
1

1.1 2002-2003 Period
By end 2001, there were a number of concerns in regard to economic changes that had
taken place by then. Poverty had declined only marginally by 2002 compared to the early
1990s – the percentage of population below the poverty line was 23 per cent in 2002
compared to 26 per cent in 1990/91. Budget deficits were running at close to 11 per cent of
GDP with two digit inflation level (Table 2). In regard to economic liberalization although
the economy had experienced liberalization for 25 years by 2002, there still remained areas
in the economy which were regulated and these pockets of rigidities prevented the
economy from effectively responding to market forces. According to the World Bank
(2005), the restrictions on labour and land markets, and the less than fully competitive
financial sector makes the investment climate much less friendly in Sri Lanka than her
competitors in East Asia. The business environment is constrained by inadequate
institutions and policies, and the regulatory framework is not in tune with the needs of a
market economy. Consequently, the private sector had yet to realize its full potential.
Accordingly, eliminating these rigidities and putting the economy back on track with the
lead from the private sector was a priority item in 2002 under the Regaining Sri Lanka
(RSL) policy initiative of the United National Front (UNF) regime. RSL strategy was to
overcome the existing problems by implementing second generation reforms based on
deepening economic liberalization by deregulation and privatization (RSL, 2003). Besides,
the Poverty Reduction Strategy Paper (PRSP) was built-in to the RSL initiative and
connecting economic growth to poverty reduction was envisaged by the trickle down
process. The macro policy package under the RSL initiative was based on a rapid
programme of stabilization and adjustment, perhaps with some justification in view of the
macroeconomic situation but the package was more liberal than the economic policies
pursued by successive governments during 1977-2001 (Chapter 6, Kelegama, 2006b). The
Multilateral Financial Institutions were content with the reform policy agenda and this
enabled the regime to sign a Poverty Reduction and Growth Facility (PRGF) with the IMF
in the second quarter of 2003.
RSL was an ambitious grand reform programme that was pursued very aggressively. What
reforms would work and what would not work in the given environment was not
addressed. Moreover, there was no sequencing of reforms. The assumption was that the
flow of foreign assistance would offset stabilization and adjustment costs and buy off
protest and opposition to reform (Chapters 6-8, Kelegama, 2006b). This was not to be the
case and thus the policy implementation strategy was vulnerable to capture by interested
groups in coalition politics and by an Executive President who represented a different
political party.
By end 2003, there was a growing perception in the country that economic growth based
on rapid deregulation/privatization policies has been highly Western Province centred
(accounting for 50 per cent of GDP and where the central city of Colombo is located) with
little or no growth in the provinces and that growth had not benefited the masses either in
cushioning poverty or in reducing income inequality. In other words, the fruits of liberal
economic policies failed to reach the rural poor through the trickle down effect.
2

There was also a perception that the CFA was based on an appeasement strategy akin to
‗peace at any cost‘ which was gradually laying the foundations for the separation of the
country. In short, managing change in the economy was not politically successful during
2002-2003.
New political forces in search of economic middle ground and in search of a solution to
the North/East conflict within a unitary state emerged. They united and formed a coalition
and found the leadership in the Executive President who was waiting to overcome the
uneasy cohabitation. The 2004 General Election saw a rejection of the neo-liberal policy
package and the appeasement strategy based peace process of the UNF regime. The newly
elected government (United People‘s Freedom Alliance – UPFA) saw internal coherence
of economic and social policies as essential for growth and social stability.
1.2 2004-2006 Period
The country witnessed a slight twist in liberalized economic policy stance after the change
of government. It did not lead to a reversal of liberalization policies already in place. The
new policy was aimed at generating more equitable distribution of income by providing
enhanced relief to the vulnerable and poorer sections of society, encourage small and
medium enterprises, and shift the focus of economic activity from the urban to the rural
sector. The new policy was also to accord a greater role for the public sector while
abandoning the programme of privatization of state-owned enterprises initiated in the late
1980s and which continued till 2003.
The UPFA government implemented some policies to redress poverty and lop-sided
growth – restoring the fertilizer subsidy, broadening the poverty alleviation programme,
continuing with the electricity, petroleum and transport subsidies (even at a time of
escalating oil prices in the global market), increasing public investment, etc. State-owned
enterprises (includes public institutions and corporations) that were involved in delivering
subsidized services was costing the government 3 per cent of GDP annually. These
enterprises had to be substantially restructured and allowed to operate on a commercial
basis with no political interference and be subject to hard budget constraints. But the
government was slow in managing this change and restructuring these enterprises (IPS,
2005).
These policies obviously did not find favour with multilateral financial institutions, for
example, the PRGF signed in 2003 with the IMF fell apart. The RSL‘s PRSP was to be
revised by the UPFA government and until it was in place the World Bank budgetary
assistance and project lending were slow to come. 1 Lack of reform in huge loss making
state-owned enterprises such as the Ceylon Electricity Board, Ceylon Petroleum
Corporation, Sri Lanka Railways, etc., also slowed down fund flows that were earmarked
by other multilateral financial agencies such as ADB. The escalating oil prices were
making a huge dent on external reserves so much so the rupee was rapidly sliding down
from mid to end 2004. The deteriorating reserves received a boost from the Tsunami
1 Budgetary assistance was made available in 2005 in the absence of a PRSP taking into account the adverse
impact of the Tsunami of 26 December 2004.
3

funds that flowed in massive scale in 2005, and this in turn halted the rapid fall of the
rupee.
All these developments were taking place when the public debt to GDP was close to 106
per cent of GDP in 2004 and the government revenue as a percentage of GDP has declined
to about 15 per cent of GDP (when the developing country average was close to 20 per
cent). The entire government revenue was absorbed by interest payments (6 per cent of
GDP), the public sector wage bill (5 per cent of GDP), and subsidies and transfers (4 per
cent of GDP). Thus, additional funds for government fulfilling its welfare oriented
programmes leave alone new development projects related to infrastructure were
increasingly becoming scarce with concessional foreign funding no longer being available
for Sri Lanka (such funding gradually came to an end when Sri Lanka‘s per capita income
exceeded US $ 750 in 1997).
The government saw commercial borrowing from the international financial markets as the
only way out of the problem and to give some policy space (as such funds are nonconditional)
for the government to engage in its desired activities. The government felt that
when the debt service ratio was averaging at 12 per cent that Sri Lanka could afford to
engage in commercial borrowing from the international market. The following factors
were taken into account: (a) although funds from multilateral financial institutions were
available for various projects from past commitments the government required matching
counterpart funds to complete those projects, (b) the government required funds to start
new infrastructure projects and fulfil election pledges, (c) the government wanted to
reduce borrowing from the domestic market to reduce the pressure on the interest rate and
cost of living -- the level of inflation was running at 11.6 per cent in 2005, and (d) the
government wanted to settle some expensive commercial debt from past borrowings before
it became a greater burden on debt.
Thus, a sovereign rating was obtained in late 2005 where Fitch gave BB- rating and
Standard and Poor gave B+ rating -- both three to four points below the standard
investment grading. There are risks on going for a Sovereign Rating when macroeconomic
fundamentals are weak and political conditions are uncertain because once a ―junk rating‖
is obtained it is difficult to change international perceptions. But now the rating is done
and accordingly, Sri Lanka will borrow from the international market at a pretty high rate
─ probably LIBOR + 1 and above.
When the public debt/GDP is running at 95 per cent GDP (in 2005), and the debt
moratorium after Tsunami for US $ 300 million is coming to end soon, budget deficits
running in the range of 9 - 11 per cent of GDP, more external borrowing at commercial
rates may not appear to be prudent. But there seems to be a strategy of gaining short-term
‗policy space‘ to implement public expenditure programmes and obtaining economic
growth in the hope that the budgetary situation will improve in the long run. 2 In 2006, the
government was optimistic in putting the Sri Lankan economy on an 8 per cent growth
trajectory by 2007 and did not see many adverse impacts on macroeconomic stability by
2
This perception gathered further importance after the new President got elected in the November 2005
presidential elections with the backing of centre-left oriented political parties.
4

such borrowings. But this was not to be the case with the deterioration of the international
economic environment.
2. Economic Growth
Being an island economy without many natural resources, Sri Lanka remains a country
highly vulnerable to external shocks. The terms of trade deterioration for the plantation
exports (tea, rubber, and coconut) had a major impact on overall growth during the first
two decades after Independence (1948) because the country was heavily dependent on
these exports for economic growth. Sri Lanka was also vulnerable to escalation of
international oil prices; and this was especially seen during a closed economy regime
during the early 1970s. This is not to say that policy failures were not contributory factors
for retarding growth during this period, in fact, they did a substantial contribution
(Athukorala and Jayasuriya, 1994, and others).
Sri Lanka was also vulnerable to internal shocks. Two youth uprisings in Southern
Sri Lanka in 1971 and 1988/89 made severe in-roads on economic growth. The North/East
war was very costly for the economy. Needless to say, the North/East war has contributed
significantly to retard growth over the 1983-2001 period (before signing the ceasefire
agreement in 2002). The Central Bank of Sri Lanka estimated that the war reduced the
country‘s growth by 2-3 per cent per year over the period of conflict (CBSL, 1998). A
simple extrapolative exercise shows that in the absence of a war Sri Lanka‘s per capita
GDP in 2002 would have been around US $ 1500 instead of around US $ 900. A
comprehensive present value (1996) estimate of the economic cost of the war for the 1984-
1996 period (discounted at 5 per cent) places it as 1.7 times Sri Lanka‘s 1996 GDP
(Arunatilake, et al., 2001).
Despite the war, Sri Lanka averaged a growth rate of 5 per cent during 1984-2001
period (Table 1), this being mainly due to the fact that the key growth generating areas not
being fully affected by the war, such as services and industries. For instance, banking,
shipping port, and telecom services; ready-made garments and tea exports, and remittances
from Sri Lankan workers overseas -- key areas of high growth, were minimally affected by
the war. Moreover, the bulk of these activities were concentrated in the Western Province
that accounted for 50 per cent of the country‘s GDP.
The largest contributor to growth is the service sector followed by the industrial
sector. The agriculture sector no longer plays a vital role in the economic growth but is a
vital sector still in addressing rural poverty. Table 3 shows the changes in composition in
manufacturing, agriculture, and services in GDP. While the services sector has gradually
increased its share to occupy the current level of 55 per cent, the agriculture share has
declined from about 36 per cent in the mid-1950s to 18 per cent in 2004. Manufacturing
sector share has increased and stabilized at a level of 14-16 per cent of GDP. The
manufacturing sector has shown an average growth rate of about 9 per cent since 1977,
and the main growth derives from export-oriented industries.
5

The pivotal role played by export-oriented manufacturing and agriculture and the
related trading activities set the stage for service sector growth. Moreover, the on-going
civil war and escalating defense expenditure has significantly contributed to war-related
service activities The key service sector growth areas are telecom, banking, tourism,
remittances, ports, etc. A discussion on the rapid growth of some of these sectors could be
found in the existing literature. In short, annual remittances amount to about 9 per cent of
GDP and is an important contributor for foreign exchange earnings of Sri Lanka. Tourism
that accounts for 2 per cent of GDP is the fourth largest foreign exchange earner to the
nation. After opening up the telecom sector for private sector investment in the late 1980s
and the subsequent privatization of Sri Lanka Telecom in 1997, the sector has grown
rapidly, touching the rural heartland of Sri Lanka. Banking is also a fast growing sector
and gradually spreading to rural areas where the informal lending is still quite large.
Key growth areas of the industrial sector are the export-oriented industries such as
ready-made garments, gems and jewellery, rubber-based products, and ceramics. Import
substitution industries in the food and beverages have been performing reasonably well.
Industrial growth has been affected from time to time by power shortages, high interest
rates (maintained at certain periods for inflationary control and budget management), and
labour related disputes (World Bank, 2005). FDI has played a major role in stimulating
some export-oriented industries and thereby industrial growth (Athukorala, 1986;
Kelegama, 1992).
The agriculture sector consists of an 85 per cent non-plantation sector and a 15 per
cent plantation sector. The latter has shown some vibrancy in recent years after the
privatization of the plantation companies in the mid-1990s and favourable international
prices for the key plantation export, tea. However the non-plantation sector has shown
slow growth throughout the 1980s and 1990s due to stagnation in the large paddy sector
and unorganized production of most other non-plantation crops (World Bank, 1996).
Needless to say, weather fluctuations and other internal shocks (such as the North/East
civil war) have contributed to the decline in some non-plantation areas such as paddy and
fish. But the key factor that contributed to the slow growth is poor supply-side ---
inadequate infrastructure and institutional failures – at the time of trade liberalization. The
Sri Lankan experience has shown that trade liberalization in the agriculture sector without
developing domestic capabilities and institutions can lead to adverse results and this in turn
results in half hearted trade liberalization ( Kelegama, 2006a, IPS, 2002, and others).
Key impediments to sectoral growth are lack of modern infrastructure,
macroeconomic imbalance centred around the large budget deficits, and rigid factor
markets. For example, while access to electricity has increased from 16 per cent in the
early 1980s to about 74 per cent in 2000, generation capacity has not kept up with
demand. 3 Increased defence expenditure and continuous focus on consumption spending
diverted resources from public investment in economic infrastructure (power,
water, transport, communications) which fell from 14 per cent of GDP in 1985 to 6 per
3
Increased reliance on expensive emergency supply of electric power as well as large technical and financial
losses by the Ceylon Electricity Board has led to relatively high cost of electricity in Sri Lanka compared to
other Asian countries.
6

cent of GDP by 2000. Due to a lack of a proper regulatory framework in place Sri Lanka
has not been very successful in upgrading the infrastructure via private-public
partnerships, in particular, BOO/BOT projects.
In 2006, the government was optimistic in putting the Sri Lankan economy on a 7
- 8 per cent growth trajectory by 2007-2008. The following factors among others
contributed to the optimism in regard to the future growth scenario. First, an annual US $
800 million aid in flows from past commitments for various projects seems to be assured
for the next 3-4 years. 4 Second, a stable inflow of overseas remittances amounting to 9 per
cent of GDP per annum (US $ 1.6 billion -- double the amount of aid inflows per annum)
also seems to be assured in the coming years. Third, the expected adverse impact on
growth from the end of the MFA did not materialize in 2005 and the ready-made garment
industry seems to have made some adjustments to face the challenge. Fourth, the proposed
deep integration with the fast growing Indian economy by the India-Sri Lanka
Comprehensive Economic Partnership Agreement (IL-CEPA) in 2006 was expected to
spillover some growth from India to the Sri Lankan economy (JSG, 2003). Fifth, the new
policy-induced diversified domestic resource based activities scattered through the country
is expected to contribute to the overall growth. Finally, the economic impact of the
Tsunami is considered marginal requiring no major policy changes in coping with it. The
growth retardation from the adverse impact from Tsunami is estimated close to 0.5 per
cent in 2005 (ADB, 2005). In fact, economic growth in 2006 to some extent was driven by
Tsunami reconstruction.
With the current global economic slow down, the government has to work out a
strategy to make these factors to work in the economy to push it on to an 8 per cent growth
trajectory. The current investment levels are at 25 per cent; a simple Harrod-Domar
framework estimation shows that in order to achieve growth rates of 8 per cent, Sri Lanka
needs to reduce capital output ratio to 4 and enhance overall investment to 32 per cent. 5 In
2004, private investment/GDP amounted to 23 per cent and overall investment was 25 per
cent (Table 4). Sri Lanka‘s domestic savings has not been at a high level and has averaged
around 14-16 per cent of GDP (Table 4) compared to 30 per cent in Malaysia and 25 per
cent in South Korea (Ahmed and Ranjan, 1995). A 32 per cent per GDP investment target
needs further policy reforms as the additional investment will come from local private
investment, increase in government investment, and FDI.
To increase local private investment, the government has to remove impediments
and implement deregulation measures on a selective basis rather than going for grand
reforms. Devarajan (2005) has pointed out that where there is heavy resistance to reforms
the government should focus on one or two workable reforms to achieve positive
results. The pockets in the economy where there is heavy state presence and where there is
less resistance need to be gradually liberalized to unleash trade/investment spurred growth.
4
This is mainly a result of the pledges of the Tokyo donor conference on the peace package (June 2003) and
the Kandy donor conference on Tsunami rehabilitation (May 2005).
5
Studies done on economic growth by Ahmed and Ranjan (1995) show that Sri Lanka‘s capital output ratio
was around 5.0 in the early 1990s. This ratio is also high compared to relatively fast growing developing
countries. According to the same authors, the ratio was close to 3 in Korea and Thailand and close to 4 in
Malaysia and Indonesia.
7

The challenge is to unleash the potential of the private sector by implementing
deregulation measures on a sequential basis in agriculture, power, education, and other
sectors. When the private sector grows it will create additional employment and with that
the gradual restructuring of the public sector can take place and release funds for public
investment.
For government investment to increase in development projects the current
subsidies and transfers that amount to 4 - 5 per cent of GDP need to be curtailed. That in
turn means that the government will have to make hard choices which will not be popular
in the short term such as introducing an automatic pricing system for petroleum and
reducing the subsidy on diesel and kerosene, price revisions on electricity and public
transport charges, curtailing the irrigation and fertilizer subsidies in the agriculture sector.
Further, the public sector wage bill needs to be reduced and this will result from
restructuring of the public sector but such restructuring may be sequenced after
implementing deregulation measures in certain regulated pockets in the economy as
explained above.
Improved infrastructure from public and private investment will obviously
contribute to increase the productivity and thereby enhance economic growth. Improved
infrastructure will also enable the country to attract more FDI and increase its share in
GDP from the current level of 1 per cent to about 3 per cent in the medium term. The
recent escalation of the war in the North and East may however curtail FDI inflows. Thus
the settlement of the North and East conflict is paramount to achieve the set growth
targets.
3. Poverty
In the contemporary global growth-equity debate Sri Lanka always features in literature. It
is an exception among developing countries in achieving high basic needs indicators when
the per capita income level was low. 7-10 per cent of GDP has been allocated for social
welfare: allocations for free education and health services, as well as food subsidies/ food
stamps, and subsidized credit to improve living standards and ensuring minimum
consumption levels of households perceived to be in need. These measures have no doubt
contributed for Sri Lanka to achieve relatively high basic needs indicators at a low per
capita level (Isenman, 1980; Sen, 1981; and others). In fact, it is these programmes that
contributed to reducing social (non-income) poverty in the country.
Sri Lanka has been successful in addressing social poverty but not income poverty. Before
economic reforms started in 1977, Sri Lanka had 35 per cent of the population below the
poverty line and income distribution by Gini index was 0.45. With economic reform the
scenario changed with income distribution becoming more skewed and slow reduction in
poverty. Poverty still remains at an unacceptable high in the rural and estate sectors (24 per
cent and 30 per cent, respectively in 2002, and in the estate sector the level was higher than
in 1990/91) compared to the urban sector (7 per cent in 2002) and there were deep pockets
of high level poverty in the country (Table 5).
8

The government has several social assistance programmes and subsidy schemes.
Samurdhi is the largest government social assistance programme amounting to 0.6 per cent
of GDP per annum. By 1999, two million families and by 2004, 1.9 million families –
about 41 per cent of all the population in Sri Lanka – were receiving the benefits from
Samurdhi. The second largest item in the social transfer budget –0.3 per cent of GDP in
1999 and 0.5 per cent of GDP in 2002 – is the assistance to the IDPs and war –affected
people. There are several other programmes with a safety net function directly or
indirectly: free text books and school uniforms, school transport subsidy, nutrition
intervention programme, producer and import subsidies intended to increase household
incomes (fertilizer subsidy [US $ 25 million in 2005]), etc. Besides, housing development,
IRDPs, and microfinance based on income transfers operates in tandem with these
programmes (World Bank, 2004).
The politicization of the poverty programme has been an issue of contention
between multilateral financial institutions and the government. Many non-deserving
people have been receiving the Samurdhi allowance either through improper targeting or
under political considerations. It is reported that the Samurdhi programme misses 36 per
cent of households ranked in the lowest expenditure quintile, while 30 and 14 per cent of
households from two highest expenditure quintile receive Samurdhi consumption grants
(World Bank, 2000).
There is increasing evidence that the costs of the poverty programmes, especially
the poorly targeted ones, are no longer sustainable and cannot be justified on the basis of
their benefits. For example, significant pockets of poverty persists, one fourth of the
population live below the poverty line, access to safe water and sanitation is inadequate,
malnutrition and stunting remain, etc. In fact, the government‘s well intentioned efforts to
protect the poor may have at times worked against fostering self-reliance and sustainable
poverty alleviation.
Sri Lanka‘s success in reducing income poverty is less noteworthy, especially
when compared with East Asian countries that were at comparable levels of development
only about 40 years ago. By 2000, per capita income in Sri Lanka was less than half that of
Thailand and one-fourth of Malaysia. Consumption poverty in Sri Lanka declined to about
25 per cent in the mid-1990s but still about twice that of Malaysia. Although poverty has
declined to about 22 per cent of the population it is still an unacceptable high level of
poverty for most Sri Lankans. Sri Lanka‘s relative slow progress in reducing poverty could
be traced to the country‘s hesitation to embrace modern social policies. Such policies
would have entailed the state focusing on the much needed social services that the private
sector cannot provide and removing all impediments for the private sector participation in
other areas.
Since 1999/2000 the government of Sri Lanka made a concerted effort to
comprehend the nature and the root causes of poverty in Sri Lanka, including areas directly
affected by the war, with a view of reassessing and reformulating its policy framework for
reducing poverty. The first draft of the Poverty Reduction Strategy Paper (PRSP) was
9

submitted to a donor forum in late 2000, and the final version was incorporated in
government‘s policy statement in 2003 (RSL, 2003). A revised poverty programme to
reflect the mico-level poverty issues and the role of the state was incorporated to the policy
statement of the new government in 2005 (MOFP, 2005). The basic message in the initial
PRSP documents is that the government will rely more on economic opportunities and
growth than on state-led redistribution to reduce poverty, to correct inefficiencies in the
social protection system, particularly the Samurdhi programme, and to empower the poor
through improved governance. The message of the revised poverty programme is better
coordination of existing poverty related programmes and redefining the role of the state in
some micro-poverty programmes. In other words, the role of Divisional Secretariats were
emphasized in addressing micro-level poverty issues (GOSL, 2005).
4. Trading Regime
Three waves of trade liberalization, viz., late 1970s, early 1990s, and 2002-2003 period
has made Sri Lanka the most open trade regime in South Asia (World Bank, 2004#). In
this section, the import and export structures are examined before going into analyze trade
policy in the context of liberalization in more detail.
4.1 Imports
Sri Lanka‘s overall dependence on imports is about 34 per cent of GDP. Import tariffs are
restricted to four bands (as of mid-2005) 2.5, 6, 15, and 28 per cent while most non-tariff
barriers have been removed. Normally the lowest band is applicable to investment goods
and the highest band for consumer goods while the intermediate goods are governed by the
middle band. Since the beginning of 2001, a 40 per cent surcharge was imposed on most
imports other than essential items. This was done as a measure to address a severe foreign
exchange shortage in 2001 due to escalating international oil prices and high military
related expenditure for the North/East war. Import duty as a percentage of GDP amounts to
about 2 per cent. According to a study by the ESCAP (2003), 70 per cent of imports (value
terms) come in as duty free, mainly due to BOI incentives that have been granted from
time to time.
Agriculture sector receives the highest tariff protection. In agriculture, Sri Lanka is
a net food importing country. The country imports 100 per cent of its wheat flour
requirements, 85 per cent of its sugar requirements, 55 per cent of milk, 84 per cent of
potatoes, etc. However the share of food items in total imports has dropped from 21 per
cent in 1979 to 16.4 per cent in 1989 and to 7.7 per cent in 1999 due to the rapid increase
in investment and intermediate goods especially to meet the requirements of the growing
manufacturing and service sectors.
Sri Lanka‘s key imports are oil/petroleum, wheat, and textiles. The country is
currently depending on thermal power generation for 65 per cent of its electric power
requirements. Thus the oil imports have increased in recent years. Sri Lanka allows dutyfree
import facility for exporters and for industries coming under the BOI the duty free
facility is automatic and not based on a reimbursement basis. Due to the rapid expansion of
the ready-made garment industry, Sri Lanka imports a large quantity of textiles. The
domestic textile industry is still not equipped to provide textiles at competitive prices and
in various varieties for the ready-made garment industry (Kelegama, 2006a). Import
10

liberalization has facilitated certain exports like gems and jewellery, etc. However import
liberalization has been resisted in sectors such as tea, among others, due to possible
adverse impact on domestic prices of tea. Foreign multinational tea blending corporations
have been putting pressure on the Sri Lankan government to liberalize tea imports to
facilitate tea blending. But the majority of tea producers in Sri Lanka feel that in the
absence of a proper regulatory framework this will lower the tea price at the domestic
auction as well as tarnish the image of pure Ceylon tea. Until such a regulatory framework
is devised the government is reluctant to embark on liberalization of tea imports (IPS,
2000).
The main import sources are Asia and Europe with the former accounting to
between 55-60 per cent of overall imports while the latter accounting for 15-20 per cent
(Table 6). USA accounts for between 3 – 6 per cent of overall imports.: India, Japan,
China (with Hong Kong) and Iran are the major Asian sources of imports while UK and
Germany are the main European sources of imports. India overtook Japan as the main
import source in 1995 – before the Indo-Sri Lanka Bilateral Free Trade Agreement
(ILBFTA) was signed. With ILBFTA coming into operation in 2000, India‘s share (in Sri
Lanka‘s total imports) rose to 18 per cent in 2005 and it has stabilized at an average level
of 16 per cent during the last three years. Clearly, Southern countries are more important
for Sri Lankan imports than the countries located in the West.
4.2 Exports
Sri Lankan exports amount to Rs.584,000 million (US $ 5,757 million) in 2004 and
accounted for 28 per cent of GDP. As Table 7 shows, there was a radical change in
composition of exports from agriculture exports in the mid-1970s to manufacturing exports
in mid-2000s. The ready-made garment sector that grew using the incentives generated by
the liberalized regime, together with the assured market provided by the quota and cheap
labour – has given the lead to industrial exports and accounted for 50 per cent of overall
exports by 2000. Gems and jewellery, ceramics, rubber-products, are the other
manufacturing exports that have grown rapidly in recent years. Although ready-made
garment exports are heavily import dependent, the turnover is such that it became a larger
foreign exchange earner to the nation than tea exports since 1992.
Sri Lanka‘s main export destinations are US and EU with the former accounting for
between 35-40 per cent of overall exports and the latter accounting for between 30-35 per
cent. Asia – although the main source of imports – accounts only for 10-15 per cent of
overall exports (Table 6). In the Asian market, India has become the third largest
destination of Sri Lankan exports in 2005 after the ILBFTA. Before the ILBFTA, 1 per
cent of Sri Lankan exports went to India and by 2005 Sri Lankan exports to India
amounted to 8 per cent of exports. Although the bulk of Sri Lankan exports to India were
Copper and Vanaspathi which had questionable beginnings. 6
Sri Lankan exports do not benefit from any preferential schemes in the US market.
However in the EU market, Sri Lankan exports have been a beneficiary of the GSP
6
It is alleged that these industries benefited from legal shortcomings in regard to rules of origin in the
ILBFTA governing exports. Some have also expressed concern that they grew by trade diversion and not by
trade creation.
11

scheme; but its utilization rate has not been satisfactory due to rules or origin governing
the scheme (IPS, 2005). In February 2004, Sri Lanka was granted an additional 20 per cent
preference for GSP due to complying with the labour standarads as stipulated by EU. On
01 July 2005, Sri Lanka benefited by duty free entry to EU consequent to the Tsunami
concessions. However as before, the fulfilment of rules of origin – based on SAARC
cumulation – still remains a problem.
Sri Lankan exports benefit from a number of preferential arrangements like South
Asia Preferential Trade Arrangement (SAPTA), Bangkok Agreement (BA), Global System
of Trade Preferences (GSTP), etc., however, the impact of these preferential arrangements
have been marginal due to inadequate preferential margins to significantly raise Sri
Lankan exports in the concerned markets. However as stated, the Indo-Sri Lanka Bilateral
FTA has gone a long way in stimulating trade between the two countries. Now steps are
under way to build on this and broaden the agreement by including liberalization of
services and investment. The new Indo-Sri Lanka Comprehensive Economic Partnership
Agreement will come into operation in late 2006 or 2007.
4.3 Trade Policy at the Regional, Bilateral and Multilateral Levels
Sri Lanka is a highly trade dependent country with trade dependence ratio at 70 per cent.
Thus Sri Lanka‘s trade policy is important in the context of further integration with the
global economy. Sri Lanka‘s trade policy has four tracks – unilateral, bilateral, regional,
and multilateral. The unilateral track has slowed down consequent to abandoning both the
PRSP with the World Bank and PRGF with the IMF. Under the new government, Sri
Lanka has given much importance to promoting rural development, especially in the
import substitution sector. More defensive trade policy has gathered momentum after
attempting to engage in rapid deregulation without developing domestic capabilities and
sorting out behind-the boarder problems during 2002-2003. The tariff structure which had
three bands as of end 2003 now has 5 bands as mentioned earlier. This structure was
driven by the need to promote SMIs and rural development via domestic agriculture
revival. Consequently, the unilateral trade liberalization slowed down.
4.3.1 Regional Track
At the regional level, Sri Lanka has membership in the Bangkok Agreement, IOR-ARC,
and SAFTA. BA is one of the oldest preferential trading arrangements and Sri Lanka was a
key member of this grouping at the very start with India, Bangladesh, South Korea and
Laos. From a trade perspective BA does not really matter for Sri Lanka. It has been very
slow moving positive list based RTA and inter-regional trade amounts to 5.9 per cent
(Kelegama, 2001). The only positive feature of the agreement is China‘s entry in 2000 and
as a result Sri Lanka being able to trade more effectively with China. In the context of Sri
Lanka‘s external trade the second major source of imports after India is China (and Hong
Kong). Moreover, since of late China is becoming a key bilateral aid donor to Sri Lanka
and playing a competitive role with India. Thus China is becoming an important player in
the Sri Lankan market.
The initial ‗pull‘ and ‗push‘ factors at the time of formation of the IOR-ARC were
momentary and have long disappeared and now the record of regional cooperation stands
for itself. After nine years in operation and six Ministerials, IOR-ARC had nothing to
12

show in terms of enhanced trade and investment or economic cooperation at the 2006
Ministerial in Tehran.
Progress on achieving tariff reductions based on the voluntary action -- the principle
embodied in the concept of open regionalism (IOR-ARC‘s functional framework) – is
almost nil. In short, voluntary trade liberalization is a non-starter in the region (Kelegama,
2002). Realizing this, at the 4th IOR-ARC Ministerial in Colombo in 2003, Sri Lanka
came up with an alternative proposal to make the IOR-ARC a PTA (Preferential Trade
Arrangement) which would ensure that there are binding commitments and thus the
members would be obliged to meet the conditions stipulated in the PTA. As some
members were reluctant to go ahead with this idea it was suggested that a 3 + X formula be
used to form a PTA, i.e., if three members or more are willing to form a PTA then they
should be allowed to go ahead to form a PTA. But this suggestion too was not seen
positively given the fact that the members were already in PTAs such as ASEAN,
SAARC, GCC, COMESA, SADEC, etc., and they did not want to overburden themselves
by forming more PTAs.
Given this scenario, Sri Lanka went out of the way to give some vigour to IOR-ARC when
it held the Chair during 2003-2005. At the 2003 Ministerial, Sri Lanka suggested that an
annual Ministerial should be held instead of once in two years which was the practice
before. This was supported by other members and accepted. Sri Lanka volunteered to
appoint a new Executive Director to the IOR-ARC Coordinating Secretariat and this was
done in 2004. At the 2004 Ministerial, Sri Lanka came up with a suggestion to develop an
IOR-ARC Shipping Council, formulate an IOR-ARC Investment Protection Agreement,
tourism cooperation with the Indian Ocean Tourism Organization and share information
and experience on the growing threat of international terrorism. The then Foreign Minister
of Sri Lanka went to the extent of saying that if there is no purpose of IOR-ARC it should
be dissolved and ‗one has to be frank about it‘. However, all members wanted to give IOR-
ARC more time to nature and deliver.
In the case of Sri Lanka, SAPTA has had no discernible impact on Sri Lanka‘s trade with
rest of South Asia. This has largely been due to the limited amount of concessions, the
irrelevance of much of concessions that have been offered, limited depth of tariff cuts,
failure to deal with non-tariff issues, and restrictive rules of origin (Weerakoon and
Wijayasiri, 2001). In short, Sri Lanka did not gain much from SAPTA and this was the
reason that pushed Sri Lanka to sign the Indo-Sri Lanka Bilateral FTA and subsequently
the Pakistan-Sri Lanka Bilateral FTA. Both these agreements are based on the negative
list concept and a time bound tariff reduction framework. If an analysis is made on Sri
Lanka‘s trading with the SAARC region it can be seen that bulk of the trade takes place
with India and Pakistan. As mentioned, trade with India has significantly increased after
the FTA and with Pakistan there is a substantial increase after one year of operation of the
FTA. It is difficult to expect SAFTA concessions vis-à-vis India and Pakistan to go beyond
the FTAs; thus for Sri Lanka, SAFTA will be meaningful only for trading with the other
South Asian countries which are in any case not major trading partners. Given the fact that
there is already a large negative list (20 per cent of traded items) and a bizarre revenue
13

compensation mechanism for LDCs – which are against the spirit of liberal trade -- it is
very unlikely that Sri Lanka will embark with enthusiasm in SAFTA. 7
4.3.2 Bilateral Track
From a strategic perspective, an FTA with India is important for Sri Lanka because of the
following factors: (1) rapid growth of the Indian economy presumably will have positive
spill over effects on the Sri Lankan economy if there is deeper economic integration, and
(2) good relations with India is bound to facilitate working out a solution to the North/East
crisis of Sri Lanka. India is also seen from the perspective where Sri Lanka could play the
role of a hub.
The Indo-Sri Lanka Bilateral Free Trade Agreement (ILBFTA) was worked out in 1998
and came into operation in early 2000 when many arguments against it were put forward,
viz., it would be the larger country that would be the key benefactor, it would lead to trade
diversion and disruption of the production base in Sri Lanka, and so on.
The outcome after six years is as follows. The trade balance in favour of India declined
from 15:1 in 1998 to 10:1 in 2000 to 3: 1 in 2005. In 2005, bilateral trade amounted to US
$ 2.39 billion with Indian exports amounting to US $ 1.84 billion and Sri Lankan exports
amounting to US $ 556 million. India which was the 21 st destination for Sri Lankan
exports in 1998 became the third largest destination in 2005. India was the largest source
of imports to Sri Lanka before the ILBFTA and this position was consolidated after the
ILBFTA with Indian imports stabilizing around 18 - 20 per cent of overall imports of Sri
Lanka. India which was mainly exporting agricultural items to Sri Lanka until the late
1980s (sugar, potatoes, onions, chillies, etc.), today is a major supplier of industrial goods
and services (petroleum products, pharmaceuticals, iron and steel products, buses, lorries,
motor vehicles, etc.).
Indian investment followed trade and over 50 per cent of the Indian investment in the
SAARC region today is in Sri Lanka. India is the fourth largest investor in Sri Lanka after
Singapore, UK, and Australia. Some of the most visible Indian investments are Apollo
Hospitals, Tatas (Taj Hotels, VSNL, etc.), Indian Oil Corporation, Ambuja, Ceat, Ashok
Leyland, etc. Education companies such as ICFAI have also entered the Sri Lankan
market. 8 Indian investments have played a key role in invigorating dormant
complementarities in the Sri Lankan export production side.The trade-investment nexus is
gradually working for Sri Lanka as well -- Ceylon Biscuits and Damro are the most visible
Sri Lankan investments in India. Sri Lanka sees the imbalance in the trade account due to
its limited export supply capability getting compensated by investment flows in the capital
account.
Following the positive outcome of the ILBFTA, both India and Sri Lanka agreed to move
towards a Comprehensive Economic Partnership Agreement (CEPA) by late 2006 –
already 6 meetings at inter-governmental level have taken place. The CEPA will include
7 For a detailed discussion, see Kelegama (2004) and Weerakoon and Thenakoon (2006).
8 Some of these investments came in before the ILBFTA but most of them were trade induced investment
after the ILBFTA was signed.
14

oadening the ILBFTA by liberalization of investment and services in addition to
deepening the ILBFTA (JSG, 2003).
What the Sri Lankan experience shows is that if the regulatory framework in a Bilateral
FTA is correctly designed to accommodate the disparity between the countries, then a
small country could in fact gain from an FTA. In this case, the time frame of tariff phaseout,
rules of origin, and negative list were designed to accommodate the smallness of Sri
Lanka‘s export and production capacity. In other words, special and differential treatment
in favour of Sri Lanka was built-in to the bilateral FTA. This is not to say that the
agreement is free from shortcomings and anomalies. They exist and India has now realized
that granting duty free entry to some products such as Vanaspathi, Copper, etc., has led to
domestic problems. Remedial measures have been taken and some future measures are
been discussed (Kelegama and Mukherji, 2006).
Sri Lanka also gained the confidence via its experience with the ILBFTA to work out a
bilateral FTA with Pakistan which came into operation in June 2005. Besides India, Sri
Lanka is the only other South Asian country to have two bilateral FTAs with South Asian
countries. The PSLFTA follows the same format, i.e., the asymmetry between the two
countries has been given due consideration. For example, there are 697 items under the Sri
Lankan negative list compared to 540 items in Pakistan‘s negative list. Pakistan has
offered 206 items duty free immediately after the FTA came into operation compared to
102 items by Sri Lanka. And Sri Lanka has been given a 5 year period for tariff phasing
out compared to 3 years for Pakistan.
Sri Lanka had a trade surplus with Pakistan till 1984; however, since then there has been a
trade deficit. At present, 0.6 per cent of Sri Lankan overall exports go to the Pakistani
market and 0.7 per cent of Pakistani exports are destined to Sri Lanka. Clearly, Sri Lanka
and Pakistan are not major trading partners; however, for specific products of each country
both markets are important. For Sri Lanka, Pakistan is an important market for tea,
followed by copra, rubber, betel leaves, and tamarind; and for Pakistan, Sri Lanka is an
important market for textiles, pharmaceuticals, machinery, and some agricultural items
such as rice, potato, fruits, etc. In fact Sri Lanka agreed to accommodate some degree of
agriculture liberalization under the Pakistan-Sri Lanka Bilateral FTA which is not the case
with the ILBFTA.
Trade stimulation between the two countries via the FTA will naturally trigger more
investment and services exchanges. Investment will stimulate more trade in both goods
and services. Once this happens a decision can be taken whether it is necessary to move
towards a CEPA. This is the first Bilateral FTA of Pakistan and may lay the foundation for
more Bilateral FTAs with other countries in the future. Sri Lanka can also now position
itself as the conduit for Indo-Pakistan trade that is happening less due to political problems
centred around Pakistan not granting MFN status for about 750 Indian products. As a
result, most official trade between India and Pakistan now takes place either via Singapore
or Dubai. Sri Lanka can acquire the position of Dubai and Singapore for promoting Indo-
Pakistan trade by encouraging Pakistani investors to open operations in Sri Lanka in order
to trade with India using the ISLBFTA and vice versa. Then Sri Lanka can gradually
acquire the hub status in South Asia.
15

Current trends seem to be very positive. Already the Department of Commerce has issued
over 400 Certificates of Origin for Sri Lankan exporters for Pakistan under the FTA. A
number of Pakistani Betel traders have arrived in Sri Lanka to identify reliable betel
suppliers. Indian investors have made inquiries about investing in Sri Lanka to export
items to the Pakistani market using the PSLFTA.
An attempt was made to work out a bilateral FTA with the USA after signing a TIFA
(Trade and Investment facilitation Agreement) in 2002. This was attempted particularly to
support the ready-made garment industry exports in the post-quota era, however, the
reverse preferences and various WTO-plus conditions in the agreement together with
political changes both in Sri Lanka and the US in 2004 made this attempt a non-starter. 9
4.3.3 Multilateral Track
Until the WTO Ministerial at Cancun, on most WTO issues Sri Lanka basically adhered to
positioning itself with SAARC countries. In 1999, for instance, Sri Lanka went along with
the SAARC common position based on the Bandos Island declaration and in 2001 Sri
Lanka went along with the SAARC common position based on the New Delhi declaration.
However, it was soon realized that formulating a common SAARC position is a complex
task because four SAARC countries (Bangladesh, Nepal, Maldives, and Bhutan) are
LDCs, two are large developing countries (India and Pakistan) and one (Sri Lanka) is a
small developing economy and they have different interests on various WTO issues. For
example, (i) LDCs will go all out to support special and differential treatment and others
may not do so, (2) India and Pakistan were against any contemplated extension of the
MFA for the textile and clothing sector whereas the smaller SAARC countries were
supportive of it before its expiry in December 2004; and (3) small SAARC countries are
net food importers and this is not the case with India and Pakistan.
Clearly different South Asian countries will have different expectations depending on their
initial conditions, trade openness, food security status, etc. At the Cancun Ministerial,
South Asia did not have a common position despite the SAARC Secretariat making an
unsuccessful attempt to formulate one. India and Pakistan went along with the G-20, the
four LDCs were united with the other 28 LDCs, and Sri Lanka went alone and in fact sided
with the USA on a number of issues. This summersault was done by Sri Lanka with the
hope of clinching a US-Sri Lanka bilateral FTA to support the then post-MFA vulnerable
ready-made garment exports, but it backfired because Sri Lanka got isolated among
developing countries and neither did it get the anticipated FTA. With the UPFA
government which is not inclined to bend over backwards to please any superpower, Sri
Lanka once again pursues its key interests with other developing countries which have
similar interests. Sri Lanka‘s current policy is to form issue-based coalitions in the WTO
and move ahead.
Sri Lanka shares most of the features and concerns of typical low per capita income
developing countries, but it has specific problems and priorities of its own. With other
developing countries, Sri Lanka shares concerns on the impact of trade liberalization on
9 See www.sawtee.org (Trade Insights, Vol. 1, No. 3: Emerging Scenario in North-South BTAs of South
Asia).
16

industrial growth, food security, poverty alleviation, etc. Besides, Sri Lanka would like to
have better market access to her export products in the major markets.
Agriculture
Sri Lanka was unique among South Asian countries in binding agriculture tariffs at a low
level of 50 per cent in 1995 (compared to 200 per cent in India and Bangladesh). This was
done with the objective of developing the agriculture sector according its comparative
advantage (Athukorala and Kelegama, 1998), however, as many promised reforms under
the Agreement on Agriculture did not take place during 1995-2001, at the WTO
Ministerial in Doha, Sri Lanka supported the concept of the ‗Development Box‘ which
emphasized measures that would enhance food security and safeguard the livelihood of
rural communities. This support was offered as Sri Lanka required to: (a) protect and
enhance food production capacity, (b) protect small/marginal farmers from ‗cheap
imports‘, and (c) safeguard employment opportunities for the rural poor.
Under (a), Sri Lanka takes the position that products that cater to basic food and livelihood
security and rural development (special products – SPs) need to be exempted from tariff
reduction commitments. Under (b), Sri Lanka takes the position that policy space needs to
be created for the inclusion of Special Safeguard Measures (SSM) to respond to import
surges of SPs, and under (c), Sri Lanka takes the position that if the current 50 per cent
binding does not provide the protection for the SPs, policy space needs to be created to
raising them to higher levels. Sri Lanka has in fact supported the proposal by G-33 for SP
and SSM designation.
Agriculture accounts for nearly 18 per cent of GDP and 34 per cent of the labour force and
almost 70 per cent of the population still depend on this sector. Under WTO
categorization, Sri Lanka is considered as a Net Food Importing Country. Food imports as
a percentage of overall imports account for nearly 8 per cent and food aid is important for
the country. Sri Lanka does not possess a highly commercialized and mechanized
agriculture sector which is competitive and is aggressively seeking market access in the
outside world. Thus, Sri Lanka basically has a defensive interest of protecting its farmers
and its rural economy against cheap agricultural imports.
NAMA
Sri Lanka depends on import tariffs for approximately 14 per cent of its overall revenue
(2.5 per cent of GDP). Until alternative revenue sources are found or current revenue
generators are improved, Sri Lanka has decided to pursue revenue maximizing tariffs at
currently applied levels. 10 Such a strategy is possible because Sri Lanka‘s tariffs are
relatively low in industrial products. The government has given emphasis to SMI
promotion and thus requires policy space for an industrial policy. Thus, it gives importance
to maintaining a minimum tariff below which tariffs would not be reduced. Sri Lanka will
not lose much due to the non-linear Swiss tariff reduction formula referred to in the WTO
Hong Kong Ministerial text because its tariffs are already low, however, Sri Lanka will
support a position of ―less than full reciprocity‖. Sri Lanka is in any case comfortable with
this position because less than 35 per cent of NAMA tariffs are bound.
10 Sri Lankan policy makers do not have much faith in the ―Laffey Curve‖ effect of tariff reduction as
advocated by some economist.
17

Some industrial products face high tariffs and non-tariff barriers in key external markets
such as USA and EU, hence Sri Lanka will join hands with other developing countries to
overcome these barriers for market access in the developed world. In short, Sri Lanka has
both a defensive interest for pursuing an industrial policy and an offensive interest to
obtain more access for its industrial exports that account for more than 75 per cent of
overall exports.
Services
This is the main sector that contributes to overall growth in Sri Lanka and it accounts for
nearly 55 per cent of GDP. The service sub-sectors that make a key contribution to the
economy are tourism, telecommunications, banking, insurance, shipping and air transport.
Sri Lanka looks at service liberalization under GATS from the development perspective
and thus appreciates the flexibility GATS offers under the ‗offers‘ and ‗request‘ format
and gradual opening up on the basis of the country‘s comfort level. Sri Lanka has already
submitted its request list to 18 countries mainly in professional services, computer related
services, health related and social services, transport services, and services auxiliary to all
modes of transport. Sri Lanka has requested full commitments in all four modes. Sri Lanka
has also made initial offers in telecom, financial services and tourism. The offers in other
sectors are been studied by an Inter-Ministerial Committee on Services. There is also
learning and gathering more information through the Trade in Services Working Group
under the Indo-Sri Lanka CEPA.
Sri Lanka has an educated labour force, thus Mode 4 – movement of natural labour –
liberalization of developed countries is important. Progress of Mode 4 in the WTO will
determine whether Sri Lanka could gain further in GATS. Sri Lanka attaches importance
to rule making in services, viz., emergency safeguard measures, subsidies and government
procurement. Sri Lanka did not support the proposed benchmarking system that developed
countries were keen to introduce to GATS to gauge the degree of services liberalization. In
short, Sri Lanka is defensive in safeguarding its underdeveloped services but offensive on
Mode 1 and 4 which are vital for its economic development and growth.
Trade Facilitation
Sri Lanka recognizes that cumbersome formalities, long waiting times at ports, unclear
trade/transport rules and regulations can all become serious obstacles to trade and increase
transaction costs and thereby reduce national competitiveness. The computerization of the
Customs has facilitated the other on-going work coordinated by the Department of
Commerce on trade facilitation. Sri Lanka has done well in this regard and is looking
forward for more technical assistance from the WTO or other multilateral donors to
improve trade facilitation work because she has already conducted a few workshops to
increase the awareness among the stakeholders on GATT Articles V, VIII and X and the
Trade Facilitation debate at the WTO.
Development Dimension
Sri Lanka has taken the position of less than full reciprocity in tariff reduction under
NAMA given the stage of industrial development in the country. Sri Lanka needs policy
space to promote SMIs and also collect some revenue by a suitable tariff rate. Such a tariff
18

ate is also required to retain the preferential margins under the existing bilateral and
regional trade arrangements. Sri Lanka has supported an initiative to take into account the
special needs of ‗small vulnerable countries‘ without creating such a subcategory in the
WTO.
In intellectual property rights, Sri Lanka nearly got trapped in 2003 under the WTO-plus
conditions and made provision to drop compulsory licensing and parallel importation of
drugs/pharmaceuticals, thus closing a channel to provide cheap and essential drugs to the
poor people. Such action was prevented by timely action of civil society groups and policy
space was finally created in the new intellectual property rights Act of 2003. The Act also
provides for the registration of geographical indications (GI) – which owes its
distinctiveness, essential characteristics or reputation and quality to geographical origin --
and Sri Lanka is currently advocating extending the protection of GI to products other than
wine and spirits. In this context, steps are being taken to enact domestic legislation to
ensure registration for the authorized users of the GI ―Ceylon Tea‖.
In order to fulfill WTO-plus conditions, in 2003 Sri Lanka also dropped the monopolies
and merges provision from the Consumer Affairs Authority Act. Policy space for
consumer welfare was compromised thinking that it will work against foreign investment
promotion and thereby achieving development goals. However, as in many countries,
monopolies and merges provision could have been designed to achieve the dual goals
without shrinking the policy space in either area but that was not considered.
19

5. Concluding Remarks
The liberalization of trade and investment regimes initiated in 1977 and sustained during
the ensuing years under alternative governments has been vital for the ―respectable‖
performance of the Sri Lankan economy, notwithstanding policy failures in other areas and
the continuation of the civil war. This is the most important message that comes out from
the Sri Lankan development experience over the last two decades.
Trade will remain a major engine of growth for the Sri Lankan economy in the coming
years. Sri Lanka attaches more importance to multilateral and bilateral than unilateral and
regional trade liberalization at present. The government while depending on trade will
have to address a number of issues to make full use of trade for economic development.
The challenge for the government is to find a solution for the North and East crisis while
preserving the unitary state of Sri Lanka. This will be the over-riding objective on which
the economic take off will depend upon. The government has to work out a strategy on
how to put the economy on an 8 per cent growth trajectory without being complacent
about the positive factors working in favour of Sri Lanka at present as explained above. To
achieve this target the investment has to increase from the current 25 per cent to 32 per
cent of GDP. But for this to happen there needs to be further policy reforms as the
additional investment will come from increase in government investment, local private
investment, and FDI.
The challenge for the government is to carve out the new economic regime with selected
deregulation for unleashing more sectors for private sector participation while
strengthening the regulatory system for public service delivery and strengthening the role
of the state where the private sector involvement is weak, say physical infrastructure
development. Meeting this challenge will be easier with the peace process moving forward
and with political realignments that strengthens the ruling political coalition in parliament.
To what extent the new government will work in all these areas and move to meet the
economic challenge remains to be seen.
References
20

ADB (2005), Asian Development Outlook: 2005, Manila: Asian Development Bank.
Ahmed, S. and P. Ranjan (1995), Promoting Growth in Sri Lanka: Lessons from East
Asia, Policy Research Working Paper, 1478, South Asia Country Department,
Washington, D.C: The World Bank.
Arunatilake, N., S. Jayasuriya, and S. Kelegama (2001), ‗The Economic Cost of the War
in Sri Lanka‘, World Development, 29 (9).
Athukorala, P. (1986), ‗The Impact of 1977 Policy Reforms on Domestic Industry‘,
Upanathi, 1 (1).
Athukorala, P. and S. Jayasuriya (1994), Macroeconomic Policies, Crises, and Growth in
Sri Lanka, 1969-90, World Bank, Washington D.C.
Athukorala, P. and S. Kelegama (1998), ‗The Political Economy of Agricultural Trade
Policy: Sri Lanka in the Uruguay Round‘, Contemporary South Asia, Vol. 7, No.1.
Central Bank of Sri Lanka (various years), Annual Reports, Colombo (referred to in the
text as CBSLAR).
Central Bank of Sri Lanka (1998), Economic Progress of Independent Sri Lanka: 1948-
1998, Colombo.
Devarajan, S. (2005), ‗South Asian Surprises‘, Economic and Political Weekly, 10
September, India: Sameeksha Trust.
ESCAP (2003), ‗Tariff and Trade Policy Framework for Sri Lanka‘, Report Prepared for
UN-ESCAP by Sandy Cuthbertson, Sri Lanka: Tariff Advisory Council.
GOSL (2005), Sri Lanka: Creating Our Future–Building Our Nation, New Development
Strategy--- Framework for Economic Growth and Poverty Reduction, Colombo: Ministry
of Finance and Planning.
IPS (various issues), Sri Lanka: State of the Economy, Institute of Policy Studies of Sri
Lanka (IPS), Colombo.
Isenman, P. (1980), ‗Basic Needs: The Case of Sri Lanka‘, World Development, 8(March).
JSG (2003), India-Sri Lanka Comprehensive Economic Partnership Agreement, Joint
Study Group (JSG) Report (http://www.ips.lk/publications/etc/cepa_reprot/islcepa.pdf).
21

Kelegama, S. (2006a), Development under Stress: Sri Lankan Economy in Transition,
India: Sage Publications.
Kelegama, S. (2006b), Contemporary Economic Issues: Sri Lankan in the Global Context,
Colombo: Sri Lanka Economic Association.
Kelegama, S. (2002), ‗Indian Ocean Regionalism: Is there a Future ?‘ Economic and
Political Weekly, Vol. XXXVII, No. 25 (June 22-28), Sameeksha Publications, India.
Kelegama, S. (2001), ‗Bangkok Agreement and BIMSTEC: Crawling Regional Economic
Groupings in Asia‘, Journal of Asian Economics, Vol. 12.
Kelegama, S. (2004), ‘SAFTA: A Critique’, South Asia Journal, No. 4, April-June.
Kelegama, S. (1992), ‗Liberalization and Industrialization: The Sri Lankan Experience of
the 1980s‘, Industrialization Series No.2, Colombo: Institute of Policy Studies.
Kelegama, S. and I.N. Mukherji (2006), ‗India-Sri Lanka Bilateral Free Trade Agreement:
Six Years of Progress‘, RIS Working Paper, New Delhi.
Ministry of Finance and Planning (2005), Budget Speech 2006, (08 December 2005),
Government of Sri Lanka (referred to as MOFP, 2005 in the text).
RSL (2003), Regaining Sri Lanka, Government of Sri Lanka.
Sen, A.K. (1981), ‗Public Action & Quality of Life in Developing Countries‘, Oxford
Bulletin of Economics and Statistics, 43.(4).
Weerakoon, D. and J. Thennakoon (2006), ‗SAFTA: Myth of Free Trade‘, Economic and
Political Weekly, Vol. XLI, No. 37.
Weerakoon, D. and J. Wijayasiri (2001), Regional Economic Cooperation in South Asia: A
Sri Lankan Perspective, International Economic Series, No. 6, Institute of Policy Studies,
Colombo.
World Bank (2005), Sri Lanka: Improving the Rural and Urban Investment Climate,
Washington, D.C: The World Bank.
World Bank (2004), Sri Lanka: Development Policy Review, Washington, D.C.: The
World Bank.
World Bank (2004 #), Trade Policy in South Asia: An Overview, Poverty Reduction and
Economic Management Sector Unit, South Asia Region, The World Bank, Washington
D.C.
22

World Bank (2000), Sri Lanka: Recapturing Missed Opportunities, World Bank Country
Report, Washington, D.C.
World Bank (1996), Sri Lanka: Non-Plantation Crop Sector Policy Alternatives, Report
No. 14564-CE, Country Department: South Asia Region, Washington, D.C.
Table 1 Growth Rates: 1951-2005
23

Year Annual GDP Growth
Rate (%)
24
Year Annual GDP Growth
Rate (%)
1951 6.2 1979 6.3
1952 4.6 1980 5.8
1953 1.9 1981 5.8
1954 2.7 1982 5.1
1955 5.9 1983 5.0
1956 0.7 1984 5.1
1957 1.5 1985 5.0
1958 2.9 1986 4.3
1959 1.4 1987 1.5
1960 6.8 1988 2.7
1961 2.1 1989 2.3
1962 4.6 1990 6.2
1963 2.8 1991 4.6
1964 6.4 1992 4.3
1965 2.3 1993 6.9
1966 3.8 1994 5.6
1967 5.1 1995 5.5
1968 8.2 1996 3.8
1969 4.8 1997 6.3
1970 4.3 1998 4.7
1971 0.2 1999 4.3
1972 3.2 2000 6.0
1973 3.7 2001 -1.5
1974 3.2 2002 4.0
1975 2.8 2003 6.0
1976 3.0 2004 5.4
1977 4.2 2005 6.0
1978 8.2
Source: Central Bank of Sri Lanka (various issues).

Table 2 Budget Deficit and Inflation Rates
Year Budget Deficit
(as a % of GDP)
Inflation
Rate*
1980 -23.1 26.1
1982 -17.4 10.8
1984 -9.0 16.6
1986 -12.2 8.0
1988 -15.7 14.0
1990 -9.9 21.5
1992 -7.3 11.4
1994 -10.0 8.4
1996 -8.9 15.9
1998 -9.2 9.4
2000
2001
2002
2003
2004
2005
-9.9
-10.8
-8.9
8.0
-8.2
-8.7
6.2
14.2
25
9.6
6.3
7.6
11.6
Note: Inflation rate calculated by using Colombo Consumer Price Index (1952=100).
Source: Central Bank of Sri Lanka (various issues).

Table 3 Changes in Sectoral Composition in GDP
Year Agriculture Manufacturing Services Other*
1950 35.6 16.7 41.0 6.7
1955 35.8 14.3 41.2 8.7
1960 32.5 14.8 43.6 9.1
1965 31.4 16.0 45.5 7.1
1970 30.3 17.6 43.5 8.6
1975 27.6 15.9 46.7 9.8
1980 26.6 14.5 47.3 11.6
1985 25.9 14.8 49.7 9.6
1990 23.2 17.3 49.6 9.9
1995 20.1 20.4 50.2 9.3
2000 19.9 16.8 52.8 10.5
2004
2005
17.8
17.2
16.3
16.3
Note:
* Other: mining, quarrying and construction.
Source: Central Bank of Sri Lanka (various issues).
Table 4 Savings and Investment : 1960-2004
Year Domestic
Savings
(as a % of GDP)
National Savings
(as a % of GDP)
26
55.7
55.8
10.2
9.7
Investment (as a % of GDP)
Total Private Public
1960 11.7 10.6 14.5 10.1 4.5
1965 12.9 12.5 12.5 7.5 5.0
1970 16.7 15.0 18.9 14.5 4.4
1975 8.1 7.4 15.6 9.9 5.6
1980 11.2 13.9 33.8 25.2 8.5
1985 11.9 14.2 23.8 19.0 4.8
1990 14.3 16.8 22.2 18.2 3.9
1995 15.3 21.5 28.0 22.2 3.5
2000 17.4 21.5 28.0 24.8 3.3
2004 15.9 21.6 25.0 22.7 2.2
Source: Central Bank of Sri Lanka (various issues).

Table 5 Poverty Head-Counts
1990-91 1995-96 2002
National 26.1 28.8 22.7
Urban 16.3 14.0 7.9
Rural 29.4 30.9 24.7
Estate 20.5 38.4* 30.0
Note: Compatibility of state head count for 1995-96 with that for other years may be affected by the fact that the
HIES in 95-96 was sampled differently for the estate sector.
Source: World Bank (2004).
Table 6 Trade Direction in Exports and Imports (as a % of total)
Year
Exports Imports
USA Europe Asia Other USA Europe Asia Other
1950 21.3 34.4 5.6 38.7 3.0 23.0 45.4 28.6
1955 9.1 36.1 11.6 43.2 3.2 30.6 41.4 24.8
1960 9.0 37.0 13.1 41.0 3.6 30.6 38.9 26.9
1965 7.5 30.9 13.0 48.6 3.8 24.7 24.3 47.2
1970 7.1 45.8 19.9 27.2 5.7 36.2 41.6 16.4
1975 5.6 23.2 26.5 42.7 6.4 24.7 40.2 28.6
1980 10.9 27.6 20.1 41.4 4.4 26.6 33.9 35.1
1985 21.2 25.0 15.7 38.1 6.5 18.6 38.6 36.3
1990 24.8 30.3 14.5 30.4 7.7 19.4 51.6 21.4
1995 35.6 36.4 14.4 13.6 3.3 20.1 54.2 22.5
2000 39.5 31.0 12.7 16.8 3.5 13.5 54.4 28.6
2004 32.4 32.4 13.3 21.9 3.0 15.7 56.8 24.5
Source: Central Bank of Sri Lanka (various issues).
27

Table 7 Changes in Export Composition: 1950-2004
Year Agricultural Exports Industrial Exports Other Exports*
1950 89.9 -- 10.1
1955 91.2 -- 8.8
1960 90.5 -- 9.5
1965 93.5 -- 6.2
1970 91.7 -- 8.3
1975 78.7 13.2 8.1
1980 61.8 33.0 5.2
1985 52.5 39.5 8.0
1990 36.3 52.2 11.4
1995 21.8 75.4 2.8
2000 18.1 77.6 4.3
2004 18.4 78.3 3.3
Note:
*Other exports: mineral exports & unclassified exports.
Source: Central Bank of Sri Lanka (various issues).
28

Challenges to the Sri Lankan Labour Market
Nisha Arunatilake
1.0 Introduction
The Sri Lankan labour market is in a state of rapid transition at present. Changing
demographic structure and emigration is ageing and slowing the growth of the working age
population and the available labour supply of the country. At the same time the youth
unemployment rates are still high in the country. On the demand side, technological
change and globalization are creating new opportunities, both locally as well as globally.
However, employment creation in the country is mainly in the informal sector. Given this
back drop, the need is to ensure optimal use of available labour resources and to improve
skill levels so that workers are able to take advantage of emerging opportunities in the
market. This paper elaborates on these labor market issues and gives recommendations on
improving the labour market performance.
The paper focuses on three challenges faced by the labour market in the country. The first
of these relates to the demographic changes that are taking place in the country. The Sri
Lankan population is estimated to age at a rapid pace. The 60 and over population in the
country is estimated to almost double from its 2000 level of 9.3 percent to 17.2 percent by
the year 2020. 11 These changes have already started to slow the growth of Sri Lankan
labour force. It is estimated that by around 2030, the labour force will actually start to
decline. 12 At the same time, the Sri Lankan labour force is becoming more aged over time.
Although there are no studies that has examined the implications of a contracting labour
force for Sri Lanka, studies for other countries shows that a contracting labour force will
result in lowering economic growth. For example in the next half century labour force
contraction will result in lowering economic growth by 0.2 to 0.5 percentage points in
France and Germany, and by 0.8 percentage points in Japan. In addition, the increasing
old age dependency of an elderly population is estimated to slow economic growth by a
further 0.2 to 0.3 percentage points. 13 In section 2 the paper will elaborate on the effects of
demographic change on the labour market and discuss different means of countering these
effects. 14
The second challenge faced by the labour market in Sri Lanka is related to taking
advantage of the emerging demands for skilled labour both domestically and
internationally. Technological change and globalization has opened up new opportunities
in the market. Technological change, especially in the IT sector has enabled countries to
get ever closer. It is now possible for workers to work for firms based in foreign countries
11 United Nations Population Projections, medium variant, 2006 revision.
12 See World Bank (2008), ―SRI LANKA: Addressing the Needs of an Aging Population‖, World Bank,
Colombo.
13 See Martins, J. O., F. Gonand, P. Antolin, C. de la Maisonneuve, and K.Y Yoo (2005) ―The impact of
Aging on Demand, Factor Markets and Growth, OECD, Economics Working Papers No.420.
14 See World Bank (2008), ―SRI LANKA: Addressing the Needs of an Aging Population‖, World Bank,
Colombo.
29

while being stationed in their own countries. These opportunities have created a new
sector in the economy referred to as the IT enabled services (ITES) sector. The ITES
sector is one of the fastest expanding sectors in the country. At the same time the demand
for skilled migrant labour is also increasing globally. There is a shortage of skilled and
semi skilled workers, such as nurses and marine engineers globally. Locally too, firms
have realized the need for upgrading their human resource capacity, so as to take
advantage of the internet and the world wide web to tap new markets and new technologies
in order to become more competitive globally and find new markets for their products. In
section 3 the paper will examine the preparedness of our labour supply to cater to the
demands of these emerging opportunities.
The last challenge examined by this paper is the challenge of making best use of our
labour resources, especially that of youth. Recent labour market statistics shows that the
unemployment rate is declining in Sri Lanka, this is especially the case for youth. Since
the release of the 2007 World Development Report, the need for improving employability
of youth and the need for providing productive employment opportunities for youth has
received renewed interest. As elaborated by the report, it is necessary to help youth to
move from school to work fast, not only as a means of reducing youth poverty, but also as
a means of improving the economic well-being of youth in their adult lives. Youth who
get productively employed are best able to make optimum use of their investments on
health and education. Among other things, they learn essential interpersonal,
organizational and time management skills that will help them be more employable in later
life. Is the Sri Lankan labour market providing opportunities for productive employment?
In section 4 the paper will examine the labour market outcomes in the country in general,
but specifically that of youth, with a view to better understanding the strength of the labour
market in improving productive employment in the country.
Section 5 summarizes the arguments made in the paper and section 6 provides policy
recommendations.
2.0 Demographic Changes and the Labour Market
Sri Lanka‘s population is ageing. At present, close to 10 percent of Sri Lanka‘s population
is 60 plus. This will increase to 27 percent by 2051. Low fertility rates associated with
fertility control policies of the government and greater access to education and high life
expectancy are the main forces contributing to population ageing. Sri Lanka‘s fertility rate
has decreased from 3.45 in 1981 to 1.96 in the 1995-2000 time period. At the same time
life expectancy at birth has increased from 67.7 to 69.9 for males and from 72.1 to 75.7 for
females, from 1980-1982 period to 2001-2006 period. 15 These changes have resulted in
changing the demographic structure of the country.
15 United Nations Population Projections, 2006 revision.
30

Figure 1: Population Projections for Sri Lanka
25000
20000
15000
10000
5000
0
2000
2005
Population Projections for Sri Lanka
2010
2015
2020
2025
2030
2035
2040
2045
2050
Source: Own calculations based on United Nations, Department of Economic
and Social Affairs‘ population projections.
As shown in Figure 1, the working age population of the country – that is the 15 and over
population – is stagnating and will start to decline around 2035. The prime age working
population – that is the 15 to 59 population – will start to decline much earlier, around
2010. In contrast, the 60 plus population will continue to increase overtime. Labour force
projections estimated based on population projections for Sri Lanka, using constant agesex
labour force participation rates for different age-sex groups, shows that the Sri Lankan
labour force growth is slowing down, and that it will start to decline around 2030. 16
Estimates for developed countries shows that the combine effect of a shrinking labour
force and an increasing dependency ratio can reduce annual economic growth rates by 0.2
to 0.8 per cent and the added burden of increasing adult dependency can reduce growth
rates by a further 0.2 to 0.3 per cent. 17 These adverse effects of ageing on the economy
can be countered through several measures. The eventual contraction in the labour force
can be delayed, and possibly reversed by improving labour force participation rates. 18 The
labour force participation rates shows that the participations rates are much lower for
younger age groups, females, and older age groups than for males. This shows that there is
some opportunity to increase the labour supply by encouraging the labour force
participation rates of these age-sex groups. However, many young who are not engaged in
the labour force are engaged in studies, while many adult females not in the labour force
are engaged in household work. Encouraging the labour force participation of females will
require improving child care and elderly care facilities in the country and encouraging
16
Vodopivec, M. and N. Arunatilake (2008), ―Population Aging and the Labour Market: The case of Sri
Lanka. IZA Discussion Paper No. 3456, April 2008.
17
See World Bank (2008), ―SRI LANKA: Addressing the Needs of an Aging Population‖, World Bank,
Colombo.
18
Another means of counteracting the effects of a contracting labour force is reducing out-migration. It is
estimated that around 200,000 leave the country annually for temporary work, this amounts to roughly 3
percent of the labour force.
31
0-14
15-59
60+
15 plus
Total

more flexible work conditions. Availability of part-time work opportunities can also
encourage students to be active in the labour market. Another means by which the labour
force participation rate in the country can be increased is through encouraging the labour
force participation of the elderly. Along with improving labour force participation rates,
improving the quality and the productivity of the work force can also reduce the effects of
a shrinking work force. This is because a more productive labour force will need fewer
labour resources to produce the same amount of goods.
Table 1: Sri Lankan worker‘s retirement plans, by type of employment
Type of worker Per cent by type of employemnt Share of the sample
Mandated Voluntary No retirement (%)
savings
savings
plan
Regular worker 81 5.7 13.4 26
Casual worker 6.7 11.9 81.4 27
Contractual worker 11.9 21.2 67 3
Employer 0 22.6 77.4 5
Self-Employed 0.6 24.7 74.7 29
Unpaid family
worker
3.3 38.6 58.2 9
Source: World Bank, 2008, table 3.6, page 57.
Other than from a labour market point of view, encouraging the labour force participation
of elderly is attractive from a welfare point of view as well. The retirement benefit
schemes available in the country are largely inadequate, both in their coverage and in the
levels of benefits provided by them. 19 Retirement benefit schemes in the country mainly
cater to the individuals employed in the formal sector. Amongst them, only regular public
sector workers are eligible for a pension. Private sector employees are covered by the
Employees‘ Provident Fund (EPF), which provides a lump sum payment at retirement (see
Table 1). As this payment is not translated into an annuity which will provide a monthly
income, the usefulness of the EPF as a retirement benefit is limited. Although a few
informal sector workers (farmers, fishermen and the self employed) are eligible to
participate in contributory retirement schemes aimed at them, the benefit levels of these
schemes are uncertain and most likely inadequate to escape poverty. Just above a quarter
of the employed are in the formal sector (See table 1). Majority of workers who are either
not covered or inadequately covered by retirement plans work in the informal sector.
Given these reasons, it is useful to help individuals to participate in the labour market as
long as they are willing, so as to reduce their dependency.
19 See World Bank (2008), ―SRI LANKA: Addressing the Needs of an Aging Population‖, World Bank,
Colombo.
32

Table 2: International comparisons of labour force participation rates for elderly
Age
group
Year of
data
Males
Sri
Lanka
India Bangladesh Pakistan Japan US Germany
2004 2001 2003 2004 2004 2004 2004
50¬54
55¬59
89.2
76.4
92.0
99.2
97.3
94.0
88.2
95.7
93.2
85.4
77.6
90.2
80.3
60¬64
65¬69
57.7
43.0
69.7
87.8 73.1 70.7
45.6
57.0
32.6
37.7
7.2
70-74
Over 75
Over 80
Females
25.0
16.8
7.4
49.3
34.6
66.1 47.5
29.3
14.6
19.4
9.0
3.7
1.5
50¬54
55¬59
37.9
25.7
40.9
19.9
17.1
18.6
14.5
68.4
59.6
74.5
65.0
76.4
61.7
60¬64
65¬69
16.9
10.1
26.3
13.4 13.0 39.7
24.0
45.4
23.3
19.7
4.1
70-74
75-80
Over 80
5.6
2.1
1.3
13.3
8.6
8.7 10.2
14.9
5.8
12.0
4.3
1.5
0.5
Note: Merged cells contain data for the combined age groups. For comparison
purposes, labour force participation rates for 65 plus and 75 plus age groups in Sri Lanka
are, males - 27.53 and 12.02 and females 5.90 and 1.72, respectively
Source: ILO, LABORSTA Labour Statistics Database
Labour market outcomes for elderly in Sri Lanka show that the opportunities for
employment in the regular sector are very limited. Elderly who are employed in the labour
market are mainly working in the informal sector and in elementary occupations. Further,
the opportunities for part time work and flexible work arrangements are limited in the
market. Most workers who do work, work as full time employees. Perhaps as a result of
lack of opportunities, the labour force participation rates of elderly in Sri Lanka are lower
than those for countries in the region, although they are higher than those for more
developed countries (see table 2). For example, the labour force participation rate for 65
and over males in Sri Lanka is only 27.53 compared to that of 66.1 percent and 47.5
percent for Bangladesh and Pakistan, respectively. Although comparable data are not
available for India, available data indicates that this rate for India is also much higher than
that for Sri Lanka. In fact, the labour force participation rates for Sri Lanka are similar to
those for developed countries where the retirement schemes are more advanced.
The retirement patterns of individuals in the country shows a dual pattern. Individuals
who worked in the formal sector in their prime age are more likely to retire in their early
60s, while individuals who worked in the informal sector work for much longer.
Examining the reasons for retirement also shows dual patterns. Formal sector employees
have retired mainly due to work related reasons, such as mandatory retirement. In
contrast, the main reason for retirement for workers in the informal sector is health. 20
20 See World Bank (2008), ―SRI LANKA: Addressing the Needs of an Aging Population‖, World Bank,
Colombo.
33

The above discussion highlights several facts. First, it shows that many individuals who
work in the formal sector are forced to retire early due to work related reasons. Given that
in the near future the country will face a contraction in the labour force, it is advisable to
introduce measures to keep these individuals longer in the labour market. Studies for other
countries show several reasons why employability of elderly is low. These include both
supply and demand factors. On the supply side, many elderly may not have the skills
needed by the market, unless they have been continuously upgrading their skills. They
may also not be able and willing to work full time. On the demand side firms may be
unable to organize their work in order to offer more flexible working conditions that are
more attractive to the elderly. They may also have other biases against hiring elderly
workers.
Second the above discussion shows that many informal sector workers leave the labour
market due to health related reasons. This is partly due to the fact that they are forced to
work longer due to economic reasons, and only leave the labour market when health forces
them to do so. It is also due to the fact that public health services have not reformed
enough to cater adequately to a growing elderly population and the health problems more
associated with them. As such many treatable health conditions remain untreated,
reducing the productive capacity of individuals.
3.0 Meeting the Challenges of a Changing Demand for Labour
There is increasing concern regarding the ability of the education sector in the country to
prepare workers to meet the skill demands of a changing employment market.
Globalization and technological change has increased the demand for better skilled
workers internationally and domestically. The expansion of ITES industry and the
increased demand for better skilled workers internationally has increased the need for
better skilled workers, particularly youth. Even local businesses need skilled workers to
use modern technology to tap international markets. There is also a demand for skilled
migrant workers from within the country. 21
One key aspect of labour market performance and the national competitiveness is the skill
level of the labour force. One of the best measures of this aspect is the education
attainment level of the labour market (ILO). The employed has become more educated
overtime (see table 3). For example, in 1992, 30 percent of the employed were having a
primary or lower level of education. However, by 2006, this proportion has dropped to 22
percent of the employed. In contrast, the proportion of employed with higher levels of
education attainments have increased for all education levels. This is particularly the case
for employed with more than A-levels; the proportion of employed with A-Levels has
increased to 11.3 percent from 6.2 percent while those with degrees and above has
increased to 2.9 percent from 1.7 percent.
21 Lewin, Keith and F. Caillods (2001), Financing Secondary Education in Developing Countries: Strategies
for Sustainable Growth, UNESCO.
34

However, evidence shows that these improvements in formal education attainments are not
sufficient to cater to the emerging opportunities in the labour market. High unemployment
amongst better education individuals shows that education alone is not a sufficient
condition for finding employment. Education results in productive employment only in a
few developed countries. In many developing countries, where economic developments
have not kept pace with the improvements in education attainments and where the
education systems do not cater to the needs of the labour market, many educated find it
difficult to find productive employment. 22
The labour market opportunities in the expanding ITES sector specifically calls for
individuals competent in information technology (IT) and the English language, while,
more lucrative jobs call for degree holders.
Table 3: Composition of the employed by level of education, 1992 and 2006
Primary
or below Secondary 1
Degree
O- A- and
1992
Levels Levels above Total
15-19 26.3 63.7 9.4 0.6 0.0 100.0
20-24 19.7 55.0 17.5 7.6 0.1 100.0
25_29 22.4 45.1 19.0 12.0 1.5 100.0
30 and above 33.9 42.7 16.0 5.2 2.2 100.0
Total 30.0
2006
45.8 16.3 6.2 1.7 100.0
15-19 6.7 73.6 17.2 2.5 0.0 100.0
20-24 7.7 54.7 20.9 16.2 0.5 100.0
25_29 8.5 52.7 18.6 16.5 3.7 100.0
30 and above 27.3 43.3 15.9 10.3 3.3 100.0
Total 22.2 46.8 16.8 11.3 2.9 100.0
Notes: 1. Individuals with 6 to 10 years of schooling.
Source: Arunatilake, N and P. Jayawrdena (2008), ―Labour Market Trends and outcomes in
Sri Lanka‖ Institute of Policy Studies of Sri Lanka. Unpublished Report (based on
Department of Census and Statistics Labour Force Survey Data).
Although the formal education attainment levels have increased in the country, the
proportion of employed with at least A-levels is still just over 10 percent, and the
proportion with degrees is less than 3 percent. These statistics further shows that
individuals with higher levels of education attainment are more likely to get trained in
English language and IT skills. However, majority of the individuals have obtained
training from non-descript education institutions with questionable quality. 23
There is little available information on the ―soft skill‖ competencies of the labour force.
Evidence from Jobsnet 24 data shows that only 3 percent of those who were seeking jobs
22
ILO (2006), ―Global employment trends for youth‖, ILO.
23
Arunatilake, N and P. Jayawrdena (2008), ―Labour Market Trends and outcomes in Sri Lanka‖ Institute of
Policy Studies of Sri Lanka. Unpublished Report.
24
Jobsnet is an ―employment sourcing and delivery system‖ established under the initiative 7 of the National
Employment Policy of Sri Lanka in 2003. Jobsnet has an island wide network of 19 job service centers
interconnected through a Wide Area Network with global accessibility. Jobseekers and employers can
35

had a ―very good‖ knowledge in English. Majority (80 percent) reported having only a
―fair‖ knowledge in English while the rest claimed only a ―poor‖ knowledge in English.
The same source of data further shows that a good knowledge in English is necessary for
obtaining high quality training. 25
Other than for English literacy, anecdotal evidence suggests that financial and geographic
restrictions also prevent individuals from taking advantage of good quality training. Most
recognized training institutions are based in the Western province, or in major cities.
Many individuals from rural areas find these inaccessible. Furthermore, many are unable
to afford the costs of attending these training institutions.
Figure 2: Expected Occupation of unemployed
45
40
35
30
25
20
15
10
5
0
Expected Occupation of unemployed
15-19 20-24 25_29 30 & abo
Source: Own calculations based on labour force survey data, 2006.
Figure 2 shows the expected occupation of the unemployed in the country. This also
implies the low skill levels of the labour force. Many unemployed are aspiring for jobs in
the low end of the market. Majority were waiting for employment as ―clerks‖, the lowest
white collar occupation category. The supply for employment as ―craft and related
workers‖ and in ―elementary occupations‖ was also high. This too indirectly indicates the
low quality of the skills available in the country.
The employment opportunities for better educated individuals in the country also seem to
be low (according to both the Jobsnet data and the Labour Market Information Bulletin
(LMIB)). Majority of the jobs in the market were for elementary occupations and for jobs
in the informal sector. The LMIB shows a moderately high level of demand for
register with Jobsnet and provide information on the types of jobs they are seeking and the types of vacancies
available.
25 Arunatilake, N and P. Jayawrdena (2008), ―Labour Market Trends and outcomes in Sri Lanka‖ Institute of
Policy Studies of Sri Lanka. Unpublished Report.
36
Legislators and senior officials
Professionals
Technicians and associate
professionals
Clerks
Service workers, shop and sales
workers
Skilled agriculture and fisery workers
Craft and related workers
Plant and machine operators and
assemblers
Elementary occupations

professionals and associate professionals (see table 4). But most of these vacancies call for
experience. The availability of jobs for educated individuals with no experience seems to
be very limited.
Table 4: Job vacancies by occupation category
ISCO-
one digit
level
37
Vacancies
according to LMIB
data
Vacancies according
to Jobsnet data
Occupation Category No. Per cent No. Per cent
1 Senior officials and managers 1868 5.1 457 2.5
2 Professionals 2850 7.7 1,169 6.5
3 Technicians and associated professionals 6185 16.8 4,303 23.8
4 Clerks and Related Workers 4031 10.9 547 3
5 Service workers and shop and market sales workers 6138 16.7 2,422 13.4
6 Skilled agriculture and fishery workers 290 0.8 12 0.1
7 Craft and related workers 6523 17.7 4,395 24.3
8 Plant machine operators and assemblers 3884 10.5 1,779 9.8
9 Elementary occupations 5079 13.8 2,978 16.5
36,848 100 18,062 100
Source: Calculated using Labour Market Information Bulletin – Volume 01/‘05 June, 2005 and Jobsnet data
The above evidence point to several facts about the skill levels of the labour market in the
country. Although, the formal education attainments have improved they are still
inadequate to cater to the emerging demands of the market. The emerging employment
opportunities demand degree level qualifications and skills in IT and English literacy. The
ability of the formal education system to cater to these demands seems to be low. Most
job seekers have low levels of English literacy. This not only restricts them from taking
advantage of lucrative employment opportunities, but also prevents them from obtaining
skills that cater to employment in the higher end of the occupation ladder.
4.0 Making Better Use of Labour Resources
In recent years the unemployment rates in the country has decreased markedly. The
overall unemployment rate decreased from 14.5 in 1992 to 6.4 in 2006. This decrease in
the overall unemployment rate is mainly due to the decrease in the unemployment rate of
youth – that is those in the 15 to 29 age group. However, despite these reductions,
comparisons with world averages shows that the youth unemployment rates in Sri Lanka
are still very high. Table 5 shows that the unemployment rates in Sri Lanka are higher
than the regional averages for all regions, except for Middle East and North Africa,
indicating that Sri Lanka has one of the highest youth unemployment rates.

Table 5. International comparisons of unemployment rates and employmentto-population
ratios
Youth
employment-
Youth
to
unemployment population
rates
ratio
Developed Economies and European Union 13.1 45.0
Central and Eastern Europe (non EU and CIS) 19.9 33.5
East Asia 7.8 62.1
South East Asia and the Pacific 15.8 47.5
South Asia 10.0 42.5
Latin America and the Caribbean 16.6 45.2
Middle East and North Africa 25.7 29.7
Sub-Saharan Africa 18.1 53.7
Sri Lanka 2 21.3 33.8
Note: 1. Youth are defined to be persons aged 15 to 24. 2. The Sri Lankan data is
for 1996 and 2006
Source: Sri Lanka, own calculations based on the Department of Census and
Statistics, Labour Force Surveys, 1992-2006; other countries, constructed using ILO,
"Global Employment Trends For Youth", table 2.2 and Annex 1.
Do the reductions in the unemployment rate imply an improvement in the labour market?
ILO (2006) argues that the unemployment rate alone may not be a good indicator of labour
market performance. For one, unemployment rate does not capture discouraged
individuals who have ceased to participate in the labour market. It also does not give an
indication of the nature of employment – that is whether individuals are employed in
‗decent work‘ activities. That is, workers have reasonable working conditions, they are
adequately compensated for the work that they do and that they have social protection. To
get a better understanding of the labour market performance, one must also look at the
propensity of the labour market to create employment, the type of employment created by
the market and the activities of individuals who do not participate in the labour market.
The best indicator available to measure the ability of the labour market to create
employment is the employment-to-population ratio. This provides a measure of the
proportion of the population that is employment. The employment-to-population ratios for
Sri Lanka show that they are lower for younger age groups, compared to their older
counterparts; they are also low compared to the regional averages for other countries. This
indicates that the ability of the country to create work is not very good. The employment
to population ratios shows that overall, only about 50 per cent of the working age
population is working. This percentage is lower for younger age groups, particularly those
in the 15 to 19 year age group. Comparisons of employment-to-population ratio for Sri
Lanka with the regional averages for the world show that Sri Lanka‘s youth employmentto-population
ratio is very low. It is lower than all regional averages considered, with two
exceptions (See table 5).
38

Figure 3: Unemployment rates by age group
45.0
40.0
35.0
30.0
25.0
20.0
15.0
10.0
5.0
0.0
Source: Own calculations using Labour Force Survey data
Figure 4: Employment-to-population ratio
70.0
60.0
50.0
40.0
30.0
20.0
10.0
0.0
Unemployment rate by age group
1992 1996 2000 2006
Employment-to-Population- ratio
1992 1996 2000 2006
Source: Own calculations using Labour Force Survey data
In order to get a clear idea about the labour market performance of the country we should
also look at the types of employment created in the country. Are they in productive
sectors? Do they adequately compensate workers? The data shows that the majority of
employment is created in the informal sector; 72 percent of male workers and 64 percent
of female workers worked in the informal sector. The proportion of workers in the
informal sector was higher for younger males than their older counterparts. But, for
females it was lower, mainly due to employment in the manufacturing sector. Although
employment in the manufacturing sector did provide an opportunity for employment in the
formal sector, it rarely provided opportunities for long term employment. The main source
39
All
15-19 yrs
20-24 yrs
25-29 yrs
30-49 yrs
50-54 yrs
55-59 yrs
60-64 yrs
65-69 yrs
All
15-19 yrs
20-24 yrs
25-29 yrs
30 & over

of employment for males and females was the private sector. The private sector
employment for males was mainly in the informal sector, while it was equally split
between the formal and informal sectors for females, again due to higher employment of
young females in the manufacturing sector.
Another indicator commonly used as a measure of the labour market activity level and the
level of development of the economy is the ‗status in employment‘. 26 This indicator
distinguishes amongst the wage or salaried workers, self-employed workers and unpaid
family workers. With economic development, countries usually experience a shift away
from agriculture towards industry and service sectors. This results in a corresponding
increase in wage and salaried workers relative to other two types of workers. As seen in
table 6, a large proportion of both males (40 percent) and females (44 per cent) work as
own account workers or as unpaid family workers, which shows that the ability of the
economy to create wage or salaried work opportunities are still low in the country. This is
despite a reduction in the proportion of employed in agriculture as a percent of total
employed, and an increase in the proportion of employed in both the industry and service
sectors. Time trends from 1996 to 2006 shows that as a proportion of the total employed,
the proportion of wage or salaried workers have increased from 1996 to 2006; for the self
employed this increase is by four percentage points while for the unpaid workers it is by
half a percentage point. 27
Table 6: Composition of the employed, by age group, sex and sector of employment, 2006
Male Female
Youth 30 & All Youth (15- 30 & All
(15-29
yrs)
over
29 yrs) over
Employee - public sector 6.7 14.3 12.3 12.8 16.7 15.7
Employee - private sector 1 59.0 38.4 43.8 59.3 32.2 39.2
Formal 17.4 10.7 12.4 37.1 13.1 19.4
Informal 41.6 27.7 31.4 22.2 19.1 19.9
Employer 2.0 5.2 4.4 0.4 1.0 0.8
Own account worker 20.5 40.6 35.3 11.7 26.7 22.8
Unpaid family worker 11.7 1.5 4.2 15.9 23.4 21.5
Total 100.0 100.0 100.0 100.0 100.0 100.0
Formal 24.9 29.8 28.5 48.1 31.6 35.9
Informal 75.1 70.2 71.5 51.9 68.4 64.1
Note: 1.This includes the employees who do not have a permanent employer
Source: Arunatilake, N and P. Jayawrdena (2008), ―Labour Market Trends and outcomes in Sri Lanka‖
Institute of Policy Studies of Sri Lanka. Unpublished Report (based on Department of Census and
Statistics Labour Force Survey Data).
26 ILO, The 20 Key Indicators of the Labour Market.
27 Arunatilake, N and P. Jayawrdena (2008), ―Labour Market Trends and outcomes in Sri Lanka‖ Institute of
Policy Studies of Sri Lanka. Unpublished Report.
40

5.0 Conclusions
The Sri Lankan labour market is faced with many challenges, some of which are emerging
and the others are inherent problems for which the market is yet to find solutions. This
paper focused on three of these challenges: 1) the challenge of facing the impacts on the
labour market of an aging population 2) the challenge of making use of emerging
opportunities in both the local and global markets due to globalization and technological
change and 3) the challenge of making optimum use of labour resources in the country.
The paper showed that the demographic changes have already slowed down the growth of
the labour force, and that it will contract the labour market around 2030. Second, these
demographic changes and changes in the labour force participation rates have shifted the
age distribution of the labour force to the right. Studies for other countries show that
contractions in the labour force will slow economic growth. The paper also showed that
Sri Lanka‘s retirement benefit schemes are not adequate for individuals to be self
sufficient. Unless, actions are taken to improve work opportunities for the elderly, this
will result in making them more dependent on their families and the state.
Globalization and technological change has opened new opportunities on the demand side.
Although the education attainment of the employed in the country have improved
overtime, these improvements alone are not sufficient to cater to the new demands. The
opportunities on the demand side calls for higher levels of education attainment – many
asks for up to degree level qualifications – and English language literacy skills and skills in
IT. The limited information available in the country on the availability of these skills
among the job seekers shows very low competencies in English skills. Data also shows
that English is needed for obtaining higher quality training aimed at jobs that are at the
high end of the occupation ladder. In addition, many have obtained training from
institutions without recognition. Possibly due to the lack of training institutions out side
the Western Province and urban areas, and the high cost of obtaining high quality training.
Lastly, the paper showed that although unemployment levels have been coming down in
the country they are still very high compared to world regional average, especially for the
youth. Moreover, the employed to population ratio in the country is low and many
emigrate for employment, majority of the employed are in the informal sector, where there
is little social protection. A large portion of the workers are in the non-wage sector
working either as self employed or as unpaid family workers. These statistics together
shows the inability of the economy to create adequate levels of productive employment
opportunities, and to make optimum use of the labour resources in the country
41

6.0 Policy Recommendations
If the Sri Lankan labour market is to counteract the effects of a contracting labour force,
the market must take action to improve labour force participation, and also to improve the
quality of the labour force. The labour force participation rates in the country are
particularly low for youth, females and the elderly. To make work more attractive to these
segments of the populations, firms must be educated on organizing work so as to offer
more flexible employment opportunities. Studies for other countries shows that
particularly youth, females and the elderly seek flexible working conditions, either because
they have other responsibilities – such as the elderly and the females, or because they are
still investing in their education – such as the youth. Also, opportunities in the formal
labour market must be expanded.
There is a critical need to improve the quality of the labour force. First, one means of
counteracting the effects of a contracting labour force would be to improve the
productivity of the labour force so that fewer individuals are needed to do the same job.
Further, to take advantage of the emerging labour market opportunities and to be
productively employed, there is need to improve training. If the elderly are to be more
employable, training institutions should cater to life long training, so that elderly are not
outdated in their skills when they retire from their career jobs. To achieve all these
objectives, the secondary education as well as the training programmes in the country must
be improved. Training courses that are in high demand and are of good quality must also
be made more accessible to people, by offering them different geographical locations and
making them more affordable. In areas where there is a high demand for skilled labour,
and where there is a shortage of skilled workers, potential employers and financial
institutions can join hands to provide loans to students with job guaranties as securities for
these loans. Such schemes have already proven to be successful.
Another area that needs critical attention is improving the investment climate in the
country. Improving the investment climate calls for changes in a wide rage of areas,
including the legal, physical and financial environment for investments. A recent joint
report by the World Bank and the Asian Development Bank highlights five critical areas
that need attention, in order to improve the investment environment in the country. Of
these two factors are critical for both the rural and the urban firms; namely, a) improving
access and the quality of energy and transport facilities in the country, and b) reducing the
cost of finance and making it more accessible. In addition, improving labour market
flexibility and improving macro economic uncertainty were identified as constraining
factors for expanding investments in the urban sector by the report. For the rural sector,
improving access to major markets was a critical factor limiting investments. 28
28 World Bank (2008), ― Sri Lanka: Improving the Rural and Urban Investment Climate‖, World Bank,
Colombo.
42

Inflation and Real Wages: Sri Lankan Scenario
Athula Ranasinghe
Shanuka Senarath
1. Introduction
This paper examines the relationship between inflation and real wages in Sri Lanka. In
doing so, it also addresses one of the prime concerns of trade unions regarding the proper
measure of inflation. Once the Colombo Consumers Price Index (New) [CCPI (N)] was
introduced in 2002, government took a policy decision to discontinue the former index,
CCPI (1952). Therefore, estimates of cost of living compensations were affected. There
were endless debates on the transformation from CCPI based compensations to CCPI_N
based compensations. This paper contributes to this debate by providing comparative basis
for CCPI and CCPI_N.
The entire study is based on official data published by the Department of Census and
Statistics, the Central Bank of Sri Lanka and Department of Labour.
2. Inflation and Real Wage: Some Definitions
Inflation in its simplest form means the continuous increase in general price level. The
Oxford English Dictionary defines the term inflation as ―A general increase in prices and
fall in the purchasing value of money‖. (www.askoxford.com). Wikipedia Encyclopedia
defines the word inflation as ―…, inflation is a rise in the general level of prices of goods
and services in an economy over a period of time.‖ (www.wikipedia.org). All these
definitions agree on two points. First it is that increase of selected commodities is not
considered as inflation. Inflation refers to increase of general or average price level of the
country. This is measured in terms of price indices. Therefore, from a practical point of
view, inflation refers to increase of price index over time. Second point on which all
definitions agree is that inflation refers to continues growth of average price level.
Therefore by definition this carries two levels: short term price increases and long term
price increases.
Economists are speaking of many different types of inflationary situations. Their
classifications are based on causes of inflation, level of inflationary pressure, and
measurements of inflation.
Demand-pull, cost-push, pricing power and sectoral inflation are one such classification.
[See; inter alia Smith (2004) for details]. This classification is based on the causes of
inflation. Demand-pull inflation suggests that inflation occurs due to excess demand for
goods and services by ultimate consumers. Demand management policies are
recommended to cure the demand-pull inflation.
Cost-push inflation occurs when the prices of final products increase due to increase of
cost of production. In this regard, factor prices are the main cause of inflation. Cost of
production can increase due to increase in wages for example. In fact, these two are not
independent from each other. Inflation may originate due to one of these causes. Once it is
43

originated, inflation can cause other to react and thereby inflation further aggravated. For
example, excess demand can be the original cause of inflation. Once the inflation
increases, trade unions demand for wage increase because inflation has reduced the real
wages of trade union members. This gives a start to the second wave of inflation. One can
continue the argument that once wages increase, wage earners increase demand for final
products and thereby another wave of demand-pull inflation can be heightened.
A third variety of inflation is called pricing power inflation. This may occur in general in
the up turn of business cycles. In the up turn of business cycle businesses tend to increase
prices to increase their profit margins. Therefore, this is also called administered inflation.
However, this can be done only by oligopoly firms. For this reason, sometimes this is also
called olygopolistic inflation.
Fourth variety in this context is the sectoral inflation. The term applies whenever any of
the other three factors hits a basic industry causing inflation there, and since the industry
hit is a major supplier of many other industries, as for example steel is, or oil is, that raises
costs of the industries using say steel or oil, and forces up prices there also, so inflation
becomes more widespread throughout the economy, although it originated in just one basic
sector.
Classification of inflation based on the level of inflation categorises it into three types:
mild-inflation strato-inflation and hyperinflation. [See; inter alia Chang (2006)]. Mildinflation
means a slow rise in price level of no more than 5 percent per annum.
For strato-inflation, the inflation rate ranges from about 10 percent to several hundred per
cent. Many developing countries particularly those in Latin America experienced this.
Hyperinflation is a very rapidly accelerating inflation which is also know as runaway
inflation or galloping inflation. In 1923, the inflation rate in Germany averaged 322
percent per month with the highest inflation rate at 29,000 percent. More or less the same
is experienced in Zimbabwe very recently 29 .
Disinflation is yet another special feature of it where it refers to continues decrease of the
rate of inflation. This does not mean a decrease of general price level. Under disinflation,
average price level increases at a decreasing rate. In other words, inflation rate declines.
Inflation can be further classified into several based on various measures of it. Measures of
inflation vary with their reference point. One can calculate monthly inflation. This is the
growth of price index from one month to the subsequent month. This is an ideal measure
of short term inflation. Similarly one can calculate annual inflation rates. This can be
measured by the growth of annual average price level of one year to the same of the
following year. Point-to-point estimate of inflation is also possible. This can be a blend of
short and long term estimates. In this inflation is calculated from for example, last January
to this January, last February to this February etc. It provides monthly figures calculated
based on 12 months variation.
In this regard the most recent classification refers to the distinction between headline
inflation and core inflation. [See, Commercial Bank (2006) for a very simple and clear
29
Hyper-inflation usually occurs during or soon after a war when a government turns to the
printing press to create money to pay its debts. It is usually short-lived and should not be
regarded as typical of inflation.
44

definition of the two]. Increase of general price level (all inclusive) is headline inflation.
Growth of CCPI, CCPI_N or any other price index measure headline inflation. Core
inflation is different from headline inflation because some goods and services are excluded
when the core inflation is calculated. Core is calculated excluding those prices which are
highly volatile mainly due to external reasons (foreign markets) and the commodities of
which the prices are regulated. In many cases core inflation is calculated excluding food
process and energy prices. Following quote from Commercial Bank (2006) clearly
describe the purpose of calculating core inflation and its mechanism in Sri Lanka.
For the purpose of calibrating monetary policy, however, the Fed and many
economists focus more intently on the core rate of inflation: the total excluding food
and energy prices. In part, that is because the core is less volatile and a better reflection
of the interplay of supply and demand in domestic product markets. [Commercial bank
(2006), p.1].
―Wage‖ normally refers to the salary, income a person may receive. Oxford English
dictionary defines the word as ―A fixed regular payment for work, typically paid on a daily
or weekly basis.‖ (www.askoxford.com). Real wages in general gives the idea of the
amount of goods and services that a person can purchase out of his/her wage. This is
calculated by dividing the nominal wage by average price level of the country.
The term real wages refers to wages that have been adjusted for inflation. This term is
used in contrast to nominal wages or unadjusted wages.
www.wikipedia.org
Income of an individual, organization, or country, after taking into consideration the
effects of inflation on purchasing power. Also called real wages. Also called real
income.
www.investorwords.com
This implies that real wages and inflation and directly related. Real wages decline with
inflation. There are number of alternative theoretical explanations about the relationship.
They are described in subsequent sections of this paper. These theories believe that there is
a negative relationship at least in the short-run.
3. Theoretical explanation of inflation and real wages
Various schools of economic thought have different views on the relationship between
inflation and real wages. In this context, Keynesian economists argue that the nominal
wage increase is slower than the price increase in an inflationary situation. Workers realize
price changes only after some period, thus as a result real wage decreases always with
inflation due to lack of foresight of the workers. Under inflationary situations, this will be
more serious. [For further details on Keynesian model see, inter alia Foryen (2005)],
Monetarists‘ interpretation of the relationship between the two is different from that of
Keynesian analysis. Being contrast to Keynesians, Monetarists argue that workers are with
perfect foresight in the long-run. Therefore, nominal wage will be adjusted for price
increase in the long-run. As a result, real wage will remain the same in the long run.
According to Monetarists, purchasing power of workers will not be affected by inflation in
the long-run. [ibid].
New classical economists continue this argument further. In the New-classical argument,
Workers have perfect foresight. Therefore, nominal wages will adjust in par with price
45

increase simultaneously. Their arguments are based on inflation expectation. New classical
economists believe that workers are rational and therefore, they realize price increase with
no time lag. Therefore, entrepreneurs will have to increase nominal wage together with
price increase. Result is that real wage remains constant even in the short run. This is the
prediction by Lucas (1972) and main stream rational expectations. However, new classical
economists are also not in an agreement on this. For example, Fischer (1977) believes that
real wage can decline with inflation even in the presence of rational expectation. There are
several arguments in this regard. Wage contracts will not allow the workers to negotiate
with employers even when they know that real wage is eroded by inflation 30 .
Therefore, in general, real wage erosion hypothesis due to inflation may prevail at least in
the short run 31 .
4. Other Impacts of Inflation
In general we can believe that real wages will be eroded with inflation at least in the short
run. In addition to the effect of inflation on real wages, it affects various other aspects of
welfare of workers. For example it may affect working conditions through cost-cutting
attempts of organizations. Further it also affects wage disparity, because trades with better
bargaining power will receive nominal wage increases before other trades. Therefore, in
inflationary situations, trades with more bargaining power receive wages increases with
inflation and for others nominal wage may increase with time lag or they do not receive it
at all. Therefore, wage disparity will increase in favour of the former type of trades.
5. Measuring Inflation in Sri Lanka
Different Measures are used to calculate inflation. In Sri Lanka several such indicators are
used. Among them, CCPI (Colombo Consumer Price Index), GCCPI (Greater Colombo
Consumer Price Index), CDCPI (Colombo District Consumer Price Index), SLCPI (Sri
Lanka Consumer Price Index), WPI (Wholesale Price Index), and GNP and GDP Deflators
are prominent. In addition to that a new price index called Colombo Consumers Price
Index New (CCPI N) is also now constructed. This will be the official price index used by
policy makers from 2002 onwards 32 .
These different price indices result different measures of inflation. Table 1 below
summarises the annual inflation calculations using different price indices.
30
Another condition making rational expectation inadequate is the information asymmetry. If employees
have no access to the information available for policy makers, one may expect slower response by employees
for inflation because they do not realize inflation increase immediately.
31
Most of the theories described above are applicable with ―mild inflationary‖ situations. In a situation
where prices increase very fast nominal wage adjustments will be slower than price increase. Administrative
requirements preclude quick adjustments of nominal wages even if the employees realize the price increase
and if the employers are ready to increase wages.
32
Currently this has become a major concern among trade unions, policy makers and economic researchers.
Until the time of drafting this paper, no agreement is reached on the official status of the new index.
46

Table 1: Annual Inflation Calculations using various Price Indices
Year CCPI GCCPI CDCPI SLCPI WPI GNPD GDPD
1981 18.00 17.00 20.60 20.60
1982 10.80 5.50 10.20 9.90
1983 14.00 25.00 14.70 14.60
1984 16.60 25.60 17.40 17.10
1985 1.50 -15.20 0.80 0.90
1986 8.00 -2.90 5.50 5.80
1987 7.70 13.40 6.80 6.70
1988 14.00 14.80 11.50 11.50
1989 11.60 9.00 9.70 9.60
1990 21.50 24.60 22.20 20.00 20.00
1991 12.20 11.50 9.20 11.20 11.00
1992 11.40 9.40 8.80 10.00 10.00
1993 11.70 8.40 7.60 9.50 9.50
1994 8.40 4.80 5.00 9.40 9.30
1995 7.70 3.90 8.80 8.40 8.40
1996 15.90 14.70 20.50 12.20 12.10
1997 9.60 7.10 7.40 6.90 8.70 8.60
1998 9.40 6.90 7.30 6.10 8.40 8.40
1999 4.70 3.80 3.60 4.00 -0.30 4.40 4.40
2000 6.20 3.20 3.60 1.50 1.70 6.70 6.70
2001 14.20 11.00 10.30 12.10 11.70 12.40 12.40
2002 9.60 10.60 6.80 10.20 10.70 8.30 8.30
Average inflation 11.12 9.22 6.50 6.95 9.60 10.31 10.26
Standard Deviation 4.59 5.78 2.56 5.02 9.43 4.73 4.68
CV 41.25 62.67 39.40 72.18 98.28 45.85 45.61
Source: Extracted from Annual Report SLCB 2002, Table 6.1
This table is extracted from the Annual Report of SLCB 2002. Overall averages, Standard
Deviations and Coefficient of Variations (CV) are authors own calculations. Arithmetic
average was used instead of Geometric Mean because inflation rates were negative in
some years. Highest overall average inflation is reported for CCPI based inflation
calculations. Lower CV value for the same indicates that CCPI based inflation is one of the
most stable measures of inflation.
Different price indices listed above result different values of inflation. This can be
explained in terms of three conditions. Condition one is that the coverage of commodities
by different indices is different. For example, CCPI covers the consumption pattern of
bottom 40 percent of working class families living in Colombo in year 1952. GCCPI
covers the consumption pattern in 1989 within Greater Colombo area.
47

Index
Second difference is due to the price levels used to calculate the index. In this context,
except Whole Sale Price Index (WPI), all other indices use retail prices. Theoretically it is
anticipated that the inflation rates
based on WPI always than any other
prices indices 33 Chart 1: Time Trend of CCPI and Deflator
.
3,500
Third difference is due to the
formulae used to calculate the price
index 34 . In this context, Sri Lankan
authorities use Laspeyres Price Index
formulae (LPI) where the commodity
basket is from the base year. It
measures the proportional change of
cost of living between base and
current years if consumers restrained
to consume the same commodity
basket that they consumed in the base
year. Expect GDP (or GNP) deflator
all other price indexes in Sri Lanka
use Laspeyres price index. The GDP (or GNP) Deflator is calculated by dividing GDN
(GNP) at current price by GDP (GNP) at constant prices. It does not use any price index
formulae explicitly. Since it deals with the GDP (GNP) in current year technically, the
Deflator uses Paasche Price Index (PPI) 35 3,000
2,500
2,000
1,500
1,000
500
-
Year
CCPI Deflator
.
Chart 1 presents CCPI, and GDP Deflator, two major price indices available for Sri Lanka.
In Chart 1, base year of all the price indices are converted into 1952. Chart 1 shows that
CCPI is lower than the GDP Deflator. This is inconsistent with theoretical expectations.
According to Chart 1 the gap between Deflator and CCPI increases overtime. Only
interpretation that one can think of is that the CCPI underestimates the actual price growth
due to unrepresentative commodity basket used for CCPI. The GDP Deflator uses all the
commodities presently available and therefore is more representative of the expenditure
Chart 2: Alternative measures of inflation:
5 years Moving Averages of CCPI and
Deflator
20.00
15.00
10.00
5.00
0.00
-5.00
1952
1950
1957
1962
1960
1967
pattern 36 .
Inflation rates calculated using CCPI and GDP
Deflator are reported in Chart 2 and Table 2
below.
Chart 2 represents annual inflation rates
calculated using CCPI and GDP Deflator. Five
years moving averages are used to smooth out
the fluctuations. In general both estimates
33
Some critiques of the CCPI indicate that the commodity prices for calculation of CCPI are taken from
Petteh Market which does not necessarily represents retail prices.
34 CCPI (MA5) GDP Def (MA5)
On various forms of Price Index Formula See, Spiegel et al (2008)
35
Theoretically it is proved that price increases measured in terms of LPI is always greater than that
measured in terms of PPI. Therefore, inflation compensations based on LPI is always greater than that
based on PPI. [See, inter alia Varian (2005)]
36
One can criticize GDP Deflator that it includes commodities which has no direct impacts on individual
consumers‘ consumption pattern.
1972
1977
1970
1982
1987
1980
1992
1997
1990
2000
48

show similar overall time trend. Inflation rate was increasing until end of 1970‘s and it
decreases after that. As far as the annual calculations of inflation are concerned, through
out the period ―strato-inflation‖ situation was observed with slight fluctuations around
10% per annum.
Table 2: Comparison of alternative measures of inflation: CCPI vs. GDP Deflator
49
CCPI GDP Def
1953 to 62 0.62 1.39
1963 to 72 3.60 2.95
1973 to 82 10.89 14.78
1983 to 92 11.84 10.75
1993 to 2002 9.73 8.88
2003 to 2007 11.34
Average Inflation Rate for the entire period 7.34 7.81
Source: Central Bank of Sri Lanka
Table 2 shows that the average annual inflation predicted by CCPI is 7.34 percent and the
same as predicted by GDP Deflator is 7.81 percent. Inflation calculation based on GDP
deflator is slightly higher by one percentage point. This situation is theoretically
inconsistent because theoretical expectation is that CCPI based inflation should be greater
than that based on Deflator. Only interpretation to this is that the coverage of commodities
by CCPI is not sufficient to capture changes in cost of living and therefore, cost of living
compensations based on CCPI is also questionable.
In order to overcome this limitation, the Census and Statistics Department of Sri Lanka
introduced a new index in 2002. This is called Colombo Consumers Price Index (New) or
CCPI_N. Technically, both the CCPI and CCPI_N are based on the same price index
formulae. Both indices are also based on the same district. Differences of the two indices
are several. First the base year in CCPI is 1952 and therefore expenditure patterns of
current consumers are not represented by the CCPI. In contrast CCPI_N is based on 2002.
More recent base year and the commodity basket of CCPI_N is more representative of
current consumption pattern than the representativeness of the CCPI (1952). Second
difference is that CCPI covers a sample of only middle or lower middle class employees.
The CCPI_N is also based on Colombo consumers. However, its coverage is wider than
that of CCPI. Table 3 below reports the composition of commodity baskets used in the two
price indices.

Table 3: Comparison of CCPI and CCPI(N): commodity Baskets and Shares
Weights
CCPI CCPI_N
Food (and non-alcoholic beverages) 62% 46.70%
Clothing (and footwear) 9% 3.10%
Fuel & Light (Housing, water, electricity, gas and other fuels) 4% 18.30%
Rent 6%
Furnishing, HH equipments & routine maintenance of HH 3.20%
Health 4.20%
Transport 9.50%
Communication 4.40%
Recreation and Culture 2.20%
Education 5.80%
Miscellaneous 19% 2.70%
Source: Central bank of Sri Lanka
Phrases stated in brackets are additional items included to CCPI_N. For example, item 1 in
Table 3 shows that in CCPI only foods are stated whereas in CCPI_N Foods and nonalcohol
beverages are explicitly stated. It is not sure whether non-alcohol beverages are
included into Foods in CCPI.
CCPI_N is with more items than the number of items in CCPI. Rent is explicitly included
into CCPI. In CCPI_N rent is included into Fuel, Light, Housing, Water, Electricity, Gas
and Other Fuels. CCPI is with greater weight for miscellaneous category.
Weights assigned by both indices are also different. CCPI assigns higher weight for Foods.
CCPI_N assigns only 46.7 percent for foods. Therefore, CCPI is more sensitive for food
price changes than the CCPI_N. For fuel and light CCPI_N includes more items and also
assigns higher weight.
Overall fuel price change is more reflected in CCPI_N and food price changes are less
reflected by the same.
At this juncture, it is interesting to compare inflation estimates based on CCPI with that
1.4
1.3
1.2
1.1
1
0.9
0.8
0.7
0.6
0.5
Chart 3: CCP I (N) Bas ed Inflatio n Rates divided by Five
Years Mo ving Averages o f CCP I Bas ed Inflatio n Rates
based on CCPI_N. The CCPI and CCPI_N
are published for several years.
Chart 3 plots the ratios of CCPI_N based
inflation rates to CCPI based inflation rates.
Most of the parts of the curve locate below
1 reflecting that the CCPI_N based inflation
is smaller than the CCPI based inflation.
Item-wise analysis of price increase in the
reference period shows that major
contributors for the increase of general price
level are food price increase and fuel price
50

increase. As compared to CCPI, CCPI_N assigns higher weight for fuel prices and lower
weight for food prices. It is noted that the periods in which the CCPI_N based inflation
rates lower than that of CCPI; main contributor for general price level increase is food
prices. As it is indicated in Table 3 above, for food items, CCPI assigns higher weight than
the CCPI_N weight.
In order to compare inflation rates calculated using CCPI with that using CCPI_N,
CCPI_N equivalent was reconstructed using item prices from CCPI records and relevant
weights from CCPI_N. In that all the items in CCPI_N do not tally with the items in CCPI.
Therefore, we assigned following weights.
Table 4: CCPI equivalent of CCPI(N): Commodity Baskets and Shares
51
Weights
CCPI CCPI(N) Weights
Assigned
Food 62% 46.70% 46.70%
Clothing 9% 3.10% 3.10%
Fuel & Light 4% 18.30%
18.30%
Rent 6%
Furnishing, HH equipments & routine maintenance of HH 3.20%
Health 4.20%
Transport 9.50%
Communication 4.40%
Recreation and Culture 2.20%
Education 5.80%
Miscellaneous 19% 2.70%
Source: Central bank of Sri Lanka
32.00%
Note that first two columns of Table 4 reproduce Table 3. Using the weights given in last
column and item prices of CCPI, CCPI_N equivalent price index was we reconstructed.
Reconstructed CCPI_N based inflation rates and CCPI based inflation rates are plotted in
Chart 4.1 and 4.2. Chart 4.2 plots the ratio of five years moving averages of CCPI_N
equivalent based inflation rates to CCPI based inflation rates. It obviously shows that the
differences disappear over time.
2.50
1.50
0.50
-0.50
-1.50
Chart 4.1: CCPI (N) Based Inflation to
CCPI Based Inflation
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
Chart 4.2: CCPI (N) Based Inflation to
CCPI Based Inflation: Five Years
Moving Averages
2.00
1.50
1.00
0.50
0.00
1955
1960
1965
1970
1975
1980
1985
1990
1995

6. Shift from CCPI to CCPI_N:
Should Trade Unions worry about it?
Once the CCPI_N was declared as official price index of Sri Lanka, The SLCB terminated
the calculation of CCPI. Now the CCPI_N is calculated by the Department of Census and
Statistics (DCS). The SLCB uses the calculations provided by the DCS. Transformation
from CCPI to CCPI_N was with several controversial arguments. The DCS, SLCB and
other proponents of the new index questions about the accuracy of the CCPI which is
based on a 50 years old commodity basket. There is no argument that expenditure pattern
has changed drastically. Therefore, no one can have theoretical argument against the
justification of the new index. The press release of the DCS on the CCPI_N is available in
the website of DCS. This has summarized all the criticisms against the existing CCPI.
Outdated commodity basket, restricted geographical location, restricted consumer group
and consumption bias of the weights are the main criticisms against the CCPI. It covers the
expenditure pattern of bottom 20 percent of Colombo working class families lived in
1950‘s.
However, movement from ―outdated CCPI‖ to ―most updated CCPI_N‖ is also with many
criticisms. Most of these criticisms are presented in Budget (2007 April) 37 .
There are several criticisms against the shift from CCPI to CCPI_N. According to the
source consumption bias of CCPI is not inaccurate. The old index is based on bottom 20
percent of working class families in Colombo. One can expect that a greater share of the
income of poor people spends on foods. The consumption bias of CCPI is a reflection of
that. Therefore, it is argued that consumption bias of CCPI is not a reason to move to a
new index. Budget (2007 April) highlights the case of US economy where the inflation
compensation is calculated using an index constructed by the US Bureau of Labour
Statistics (BLS). This index is based on the bottom 32 percent of US population.
It further argues that CCPI is more with domestically produced items and non-tradable.
Therefore, the ―old index‖ is more sensitive for monetary policy changes. The LBO.lk
article titled ―Index Scam‖ published on 11, April 2007 highlights that the shift from CCPI
to CCPI_N is a scam to hide the true inflation caused by ―printing money‖ by the SLCB.
The same source is also very suspicious about the selection of commodities for the
CCPI_N basket. The new index has excluded tobacco and alcohol of which the prices are
ever increasing and included mobile phone charges. The mobile phone charges are steadily
declining 38 .
Finally, it is also interesting to examine the choice of the new index. After 1952 number of
new indices was introduced. A list of those indices is given above. Few years before the
introduction of CCPI_N, another index was constructed using a sample survey covering
the entire country. The Sri Lanka Consumers Price Index is based on 1995. This covers the
entire country and the base year is also not very much outdated. Therefore, why does the
DCS come up with new index based only on Colombo consumers is questionable.
37
11, April, 2007 and 21, January 2008 issue of LBO.lk have very serious criticism of this shift.
38
Some commentators to the original article in LBO.lk highlight that inclusion of mobile phone charges is
acceptable because at the moment over 90 percent of Sri Lankans are using phones. However, inclusion
of only mobile phones and exclusion of fixed phone charges is questioned.
52

In any case, it is difficult to conclude about the relative accuracy of the two indices.
Comparison can be done based on a normative question which index would make workers
better off.
In this context, the Deputy Governor of the Central Bank of Sri Lanka, Wijewardhane
(year is not mentioned) has an excellent review of the matter 39 . In this review,
Wijewardhane compares the compensation schemes under CCPI and SLCPI. The CCPI
compensates Rs. 2.02 for each unit increase of the CCPI value (annual increase: January to
December). Under SLCPI each unit increase is compensated at Rs. 47.86. The CCPI_N
proposes Rs. 67 for each unit increase of the index. The compensation formulae are rather
vague. It is difficult to find any method on which these figures are derived. Assuming
given rates Table 5 below calculates the inflation compensation under CCPI and CCPI_N.
7. What is the best measure of price inflation for compensations?
In order to determine the most favourable index from workers‘ point of view, we
calculated the inflation compensations for several years. Compensation is calculated using
CCPI and CCPI_N. As described in previous section, compensations are calculated by
multiplying the January to December change of each index by 2.02 for CCPI and by 67 for
CCPI N.
2000
1500
1000
Table 5: Calculation of Inflation Compensation under alternative price indices
Index Change Compensation
CCPI CCPI_N CCPI CCPI_N CCPI CCPI_N
2003 January 3,462 106
December 3,488 109 26 3 53 208
2004 January 3,479 111
December 3,969 123 490 12 990 811
2005 January 3,987 124
December 4,287 132 300 8 606 523
2006 January 4,304 134
December 5,114 150 810 17 1,636 1,106
2007 January 5,184 152
December 5,955 178 771 26 1,557 1,762
Source: Price Index Data are from DCS website. Calculations are our own
500
0
Chart 5 Comparison of Compensation
based on CCPI and CCPI(N)
2003 2004 2005 2006 2007
CCP I CCP I(N)
39 W. W. Wijewardhane, A Child‘s Guide to Taming of Inflation.
Chart 5 below presents the calculated inflation
compensations under two price indices, CCPI and
CCPI_N. Dotted line represents compensations
based on CCPI and the straight line represents the
compensation based on CCPI_N. These are the
numbers reported in last two columns of Table 5
above. These figures indicate that the CCPI based
compensations are greater for most of the period.
However, compensations based on CCPI_N are
increasing over time. Towards the end of the
period, CCPI_N based compensations exceed the
53

CCPI based compensations. This is the method proposed by the DCS. Our calculations
show that prediction of compensations based on the two methods is hardly possible. For
the five years calculations show very high variation. Therefore, no one can assure whether
CCPI_N based compensations will make workers better or worse off.
In order to test the consistency of the two indices we performed a simple econometric test.
Econometric test and its results are presented below.
For this purpose we first estimated a regression equation with CCPI as dependent variable
and CCPI_N as independent variable. As the data for both series is available for 2003-
2008 (Jan.-Feb.) we used these 62 observations for the regression. In addition to the
CCPI_N we also included month dummies to capture possible monthly variations of CCPI.
Equation we estimated is given below.
1
12
CCPI CCPI ( N)
M
(1)
t
t
t 1
t
t
t
Where, Mt‘s are monthly dummies. Each represents one month. Base year of CCPI is
converted to 2002 because the CCPI_N has the same base. Based on the estimated
regression equation, CCPI values were predicted and calculated the compensation based
on actual CCPI (As reported in Table 5 above) and on predicted CCPI values. Then the
two series were used to test whether there is a significant difference between the two.
Adjusted R 2 is almost one indicating that almost total variation of the CCPI can be
explained by the model. All the t-stats are also greater than 2 (absolute values) indicating
that all the explanatory variables have significant influence in determining the dependent
variable.
According to the regression results, every unit change of CCPI_N is associated with 1.15
unit change of CCPI. Negative signs of the coefficients attached to month-dummies
indicate that there is a seasonal effect shifting the linear progression of CCPI downwards.
Estimated results of equation (1) are reported in Table 6.
Table 6: Prediction of CCPI using CCPI(N)
Coef. t
CCPI_N 1.15 81.82
January -15.24 -7.09
February -17.45 -8.04
March -19.15 -9.18
April -19.83 -9.44
May -17.16 -8.11
June -16.03 -7.51
July -16.40 -7.65
August -18.73 -8.70
September -18.92 -8.72
October -18.98 -8.66
November -16.93 -7.63
December -15.77 -7.04
Adjusted R 2
0.9997
F(13,49) 14,829
Number of Observations 62
54

Based on the predictions by the regression we can now calculate the compensation if CCPI
is used for that.
Table 7 and Chart 6 present the calculations.
Table 7: Predictions of Compensation: Three alternative Scenarios
Compensation
Year CCPI CCPI Predicted CCPI_N
2003 53 195 208
2004 990 859 811
2005 606 542 523
2006 1,636 1,183 1,106
2007 1,557 1,907 1,762
Note that the last two columns of Table 5 are reproduced in first and third columns of
Table 7. This is just for comparison.
2,500
2,000
1,500
1,000
500
0
Chart 7: Comparison of Inflation
Compensation Calculations
2003 2004 2005 2006 2007
CCPI CCPI pred CCPI (N)
Dotted line represents the inflation
compensation calculated using predicted
values of CCPI. Chart 7 shows that use of
predicted values of CCPI and CCPI_N with
new compensation factor (Rs. 67) yield very
close calculations. CCPI based calculations
are highly volatile as compared to the other
two.
In addition to the graphical presentation, we
also performed ANOVA table analysis to see
whether there is any significant difference of
the compensation calculations using three
methods. Results are reported in Table 8
below.
Table 8: Analysis of Variance (ANOVA) Table
TSS DF MSS F
Between Group 19,226 2 9,613 0.02
Within Group 4,889,700 12 407,475
Total 4,908,925 14
Last column of Table 8 shows that the resulted F-statistic is very low. This indicates that
the differences we observed between compensation calculations using three different
methods are not statistically significant. Therefore, workers‘ welfare will not be
significantly affected due to transformation and also regression method we proposed in
this paper is also not very much different from the method proposed by DCS.
55

8. Wage Fixing Mechanism in Sri Lanka
Wage fixing mechanism in Sri Lanka takes different forms and methods. Variety of
mechanisms is applicable for different sectors of the economy. Most of the mechanisms
are regulated directly or indirectly.
Among those mechanisms, Wages Board Ordinance in 1941, Shop and Office Employees
Act in 1954, National Salaries and Carders Commission in 2006 play dominant role. In
addition to these regulations, collective and individual bargaining also work in the formal
sectors of Sri Lankan economy.
The Wages Board: The Wages Board is constituted of members representing employers,
workers and not more than three members nominated by the government. At the present
there are 43 trades that are covered by the Wages Board Ordinance and it is estimated that
over one million workers from plantation agriculture to manufacturing industries receive
minimum wage protection by wages boards.
The Shops and Office Employees Act: Minimum wages in the case of mercantile
employees are regulated by the Shop and Office Employees Act of 1954 which has
provision for the establishment of Remuneration Tribunals on a tripartite basis to
determine remuneration in specified shops and offices if the Minister of Labour
considers such as being expedient. There are 12 Remuneration Tribunals that have been
established so far.
National Salaries and Caldres Commission: In the public sector, the President acting
under article 33 of the Constitution established the National Salaries and Cadres
Commission in 2006 and fourteen members representing divergent fields / interests were
to advise and assist the government in the formulation of policies with regard to wages and
cadre management in the public sector.
Apart from those regulations collective agreements also work as an effective wage fixing
mechanism for many trades in Sri Lanka. In that case, unions representing employees and
the management of the enterprise come to an agreement on remuneration of the employees
for a specified period. The agreements are revised once the specified period is over.
In addition to collective agreements, in the modern enterprise sector individual agreements
are also possible. Mechanism of individual wage agreements is similar to that of collective
agreements except that the collective agreement is reached between trade union and
employer whereas under individual agreements unions have no role to play. It is a private
agreement between individual workers with the management. In general individual level
agreements are observed only among professional, management and administrative
workers. Under individual agreements, two workers in the same place with identical
qualifications may receive different salaries depending on the bargaining power of each
worker.
All these are formal agreements or arrangement. However, a large number of employees
employed in informal sectors which are not covered by any of the above mentioned
regulations have no any mechanism as such. For them the free market forces determines
wages.
56

9. Trends in Nominal and Real Wages in Sri Lanka
Trends in nominal and real wages in the formal sector employment in Sri Lanka is
presented in this section. Informal sector is excluded because there is no data on that
sector.
Analysis in this section is entirely based on the wage indices published by the Department
of Labour in Sri Lanka 40 . Wage indices are available at aggregate level and both nominal
and real wage indices are available.
12000
10000
8000
6000
4000
2000
Chart 8: Nominal Wages of Public Sector and
Estate Sector Employees
0
Chart 9: Organized Sector : Nominal Wage Indices
(1978=100)
6000
4000
2000
0
1996
1995
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
1978
1998
1997
2000
1999
2002
2001
Estate Govt.
2004
2003
2006
2005
Nominal wage (All Central Government Employees)
Nominal wage ( Workers in wage Boards Trades )
Data available in the website of labour
department covers only selected employment
categories. Namely, employees covered by
the Wages Boards, Central Government
employment. Within Wages Boards,
aggregated wage indices are available for
Agriculture (plantations), Services and
Industry sectors separately. Within Central
Government, aggregate wage indices are
available for Minor employees, Nonexecutives
and Government Teachers
separately. Therefore, the following analysis
reports only the observed variations in those
categories. Figures for Chart 8 are available
from Department of Labour Statistics
published in their website. [tab_4.pdf]. This
covers all unskilled male workers in public
sector and the Tea, Rubber and Coconut estate
workers. For the former average monthly
wages are given in the table. For the latter,
minimum daily wages are given. The monthly
wage is calculated by multiplying the daily
minimum wage by 30. Chart 8 shows that the
nominal wage disparity is increasing over
time between estate sector employees and
public sector minor employees.
Chart 9 demonstrates another aspect of the
growth of nominal wages. It compares the
nominal wage indices of non-executive public sector employees with that of Wages Board
employees. Long-term data shows that the nominal wage gap is increasing over time. The
gap has increased in favour of the public sector employees. The two charts presented
above display the trends in nominal wages in the past. It is quite evidenced that the
nominal wages of all types of employees included into the charts above have increased.
However, the wage gap has been increasing. As a result public sector workers are better
off in terms of nominal wages.
40
Currently there is no any other national level institute or organization collecting and analyzing wage data
in Sri Lanka. Probably, the Trade Union consortium or any such national level organization can start
collecting and analyzing wage data at least of the member employees.
57

175
165
155
145
135
125
115
105
95
85
In order to understand the impacts of inflation
on workers‘ welfare we have to examine the
growth of real wages. Growth of real wages
of wages boards workers and wages of
central government employees (nonexecutive)
are presented in Chart 10. Real
wage growth is calculated by subtracting the
inflation rate from the growth of nominal
wage index. Chart 10 clearly shows that
growth of wage indices of both types of
workers show the same pattern until the end
of 1990‘s. Both indices are growing very
slowly. However, the situation is drastically
changed at the end of 1990‘s. Chart 10 shows
a very clear increase of the growth of real wage index of central government employees.
At the same time, real wage index of wages board employees show a drastic decline. This
shows that the inflation has increased the wage disparity between central government
employees and wages board employees.
Real wage disparities within each sector are presented in Charts 11 and 12 below.
2000
Chart 10: Organized Sector : Real Wage Indices
(1978=100)
75
1978 1982 1986 1990 1994 1998 2002 2006
0
Real Wage ( Workers in WageBoards Trades )
Real Wage (All Central Government Employees)
Chart 11: Wage disparity within Wages Board
Employment
1952
1959
1966
1973
1980
1987
1994
Agriculture Industry
2001
4000.00
3000.00
2000.00
1000.00
0.00
Chart 12: Wage disparity within
Central Government Employment
Chart 11 presents the wage disparities within Wages Board Sector. All wage indices in the
Wages Boards sector coincide with each other up to the end of 1980‘s. Until the end of
1980‘s, employees (covered by wages board ordinance) have received the same wage
increase. Disparity starts after that. The last part of the Chart 11 shows that the agriculture
wages (plantation sector) report the highest growth and the lowest growth is reported in the
wages board trades in services sector.
Chart 12 shows the situation in government employment. Data is available for nonexecutive
employees, minor employees and government teachers. All the lines coincide.
However, break of the chart into different time periods shows an interesting pattern. Charts
12.1 to 12.5 break the graphs in Chart 12 into five time periods.
80
60
40
20
0
Chart 12.1: Wage disparity within
Central Government Employment
1952
1952-61
1954
1956
1958
1960
Non-exe minor
1952
58
1960
1968
1976
1984
1992
2000
Non-exe minor
80
60
40
20
0
Chart 12.2 Wage disparity within Central
Government Employment 1962-71
1962
1964
1966
1968
1970
Non-exe minor

Chart 12.3: Wage disparity within Central
Government Employment 1972-81
160
140
120
100
80
60
40
20
0
1972
1974
1976
1978
1980
Non-exe minor teachers
Chart 12.5: Wage disparity within Central Government
Employment after 1991
4000
3500
3000
2500
2000
1500
1000
500
0
1992
1995
1998
2001
2004
Non-exe minor teachers
10. Inflation and Real Wage
Charts 12.1 to 12.5 shows that the
government teachers‘ position is gradually
declining. In the beginning of the period,
teachers‘ wage index was at the highest
position. However, transition took place in
1971-81 period. After this period, teachers‘
wage index drops to the lowest.
This section of the paper describes the
relationship between inflation and real wages in
Sri Lanka. Charts 13 and 14 present the
observations in this regard.
Chart 13 reports the five years moving averages
of inflation, growth of real wages of government
employees and that of wages board employees.
Chart 13 shows that the inflation and real wage
growth of government employees follows a
counter-cyclical pattern. When the inflation increases real wage growth decreases. The
same pattern is observed for wages board employees only up to 1990‘s. After 1990‘s the
trend is reversed. Real wage growth has declined together with the inflation rate.
Chart 14 has reproduced the growth of real wages of government employees and that of
wages board employees. This is a reproduction of
the Chart 13 excluding inflation rate. This is
reproduced in order to highlight the trends in real
wages over time. Real wage growth is continually
declining for the wages board employees. The same
situation was followed by the government
employees until end of 1990‘s. At the beginning of
year 2000 there is a sudden increase of the growth
rate of real wages of public sector employees (nonexecutive,
minor and teachers).
59
Chart 12.4: Wage disparity within Central Government
Employment 1982-91
700
600
500
400
300
200
100
0
1982
1984
1986
1988
1990
Non-exe minor teachers

11. Summary and Conclusions
Inflation and real wages is the theme of this paper. Inflation in simple terms is the
continuous growth of general price levels. Inflation may have various effects on an
economy. People may become ―poor‖ since their real wages erode due to inflation. In Sri
Lanka various methods are used to measure inflation. The most recent addition to those
methods is the Colombo Consumer Price Index–New (CCPI_N). Various indices may
arrive various figures of inflation. However CCPI_N seems be a more suitable measure of
inflation. CCPI_N was introduced in 2002. Both the Colombo Consumer Price Index
(CCPI) and CCPI_N are based on same price index formula. The older index, CCPI is
based on year 1952, where as the new measure is based on 2002. Further the commodity
basket, consumer sample etc differ when we compare the CCPI and CCPI_N.
Analysis in this paper shows that there is no significant difference between compensation
measured based on CCPI or CCPI_N. As far as wage fixing mechanism in Sri Lanka is
concerned, there seems to be many such mechanisms. However a large number of workers
in the informal sector may not be covered by any such wage fixing regulation.
Calculations based on available data highlight that nominal wages are subjected to increase
over the time. This is common for both employees of the central government and the wage
boards.
To understand the impact of inflation on workers, real wages should be taken in to
consideration. Until the latter parts of 1990s‘ real wages seem to be growing at same rate
with regard to above two categories of employees. After 1990s‘ real wages of the
employees under the wages board has declined, while an increase in real wages is visible
with regard to those who are employed under the central government. Henceforth it is clear
that inflation has contributed much in increasing the wage-gap between those two
categories of employees.
60

List of References
Annual Report of SLCB (2002)
Budget F. (2007 April) Index Scam: How Sri Lanka is trying to Manipulate Inflation
Numbers in Lanka Business Online April 2007
Chang J. H. (2006) Types of Inflation - Mild Inflation, Strato-Inflation and Hyper-Inflation
in Financial Realm
Commercial Bank (2006: No. 5 May 31, 2006) Headline Versus Core Inflation
Foryen R. T. (2005) Macroeconomics Theories and Policies, Pearon Education, Inc.
London
Fischer, S. (1977) Long-Term Contracts, Rational Expectations and Optimal Money
Supply Rule in The Journal of Political Economy, Vol. 85, No. 1 (Feb., 1977), pp. 191-
205
http://www.statistics.gov.lk/Press%20Release/Compilation%20of%20new%20Consumer
%20Price%20Index_gov.pdf
Lucas Robert (1972) Expectations and Neutrality of Money in Journal of Economic
Theory (4) 103-124
Oxford English Dictionary www.askoxford.com
Smith H. M. (2004, April) Types of Inflation in Website for Thoughtful People,
http://www.econ.umn.edu/~smith097/
Spiegel, M. R., Schiller, J.J. and Srinivasan R.A. (2008) Schaum's Outline of Probability
and Statistics, 3/E McGraw Hill
Varian H. R. (2005) Intermediate Microeconomics: A Modern Approach, Seventh Edition
Wijewardhane (year is not mentioned), A Child‘s Guide to Taming of Inflation
www.cbsl.gov.lk/pics_n_docs/11.../article_20070709.pdf
www.wikipedia.org
61

Working poor
An analytical view at poverty and inequality of working population in Sri Lanka
K. M. Rathnapriya Wickramasinghe
1. Introduction
Poverty and poor may exist within any social segment in any country and with the
development of the electronic computing capabilities, the poverty, inequality and other
elated grievances in human living conditions have become easily quantifiable substances
that could be compared over time and over regions. Hence the real picture is no longer
hidden or covered and therefore eradicating the poverty has turned out to be the most
priority and challenging task of most of the regimes and concerned authorities in today's
world. However, the identifying and measuring the levels and trends of poverty that are
the basic steps in the process of treating or giving relief to the poor too remains as
challenging tasks in many countries due to regional and local ignorance and/or other
difficulties faced due to administration and accessibility circumstances.
Working population of a country is a broad social category that represent almost all the
ethnic, education and age classes and is the most important segment that most effects the
development of the country. Poverty level of the working population that represented by
most of the social categories may be the hidden fact behind the total growth or reduction
of the country and therefore investigating the characteristics and living conditions of the
working poor is vital when searching, planning and implementing solutions to most of the
challenges and grievances faced by a country.
2. Research and data source
This research study investigates the nature and the size of the working poor as seen in
some diverse view points to provide reliable estimates and assistance to programmes
aimed at developing the living standards of employed population and their dependents in
Sri Lanka. The study is focused on working population live in households to identify
general human development characteristics and measure their difficulties, shortfalls and
requirements of them in-order to find out whether there are links between the two and to
highlight the major findings. The main data foundation of the research is a valuable
national household sample survey series which identify and express poverty or inequality
of population by means of their direct consumption levels.
3. Household Income and Expenditure Survey (HIES)
HIES 2006/07, which is the latest of the county's main poverty investigating survey series
is the main data source of the study. The Department of Census and Statistics (DCS) of Sri
Lanka which is one of the best statistics offices in Asia and Pacific region, started the
HIES series in 1985 to fulfill data and information requirements related to household
living standards and the HIES 2006/07 is the seventh survey in the series. Generally the
HIES is a year long national sample survey which was conducted once in a five years
duration prior to 2006/07 and from 2006/07 onward the DCS took a progressive step
deciding to conduct the HIES once in every 3 years due to high demand, correctness,
62

efficiency and effectiveness of the information that is produced by the survey.
The HIES compulsorily investigates the consumption and income of the household
population at household level and at personal level and summarizes the quantified the
information till district level which is the least geographical and administration
information dissemination level of a complete survey. The other direct estimation and
dissemination levels of the survey findings are National, Province and Residential sector
(Urban, Rural and Estate sectors) levels.
Starting from the HIES 2006/07 the survey is on track to collect almost all the household
information as an upgrade to the survey which collected only the demographic
information, income, consumption and expenditure of the households in previous surveys
and therefore now, in addition to the above, the HIES is capable of providing data and
detailed information about health, schooling, housing and sanitary conditions, fixed and
current household assets, household debts, access and availability of infrastructure
facilities including transportation.
4. Limitations
The study is based on the HIES which is a living standard measuring survey (LSMS) in
which institutions and other similar residential organizations are not covered. The HIES
which is conducted by the government of Sri Lanka under the Ministry of Finance and
Planning was unable to cover most of the areas in the Northern province and the Eastern
province due to Liberation Tigers of Tamil Elam (LTTE) terrorists who blocked the
government activities in the two provinces during the last three decades starting from
1975.
The statistics calculated for the study are at mostly the country level and only the basic
poverty indicators are shown due to time and scope limitations of the study. However as
mentioned in section 3, the HIES is capable in disseminating the information exposed
under this study and many other poverty related information at many other lower
administrative levels also.
5. Identifying the Working population
The working population is identified from 10 or more years of aged population which is
83.2% of the total household population of the country in 2006/07. As also revealed by the
HIES 2006/07, 43.6% of the country's 10 or more years of aged population has been
identified mainly depending on their contribution to economic activities of the country, as
working population. The working population or economically active group of the country,
according to the HIES and regardless of their employment statuses, is named as Employed
population.
The remaining 56.4% of the non-working population who do not participate to the
working population in the country fall in to the other four main usual activity categories
namely Unemployed, Household work, Students and Old/Unable to work. The sizes of
these economically inactive groups are estimated as 6.3%, 21.5%. 18.5% and 9.4% in the
above respective categories in 2006/07. It is to be noted here that the Unemployed
population is over-estimated by the HIES which directly determines the employment
status of the survey respondents based on the person's income source as reported by the
63

espondent whereas the Sri Lanka Labour Force Survey (LFS) which is another DCS
conducted national household survey and the official unemployment rate provider for the
country, comprehensively determines the employment status of the survey respondents
only after a thorough investigation of the involvement in any form of economic activity
and duration of such involvement by the respondent through a series of tactical questions
after which most of the respondents who identified themselves as unemployed are revealed
to be either employed in some form or not seeking any employment falling in to the usual
status category of Household work which does not contribute to the economic activities of
the country.
6. The Working population
The working population includes Employees, Employers, Own account workers and Unpaid
family workers categorized as the employment status by the HIES in line with the
DCS standards that tries to match international standards as much as possible. Employers
are identified if they employ at least 1 formally waged employee under him or her working
in his or her economic activities. The Employees are of the employment sectors of
Government, Semi government and Private. The own account workers are mostly self
employed individuals who work without employing any workers under him or her own
business and some such workers may not fall into a specific trade or industry and includes
informal businessmen too. The group of Un-paid family workers is participants to the
economic activities of the family industries without getting any direct cash payment for
the work they do.
It is found by the HIES that almost half of the working population is of the private sector
(48.6%) and the contribution by the Government and the semi Government sectors to the
working population is 11.2% and 3.4% respectively in 2006/07. The next highest
economically active group of the working population is Own account workers (27.6%).
The group of Unpaid family workers is also identified as an important part of the country's
working population as the group has contributed by 7.1 percent to the total working
population of the country in 2006/07.
The size or proportion of Employers among the working class in the country is just 2
percent which hardly permits further elaboration of their characteristics due to restrictions
imposed by the low sample size.
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7. General characteristics of the Working population
According to the age and sex distribution of the working population, 80% is distributed in
the broad age group starting from 25 years to less than 60 years of aged and it is revealed
that almost half of the working population is less than 40 years of age. A 7.9 percent
contribution by the 60 years or higher aged population to the country's workforce is also
exposed in the study.
About one third (32 %) of the working population in all the age categories is female and
thus half of the both male and female workers are identified as 40 years or less aged.
According to the investigation of the relationship of the working person to the head of the
household it has been revealed that almost half of the working population is heads of their
households and 15.6 percent of the total working population is made of spouses. The
contribution by the son or daughter of the family to the working population is about 25
percent and the about 10% of the balance is made of other relative members such as
parents, in- laws etc. of the household. It is also discovered that 52.9% of the government
employees have passed either GCE (A/L) or hold above GCE (A/L) educational attainment
being the most educated sector of employment and among the total working people only
15.6% has reached the level of the education of GCE (A/L). Only 11.6% of the private
sector employees hold the GCE (A/L) qualifications and the proportions among the Own
account workers and Un-paid family workers are 7.7% and 7.3% respectively. However
the Employers are relatively more educated than all the other groups other than
government and semi government employees as the survey revealed that almost 20% of
the employers have passed GCE (A/L) or higher level examination.
8. The concept of Poverty and well-being
The poverty as a statistic has a unique value among all the human development indicator
statistics as repeated studies have revealed that the poverty status of a person that is
someone being poor or not is a representative of most of the other social and human
development indicator statistics of the person. The poverty is also identified and expressed
as a relative measure and therefore a common definition for poverty is hard to come by.
However the poverty or poor exists where some people remains short of accessing certain
welfare levels which are well recognized by his or her own society itself as minimum
levels that someone should reach to escape the status of being poor or to come out of the
poverty.
The poverty is mainly two types, Relative poverty and Absolute poverty according to the
United Nations definitions based on Rawalion (2001). The Relative poverty is expressed
comparatively to a segment of people living in the same society at the same time period
whereas the Absolute poverty is related to a well defined minimum level of welfare which
is not changed with the change of human and/or social development or reduction over time
or regional boundaries or societies. Therefore it is understood, for making poverty
evaluation and poverty reduction policy decisions, the trend or the relative development
over time is more important than the current poverty incidence and the use of Absolute
poverty statistics produced on an absolute poverty conditions hence is encouraged against
the use of a relative poverty measures.
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9. Poverty line
A poverty line which states a certain minimum level of personal welfare defined in general
terms is required to identify the poor by means of the ability of public to reach the welfare
level declared by it. Setting a poverty line is one of the first and the most important steps
of poverty analysis in which the poverty is identified and treatments are suggested. Unless
a well-defined poverty line is universally used, conducting poverty analysis does not
necessarily improve understanding of the situation of deprivation, but might lead to further
confusions. In a fast changing social environment it is a reality that there are many factors
such as income, consumption, social rights required for free living etc. that has possible
direct or indirect links which affect the normal human living. Therefore the declaration of
a poverty line for a country is a challenging task and the process of selecting most suitable
methods should as much as possible investigate and evaluate almost all the angles it is
looked, practices in other countries and other options available.
10. Official poverty line (OPL) of Sri Lanka
Sri Lanka also used several poverty lines prior to declaration of the current official poverty
line (OPL). The value of the OPL was determined after a thorough analysis of HIES data
available till 2002 and recommendations of the Medical Research Institute (MRI) of Sri
Lanka were also incorporated to decide the minimum levels of per-capita dietary energy
requirement of the population which is the base for the OPL of Sri Lanka. The OPL of Sri
Lanka is an absolute poverty line, the value of which is calculated according to the method
of Cost of Basic Needs (CBN) which is a popular method of determining poverty lines in
most of the developing countries. The value of the OPL is the union of food and non- food
poverty lines valued using minimum required and available per-capita consumption and
expenditure values of basic food and non- food needs determined analyzing the
consumption pattern of lower income population of the country in 2002. The value of the
OPL determined in 2002 is continuously updated by the DCS applying the inflation rate
and regional changes of commodity prices on it. The inflation rate is measured using the
DCS calculated Colombo Consumer Price Index (CCPI) which is also used by employers
and the government to adjust the cost of living allowances of formally waged employees.
In the base year of the OPL which is 2002, the national value of it was Rs. 1,423 and
according to the appreciation of the CCPI, it had reached to Rs. 2,233 for the 2006/07
HIES period. The OPL for different districts are also adjusted for regional price differences
using the price indexes calculated on local commodity prices reported in the HIES itself.
However it is to be noted that other similar HIES type of surveys conducted by parties other
than the DCS also can use the value of the OPL to measure poverty levels in own selected
areas if the correct consumption values of all the individuals living in the area or of a
representative sample of the area is obtained.
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11. Poverty indicators
The poverty incidence is measured by comparing the consumption expenditure value of
each and every individual live in the society or in the social segment which is in focus,
with the value of the poverty line. The incidence of poverty is reported by the commonly
known basic poverty indicator named Poverty Head Count Index (HCI) which calculates
the number of poor as a percentage proportion of the total population in the area. The next
not much talked about but more important poverty indicator is the Poverty Gap Index
(PGI) which averages the individual proportions of depths of poverty of the poor under the
poverty line over the total population assuming zero poverty depth for the non-poor.
Although there are many other poverty indicators defined to describe the poverty situation
in more detailed manner, due to time and scope limitations and for better understanding of
laymen's to the subject of poverty, this study which is focused only on working population
in Sri Lanka in 2006/07 is limited to the estimations of the above two poverty statistics
most of which are calculated and described only at the national level.
12. The Poverty incidence in Sri Lanka
The overall poverty (HCI) in the country has dropped by welcome proportion of exactly
one third from 22.7% in 2002 to 15.2% in 2006/07. However the very high sector disparity
exposed by 6.7%, 16.7% and 32.0% reported in Urban, Rural and Estate sectors
respectively in 2006/07 also, remains unchanged over the period from 1995/96 to 2006/07.
The 32%, maximum among sectors poverty head count rate reported by the Estate sector
population in 2006/07 implies that almost one person in every 3 persons in the Estate
sector in Sri Lanka is a poor person and this high figure shows almost a 2 times bigger
deprivation in the Estate sector when compared it with the national poverty incidence
(15.2%) of the country.
When considering the usual activity status of the population in Sri Lanka, the poverty
incidence among the total working population known as economically active group of the
country is 13.7% in 2006/07. Among the economically inactive categories, the
unemployed population showed the highest poverty incidence which is 17.0% and they are
followed by the Old/unable usual activity group of the population and Students
reporting 16.0% and 16.7% of HCI respectively. Those involved only in household
work have convincingly reported the lowest poverty incidence expressed by 12.6% of
HCI among all the usual activity categories.
13. Working poor
The national working poverty incidence (13.7%) has been exceeded by the production
industries of Agricultural, Construction and Mining workers who hold 21.1%, 18.1 and
21.8% poor workers in respective categories when studying the poverty across the main
industry categories of the workers occupied. The Fishing and Manufacturing industry
groups reported slightly less poverty than the national working poverty with 10.0% and
11.6% respectively and the poverty rate is almost 30% among the workers in the major
industry category of Un-identified or who are mainly unskilled workers involved in
varying or multiple industries. However the industry of Electricity production shows
almost zero poverty incidence being the least poor group among all the industries and
67

among the workers in major industry category of Manufacturing which represents all the
non-agricultural production industries has reported 13.7% of HCI which is equal to
national working poverty incidence. Among the service sector industries in which the
poverty is minimum (9.1%) among major industry categories, Health, Education, Public
administration and financial sectors reports the least poverty incidences below 5% by each
and the Trade, Hotels and Transport service sectors also shows relatively low poverty
incidence within the range from 5% to 8.5%. The financial industry workers who reported
only 1.8% of poverty incidence among the service sector industry workers are the least
poor.
When considering the place of living of the workers, the Estate sector has reported the
highest poverty incidence (27.8%) among the residential sectors and the Agricultural
industry sector workers are the poorest (20.7%) in all the industries. Consequently the
agricultural Estate workers have become the poorest (29.4%) workers and Urban sector
living service sector workers are the least poor (5.2%) workers among the workers in all
the different working segments in the country. The poverty head count ratios for Urban
sector and Rural sector living workers are 5.6% and 13.9% respectively.
The poverty incidence, according to the occupation is topmost among the people occupied in
basic employments (24.3%) among major occupational categories for all the workers
and Professionals are almost out of poverty as they reported only 1.8% HCI which is an
insignificant estimate in inferential statistics. The positions of skilled agricultural category
of the Employees reported almost 30% incidence of poverty which is the highest poverty
incidence among major occupational categories of Employees alone.
The poverty incidence among the Private sector employees is 18.3% which is the highest
among the different employment statuses of all the working people and the government
employees have reported the least poverty incidence (2.2%). The unpaid family workers
and Own account workers have reported a moderate level of poverty at 15.5% and 10.9%
respectively close to the national level.
However despite the high sector and poverty disparities, it is an important finding that the
poverty incidence of the workers does not show any significant Gender or Age disparity in
Sri Lanka as the poverty incidence among working population remains in close proximity
to the national HCI value of 13.7% for both the sexes and for all the age groups fall
beyond the 24 years of age of the working population. Interestingly the oldest workers
aged 60 years or higher show the least poverty incidence of only 12.0% whereas 16.3% of
the workers who have not reached 25 years of age in 2006/07 are poor.
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14. Assets and living standards of the working poor
Levels of ownership of assets and access to facilities by workers as reported at household
level in the HIES 2006/07 agree with the most of the consumption poverty incidence
figures and for instance, 88% of the professional workers who reported the minimum
poverty incidence (1.8%) among the major occupational groups has home telephone
and/or mobile phone and receives the highest household income. 31.4% and 26.4%
ownership of household telephones among the poorest workers of Agricultural and Basic
employments respectively as identified by the in higher HCI, are figures lying well below
the 49.1% of household telephone ownership for the total working population.
Use of LP gas for cooking among total working population is 16.6% and in consistent with
the poverty incidence, only 14.8% of the private sector employees use LP gas for cooking
whereas it is as high as 33.8% for the Government employees.
According to the results of investigation of the access to basic facilities of the working
population, 83.8% of the total working population has access to safe drinking water and
the statistic is reduced to 70.6% for the Agricultural workers and reaches to 90% for the
Service sector workers. When the household income in cash and in-kind of the working
population is calculated the median monthly household income implies that 50% of the
total working population in Sri Lanka lived in households that received Rs. 19,393 or less
per month whereas 50% of the Professionals are members of households that received Rs.
40,021 or higher monthly monitory or non- monitory gains in 2006/07.
15. How poor the working poor are? Depth of Poverty
Among the working poor the private sector poor workers are poorer than all the other poor
in all the other sectors as shown by the average poverty shortfall. An average poor private
sector employee needs a boost of Rs. 443 per month to come out of the poverty while the
need for an average worker over any category is Rs. 431. The highest poverty depth among
the occupation categories is reported by the basic employees as confirmed by the 5.2% of
highest PGI. It is also witnessed that the poverty, poverty depth and the inequality
decreases along with the increase of the level of the educational attainment among all the
workers.
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16. Concluding remarks
Poverty incidence among working population shows a steady decline since 1995/96
from 24.6% to 13.7% in 2006/07.
No gender or age disparity is shown in poverty incidence among working
population.
Poverty and deprivation is high among private sector employees.
The higher the level of education lowers the poverty in any working segment.
Estate sector workers are in alarming high level of poverty and deprivation
with minimum inequality.
Poverty among working poor is reflected in their access to basic needs, availability
of facilities and hold of current and fixed assets.
Among the major industry categories the workers occupied in the Agricultural
industry is the most poor and the Service sector workers are the least poor.
Unskilled workers and/or workers who do not involve in a fixed trade are more
likely to be in poor than the other workers.
For making better poverty alleviation decisions related to the working poor, further
calculations of poverty, poverty depth, inequality, actual consumption levels and
other poverty indices of the working population disseminated at lower geographic
and socio economic levels beyond the level of this research which is an
introduction to the working poor, is required.
70

References
Department of Census and Statistics, Sri Lanka (2008), Household Income and
Expenditure Survey – 2006/07: Final Report, Colombo, Sri Lanka
Department of Census and Statistics, Sri Lanka (2008), Poverty Indicators -
2006/07, [Online], Available from: http://www.statistics.gov.lk, 19-2-2009.
Department of Census and Statistics, Sri Lanka (2008), Household income and
Expenditure Survey - 2006/07, [Online], Available from:
http://www.statistics.gov.lk/HIES2006_07, 19-2-2009.
Department of Census and Statistics in Sri Lanka and the World Bank (2004), Setting
the Official Poverty Line for Sri Lanka: Technical Note
Nanayakkara A. G. W. (2006), Poverty in Sri Lanka - Issues and Options, Department
of Census and Statistics, Colombo, Sri Lanka
Vidyaratne, D.B.P. S. and Tilakaratne K. G. (2003), Sectoral and Provincial Poverty
Lines for Sri Lanka, Department of Census and Statistics, Colombo, Sri Lanka
Vidyaratne, D.B.P. S. and Nigamuni W. J. (2006), Time trend of poverty indicators on
population/ employment and Socio - Economic Situation 1981 - 2004, Department of
Census and Statistics, Colombo, Sri Lanka
71

Quality Public Service through Good governance,
industrial peace and Social dialogue
W.A.Jayasundera
1. Introduction
Quality has become a way of life today. Every citizen is keen to fulfill his/her need to the
maximum satisfaction. With regard to the public service, the quality aspects have become
of much concern. All over the world, different governments take variety of initiatives to
introduce reforms to provide quality public services. Sri Lanka also has introduced many
reforms to develop service quality to enhance customer satisfaction and thereby practice
good governance principles. While some of these reforms have achieved expected
outcomes, other reforms need modifications and improvements to achieve results.
Industrial peace and social dialogue provide a way for smooth operating of reforms
towards good governance. This paper attempts to discuss the importance of good
governance in improving quality in public service delivery and how industrial peace and
social dialogue can contribute to improve public service quality.
2. Good Governance
Good governance was the new buzz word of the 1990s. It was used by the World Bank in
1989 in the report Sub-Sahara: From Crisis to Sustainable Growth to refer to good
management of government mechanisms in administering social and economic resources
for development. In that report the word governance was used to cover three broad areas:
(1) the political structure; (2) the processes which those with political power use to
administer and manage the social and economic resources of the country; and (3) the
capability of those in power to plan and implement policy and to improve administration.
The World Bank began to push for reform of development mechanisms in countries
which asked for assistance from the Bank in the areas specified in (2) and (3), and left the
reform of the political structure aside (Oraphin 1997, 4). To put it simply (2) and (3) may
be read as modernization of the public administration, which was promoted by the Inter-
American Development Bank and other agencies including the World Bank before good
governance came into vogue.
Later UNDP expanded the meaning of good governance by addressing what is bad
governance. Bad governance was defined to include failures by government to provide
good and efficient public services; failures to manage the fiscal and the budget problems
of the country; and failures to prevent bureaucratic and political corruption. It is now
more or less accepted that good governance means ensuring public participation, honesty,
transparency, accountability, political legitimacy; fair legal framework, predictability,
efficiency and effectiveness (Oraphin 1997, 7–8).
The term good governance was used to replace modernization of the public
administration because the World Bank wanted to address the problem of administrative
corruption in developing countries but was unwilling to use the word corruption as such
because it is a negative word and might offend governments of countries which the
World Bank works with. The phrase good governance is more neutral and can be defined
72

to have a broader meaning, including the issues of transparency and accountability which
are really about the problems of corruption.
Sri Lanka has attempted to achieve good governance practices in the past two decades to
fight bureaucratic and political corruption. The major land mark was the introduction of
17 th amendment to the Constitution. By 17 th amendment seven independent
Commissions have been introduced to ensure good governance principles. However the
lacuna in the law has hindered the proper implementation of the 17 th amendment. The
appointment of members to the Constitutional Council has not been made yet.
International organization like the World Bank use the term good governance to mean
putting in place a better legal framework to ensure transparency and accountability in
public administration. They see this as a top-down exercise. They do not want to touch on
the issue of political reform. The recent experiences in combating corruption highlight
the importance of political reform and the role of social movements working from below.
Participation of the trade unions and civil societies are critical to the success of efforts to
put in place new independent institutions to ensure human rights, community rights, and
the rights of citizens to investigate the behaviors of politicians and bureaucrats.
3. Managing Service Quality in Public Service
It is important to enhance the quality of public services using quality techniques. Total
Quality Management is a management approach that originated in the 1950's and has
steadily become more popular since the early 1980's. Total Quality is a description of the
culture, attitude and organization of a company that strives to provide customers with
products and services that satisfy their needs. The culture requires quality in all aspects of
the company's operations, with processes being done right the first time and defects and
waste eradicated from operations.
a. What is Total Quality Management?
TQM is a management philosophy, a paradigm, a continuous improvement
approach to doing business through a new management model. The TQM
philosophy evolved from the continuous improvement philosophy with a focus
on quality as the main dimension of business. Under TQM, emphasizing the
quality of the product or service predominates. TQM expands beyond statistical
process control to embrace a wider scope of management activities of how we
manage people and organizations by focusing on the entire process, not just
simple measurements.
TQM is a comprehensive management system which:
Focuses on meeting owners‘/customers‘ needs by providing quality services
at a cost that provides value to the owners/customers
Is driven by the quest for continuous improvement in all operations
Recognizes that everyone in the organization has owners/customers who are
either internal or external
Views an organization as an internal system with a common aim rather than
as individual departments acting to maximize their own performances
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. TQM beliefs
Focuses on the way tasks are accomplished rather than simply what tasks are
accomplished
Emphasizes teamwork and a high level of participation by all employees
Presented here are universal total quality management beliefs.
Owner/customer satisfaction is the measure of quality
Everyone has owners/customers; everyone is an owner/customer
Quality improvement must be continuous
Analyzing the processes used to create products and services is key to
quality improvement
Measurement, a skilled use of analytical tools, and employee involvement
are critical sources of quality improvement ideas and innovations
Sustained total quality management is not possible without active, visible,
consistent, and enabling leadership by managers at all levels
If we do not continuously improve the quality of products and services that
we provide our owners/customers, someone else will
When talking about a total quality initiatives in the public sector, particular
attention is given to the following aspects:
every one of us is always trying to do his/her best, but there is also always scope
for improvement;
public expectations always and everywhere exceed public service delivery; and
if there is no problem, do not look for a quality solution.
In addition, there are certain basic assumptions relating to introduction of Total
Quality Management(TQM) in government:-
that service quality principles are applicable to good governance too;
that a Citizen‘s Charter can be the starting point of a service quality initiative in
government; and
that a Quality State is also an e-State.
c. It is also to be borne in mind that TQM is not the only technology for bringing
about improvements in the quality of service, including delivery of public services.
Service improvement technologies include process simplification e.g. cutting down nonvalue-adding
activities, and benchmarking of best practices based on assessment of
internal processes and comparing them with performance of other service providers in
order to identify and close the gaps. The other service providers could be other
units/departments in the same organization, other organizations in the same service sector
or totally different institutions/industries. ISO 9000 and its variants also constitute an
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approach to service improvement through documentation of the processes and providing
evidence that they are being followed. Business Process Re-engineering is about
fundamental change in the way the work is done to achieve radical performance
improvement. Then there is Total Quality Management, described earlier, which
propagates holistic but incremental and continuous improvement.
d. The quality initiative has to be demand-driven. First among the drivers of Service
Quality is Leadership, without which any quality initiative is a non-starter. Budget and
resource pressures are increasingly becoming the prime movers of service quality in
government. As democracies mature, citizens‘ demands for improvement in the delivery
of services provided by the government, along with their desire to have a say in how the
services are designed and delivered, have come to the fore. Against the backdrop of
structural adjustment programmes being implemented by several governments, it is being
increasingly realized that efficiency in public service delivery contributes to better overall
economic performance. New technologies, such as Information and Communication
Technologies (ICT), are opening up avenues for better and speedy delivery of public
service along with ensuring transparency and accountability at the same time. ―E
government program‖ can be cited as a good example. In Colombo District every citizen
is able to receive his or her birth certificate without spending much time. If all particulars
are made available, they say within 5-6 minutes you can get a copy of your birth
certificate. Another good example is the revenue licenses for vehicles. The waiting time
has drastically cut down by introducing a software designed by SLIDA.
e. For a quality initiative to succeed, a Quality Service culture has to be developed
in the organization. This requires cross-functional management (Team Work), and
management of the customer-supplier chain (‗next process is your customer‘). It is about
empowerment of employees through decentralization and delegation of responsibility as
well as authority in order to create process ownership among them to respond to customer
needs and expectations. For this purpose they have to be trusted and capacities have to
be built in them. Customer and employee feed-back have to be obtained for monitoring
the system. Systematic problem solving is achieved through Plan, Do, Check and Act
(PDCA) cycle, comprising identification and analysis of the problem, generation and
selection of solutions and their implementation and evaluation. Decisions must be based
on data and not hunches. The PDCA cycle must be repeated in order to ensure
continuous improvement (kaizen). The cost of not achieving quality out-puts is reflected
in errors/mistakes and consequential rework, delays, wastage and non-value-adding
activities.
f. The Service Quality components in governance are accessibility (easy availability
of service, such as in education, health, housing, public distribution system etc.),
timeliness, accuracy, responsiveness ( e.g. to complaints), courtesy (being treated as
customers and not as beneficiaries or supplicants), listening (to what they have to say),
appropriateness (providing suitable choices), and, above all, legality (corruption free
service).
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g. Improvement Teams/Task Forces are thereafter constituted to work on the issues
identified during the Visioning Workshop. These Teams have to have a very specific
focus and a life of three to six months to complete the tasks on hand. It is important to
appoint only a few Improvement Teams/Task Forces, say four to six, to work at a given
point of time. If the issues identified for improvement are large in number, they could be
prioritized so that at any given point of time only a limited number of Task Forces are
operational. Setting up of Task Forces does not automatically lead to any visible
outcomes. In view of the pressure of day-to-day work, the chances of the Task Forces
not being able to focus attention on their agenda are there. Having fixed day(s) and time
for the meeting of the Task Forces could be of help in this regard.
h. Training is a very important component of any quality initiative. In order for the
improvement to be continuous, the training effort too has to be sustained. The training
initiative has to address the work related training needs of the employees and, in addition,
develop their competencies in application of TQM tools and techniques. Certain other
broad-based issues relating to team work, facilitation, counseling etc. may also be
addressed through a training/awareness programme. It is advisable to utilize the in-house
resources, at least in the beginning, for organizing the training programmes. This
approach is non-threatening and also builds confidence in and creates favourable opinion
for the TQM initiative, among the employees. There is, on the other hand, real danger of
knowledge and skills acquired through training in TQM tools and techniques remaining
unutilized. In order to ensure that this does not happen, the teams and Task Forces
should be encouraged to use them in their day-to-day working.
i. Quality initiatives in government need not necessarily begin with a Visioning
Workshop. An equally focused beginning could be made with the formulation and
implementation of a Citizen‘s Charter. Similarly, documentation and standardization
with a view to obtaining ISO certification could be another starting point. Daily
management (of 5 ‗S‘ variety or a formal kaizen initiative) could also be an opening
move. In order, however, for the daily management or kaizen to be inspiring and
sustained, a system of employee recognition and reward has also to be put in place. It is
important to orchestrate the activities of the four initiatives relating to Citizen‘s Charter,
daily management, kaizen and employee recognition and reward in such a manner that
they are implemented more or less simultaneously. Citizen‘s Charter, which has several
TQM elements (meeting customer/citizen requirements, conformance to standards,
stakeholder involvement, continuous improvement etc.), could provide the benchmark for
the kaizen and daily management initiatives. The criteria for employee recognition and
reward could then be linked to their performance in respect of daily management and
kaizen. A little bit of creativity is needed to introduce a system of reward and
recognition, especially of a non-monitory nature (‗non-financial currency‘). Organizing
of an Annual Day function to distribute certificates of merit is a good practice. Sending
good performing teams for excursions is also recommended. The Ministry of Public
Administration and Home Affairs issued circular guidelines requesting all Ministries and
Departments to display Citizen Charters. All the institutions coming under the Ministry
of Public Administration and Home affairs have already prepared Citizen Charters and
displayed.
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j. There is need to assess the improvement in processes achieved through the quality
initiative. Hence, measures for all key processes should be developed to assess the
quality and quantity of progress. In the event of the organization opting for developing a
Citizen‘s Charter, applying for the Charter Mark could be the beginning of the
assessment/evaluation of the quality initiative. It could be followed by certain more
rigorous quality assessment procedures relating to ISO certification and TQM award.
Improvements can be achieved simply by attempting to fill up the form for selfassessment
and also by taking note of the reports of the assessors. Winning the award is
not necessary for this purpose.
k. It bears repetition that for any quality initiative to be successful, it has to be
conceptualized, implemented and nurtured by the top management. In short, it has to be
top-led. For top management, in turn, to get hooked on to it, the need for quality must be
palpably felt; and this would happen only if there is a high level of discomfort with the
present reality. Secondly, the people involved in the initiative must be made thoroughly
conversant with the principles and practices of TQM before they embark on action
planning. Without that, the solutions they generate will be no better than before. Finally,
the actions must impact on the citizens in a very powerful and visible manner for the
quality initiative to get public support.
4. Sri Lankan experiences on public service quality
Public sector in Sri Lanka has introduced a number of innovations in the recent time to
offer customer friendly services. These changes have helped to cut down the service
delivery time drastically. For an example, earlier there were a number of steps have to
follow to obtain the revenue license from a Divisional Secretariat. Today the customer
needs to tell his vehicle number and show insurance policy to obtain his/her revenue
license. This whole process will take very short time period compared to the past.
The Commissioner of Motor Traffic Department in the Western Provincial Council has
introduced ― On the Wheel‖ license system at their office in Maligawatte. According to
this system, the customer can obtain his revenue license from a counter while drive in.
This has provided a lot of comfort for the customers and can avoid intermediate who
normally come forward to help customers for a fee.
The Colombo District Secretariat has introduced e – services to provide Birth Certificates
through all Divisional Secretariats within Colombo District. They have extended this
service to cover all the Divisions and the customer can obtain his/her Birth Certificate
from any Divisional Secretariat within Colombo District.
In the recent past, Department of Immigration and Emigration and Motor Traffic
Department have introduced new measures to provided speedy quality services to the
customers. In this process they have provided many facilities to the customers such as
good seating arrangements, entertainment for waiting time, attractive layout
arrangements etc. In this manner, these two departments attempt to change the bad name
they had in the past. They have remarkably reduced the waiting time for different
services and earned good reputation.
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The 5S competition organized by the Productivity Secretariat has helped a lot to provide
a clean and neat office environment for many public sector organizations. This has
facilitate in a great way to promote customer friendly office environment.
The new performance appraisal system suggested for the employees for the public sector
has linked to their job performance rather their day to day operations. This system will
help to measure real job achievements.
The vital ingredient for public sector decision making is the updated and accurate
information. Most of the public sector organizations are keen to establish data bases for
their organizations using computer technology.
The most important aspect is the sensitivity of the public officers on the need for quality
improvement. If organizations are serious about this aspect, they will attempt to enhance
the quality as a priority area.
5. Industrial Peace
Industrial strife leaves its scars upon the relations between employers and employees.
When strikes occur, distrust and antagonisms are engendered which persist after the
strikes are over. Strikes, too, curtail production. A strike in one plant often causes work
stoppages in other plants where industrial peace prevails. Strikes cause employees to lose
wages which they may never recover even though they gain increases in their rates of
pay. Strikes upset the economy of the communities in which they occur. The "butcher,
the baker, and the candlestick maker" lose business if the striking employees cannot buy.
Strikes weaken the finances of the companies in which they occur. Stockholders face
possible reductions in their dividends. Strikes, particularly in the basic industries and
utilities, jeopardize the rights of the public. The cutting off of electricity, gas,
transportation, milk, and fuel are serious matters. Strikes and other forms of industrial
strife must give way to industrial peace. But we cannot countenance industrial peace "at
any price." Industrial peace must not be gained at the expense of our democratic way of
life, nor by the abandonment of free enterprise system. Industrial peace must be achieved
by democratic means, in some countries industrial strife has been outlawed but only
through the compulsion of autocratic government. While we recognize the evils of
industrial strife, we have not clearly identified the underlying causes.
It is widely acknowledged that industrial peace is beneficial for business and society.
Industrial peace contributes to a stable and predictable operating environment for
business, and to greater harmony at the societal level. This translates into enhanced
organizational effectiveness for the international firm and a heightened capacity to attract
and retain foreign direct investment for the host country. Building industrial peace,
however, is said to be one of the most challenging aspects of globalization. For emerging
economies, in particular, the process of globalization can generate market opening
pressures that create or exacerbate confrontational employment relations. We propose
that international firms can play a proactive role in fostering industrial peace in the
societies in which they operate, while simultaneously promoting their own effectiveness,
by leveraging the indigenous knowledge of consensual dispute resolution found in many
emerging economy countries. Indigenous knowledge refers to non-Western knowledge
systems which have typically been obscured through the process of modernization.
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6. The Practice of Social Dialogue in Public Service
What is social dialogue?
Social Dialogue is both a means and an end. Like any complex process, there are a
number of different definitions. Social dialogue will take various forms in different
countries and at different times.
What is essential is that dialogue takes place -which means an exchange of ideas, a
willingness to listen, to respect other opinions. Dialogue is not the various parties
making statements and speeches - fixed positions from which they will not move.
How you define social dialogue, therefore, depends to some extent on your national
context.
The ILO defines broadly the concept of social dialogue. Its working definition includes:
“all types of negotiation, consultation or exchange of information between
representatives of governments, employers and workers, on issues of common
interest relating to economic and social policy.
Mr. Jose Luis Daza Perez, Senior Labour Administration Specialist, IFP/Dialogue,
recalled the definition of social dialogue that includes all forms of negotiations,
consultations or simple exchange of information between representatives of governments,
employers and workers on issues of common interest relating to economic and social
policy. These elements of exchange take place between actors—government, employer
and workers, unlike in public administration which has only the government and workers.
A quick distinction between public administration (discharge of administrative
functions), public sector (composed of state-owned enterprises and public administration)
and civil servants (workers in the public administration) and between workers and civil
servants was made. The key components of social dialogue are the actors, institutional
arrangements, and the agenda which is the content of the dialogue. The importance given
to social dialogue in civil service varies in different countries; in some there is a Ministry
of Public Administration; in others the ministry of labour is grouped with civil service
and e.g., in Sweden, there is a separate agency that deals only for bargaining with public
employees. Forms of dialogue in the civil service include publications for internal
circulation, surveys, general meetings, information, consultations and mostly importantly
bargaining. The salient features of collective bargaining is to develop bargaining
mechanisms, bargaining context and possibility of reaching genuine collective
agreements with public administration, applicability and binding nature of the agreements
and ratification by legislature or full independence of government negotiators. Attitudes
of the state needs to be addressed, especially transition from authoritarianism to dialogue
and by using the dynamics of consultations that can yield agreements. Another aspect
important to the success of negotiations is the level of the association or union. Towards
this, it is useful for various unions to form a federation if permitted by the law in the
country. Federations can represent, on one platform, separate geographical, ideological,
sectoral, and political differences. The mechanisms to be used through the process of
information exchange to consultations to bargaining have to be clear. A clear design has
to be prepared with the ultimate aim in sight.
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Discussions on the practice of social dialogue touched upon core functions of
governments i.e., law and order, security, revenue collection and budgeting and land
reforms that always remain with the State. There are other areas that were basic services
provided by the State but are now becoming a commodity, e.g., water. The
accountability is being questioned by the citizens on the performance in areas that require
constant support from the state. The dispute really comes out when operationally the
work goes against the laid down rules. This is where consultation is essential. In the
debate on the obstacles of holding social dialogue and collective bargaining, the first
point made was lack of information for the leaders and workers about their rights. Many
TU leaders too do not have the awareness. ILO convention 151 talks about the time off to
prepare for bargaining and also physical facilities, even if just a notice board that can be
used for information exchange.
Dispute settlement in connection with collective bargaining identified that mechanisms
were lacking in public service procedures on dispute settlement. It was recommended
that:
joint consultative committees be set up at all levels;
training and education be undertaken to disseminate the importance of the
social dialogue process;
terms and conditions of employment be developed in consultation with
public service associations and never unilaterally;
dispute settlement bodies be reviewed and monitored; and
information exchange before consultations be guaranteed.
As discussed the best way to achieve industrial peace would be through social dialogue.
Therefore, it is necessary to develop strategic objectives for industrial peace.
The following strategic objectives can be suggested for Sri Lanka: (i) to promote rights
and interests of civil servants and (ii) to promote social dialogue in public service to
enhance the accountability, transparency and efficiency. Outputs: (i) ILO Convention No.
151 to be ratified; (ii) amend existing law; and (iii) establish mechanism to have social
dialogue in the public service. Activities: (i) dialogue and lobby with Minister of Labour
by leader of unions; (ii) lobby with MPs and political parties; (iii) make union strong and
equally representative by encouraging women membership and holding regular meetings
intra- and inter-unions; (iv) dialogue and lobby with National Trade Union; (v) submit
written demands on actions for industrial peace to the Ministry; and (vi) lobby with
media.
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References
1. Arora D., (1998:397) ―Governance‘ as Agenda: The Discursive Shift,‖ in the
Indian Journal of Public Administration Vol.XLIV, No. 3, July –Sept.1998, New
Delhi.
2. Nualnoi Treerat, ‗Fight against Corruption‘, Asia Solidarity Quarterly (Seoul), No. 3,
special issue on anti-corruption, 2001.
3. Oraphin Sopchokchai, ‗Sangkhom sathiraphap lae konkai pracharat thi di (Good
Governance)‘, Rai ngan TDRI chabap thi 20 [Thailand Development Research Institute
report 20], 20 December 1997.
4. Pasuk Phongpaichit, Nualnoi Treerat, Yongyuth Chaiyapong and Chris Baker,
Corruption in the Public Sector in Thailand: Perception and Experience of Households,
A survey report prepared for the Civil Service Commission with support from the World
Bank and the Asia Foundation, The Political Economy Centre, Chulalongkorn
University, 2000.
5. Asian Development Bank (2000-1)), ―Introductory Notes on ADB Publications
on Governance.‖ Updated 11 September, 2000.
http://www.adb.org/governance/govpub.asp.
6. Dey B.K. (1998:423), ―Defining Good Governance‖ in the Indian Journal of
Public Administration Vol.XLIV, No.3, July-September 1998, New Delhi.
7. Dwivedi O.P. (1998:255), ―Common Good and Good Governance‖ in the Indian
Journal of Public Administration Vol.XLIV, No.3, July-September 1998, New
Delhi.
8. Drucker, Peter quoted by Sengupta, Bhabani (1996:P vii), ‗The Problem of
Governance, Konark, Delhi.
81

New Management Strategies and their impact on
Trade Unions
E.A. Ramaswamy
Fundamental changes are taking place everywhere in management methods for
dealing with labour. The new method is sometimes called strategic management
or Japanese Management. We will refer to it as Human Resource Management
(HRM), which is more common all over the world. HRM should not be confused
with Human Resources Development (HRD) which is popular in our country. In
many of our firms, HRD is another word for training. HRM is very different.
HRM has posed a serious challenge to the labour movement whenever it has been
tried. It has led to a reduction in union membership in several industrialized
countries. Many of our own firms will begin to adopt HRM strategies as
competition increases under the influence of new economic policies. It is
therefore important for trade unionists to understand the changing management
strategy and its implication to labour.
I. The Old Method
In comparison with old methods, the main difference is that management now
want to deal with workers as individuals. Let us first look at the old system so that
the difference becomes clear. For a long time, collective bargaining has been the
only relationship between labour and management. Trade unions placed their
demands, management responded and a settlement was signed after negotiation.
Bargaining was initially limited to wages and benefits. With time, new demands
came up – promotion policies, incentive schemes, work loads and manning levels
are now commonly bargained. Management too began to place demands on
labour. They wanted agreement on productivity, flexibility to shift people from
one job or department to another and the like. Sometimes they even submitted a
charter of demands, much like unions.
These changes did not pose any threat to the union because it remained the only
channel – the single route – for management to reach workers. Direct links with
workers would have been considered by labour to be anti – union. Even
managements were not interested in this. Dealing individually with thousands of
workers was thought to be just impossible. They were more anxious to strengthen
ties with the union which represented everyone. This is what has changed. The
new strategy is to open a line of communication with the individual. This does not
mean refusal to bargain with the union. Wages and other trade union demands
may still be settled collectively. The link with the individual comes as an
additional bridge. Instead of single channel, there are now two.
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II. Why this change?
It is sometimes argued that the main objective of HRM is to weaken the labour
movement. Trade unionism, it is true, has taken a terrible beating in many
countries. But the claim that union – breaking is the intention is not entirely true.
There are other important reasons. The most important of them is a shift in
managerial expectation from labour.
It is no longer enough for business to keep down wages. Cheap labour which was
once thought to be the key to profits is no longer considered sufficient. How
labour performs, and not just how much it is paid, has become the critical issue.
This is true especially of modern, high – technology industries. Labour which
understands the goals of the firm has emerged as the major new requirement. To
compete effectively, firms need ‗committed‘ labour and not just cheap labour.
1. What is commitment?
Commitment is a concept which includes many expectations. Productivity is one
of them. Workers cannot be productive if they resist change when everything else
is changing. Technology is changing rapidly, and the willingness to learn new
skills is important. Workers with many skills are more productive because they
can be fitted in many slots instead of being stuck with one job or machine. Skilled
workers have more capacity to identify and solve problems at work. Flexibility in
learning and using new skills is therefore a second major expectation.
Commitment also means responsibility for the company‘s goals. To survive, it
must offer good quality at the right price - value for money to the consumer. Who
is responsible for quality? Not final inspection, which can reject bad quality but
cannot produce good quality. Not supervisors and managers who only oversee
other people‘s work. The new philosophy is that quality has to be everyone‘s
concern. Committed workers are expected to be responsible for their own quality
so that supervision can be reduced. These are high expectations and not at all easy
to achieve.
These expectations did not exist some years ago. Like soldiers in an army,
workers had only to obey orders. Management took responsibility for productivity
and performance. Rapidly changing technology and high levels of competition
have put an end to that. With automation, machines have taken over many simple
tasks. Workers are now left with more complex jobs which require skill and
responsibility. Because of this, the level of their performance has become
important. Industry has also to face high levels of competition. Consumers who
have vast choice reject poor quality.
The new strategies have also been adopted to weaken trade unionism. Not all
employers want to bring down the union – but some do. We will later discuss how
and why HRM is a threat to trade unions.
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III. Some Basic Principles of HRM
Underlying HRM are several basic principles which come as a contrast to old
management styles.
1. The importance of Team Work
Individual cannot achieve very much – only teams can. It is essential to cooperate
with others. Work should be assigned not to individuals but to small groups. The
group should be given the freedom to decide how work is distributed among
members. It can be boring to do the same job day after day. When groups are
given the freedom, some job rotation can take place. This makes work more
enjoyable.
Old management styles, on the other hand, assigned jobs to individuals. The
objective was to hold the individual responsible for results.
2. Flat Structures are More Efficient
Cooperation becomes difficult when there are too many levels, grades and
designations. It is hard to rotate members of a group if they are from many
different grades and designations. Feelings of superiority and inferiority come in
the way of cooperation. While all workers cannot be equal, there should not be
more levels than is really necessary.
In conventional management, levels have a way of multiplying. There are many
reasons for this – the most important is that promotion to a higher level is seen as
an important reward.
3. Change is a Continuous Process
There is always room for improvement. Any job can be done better, more
efficiently, in less time, with less material and less effort. There is no end to
improvement. There is a Japanese word for this – Kaizen. It simply means
continuous improvement. Only those who actually do a job know how to improve
it. It is important for organizations to give ordinary working people the
opportunity to become creative and find ways of doing things better.
In contrast, the old style was to bring in efficiency experts to effect
improvements. They came with their stop watches to measure the time jobs took,
eliminate wasted time and motion, and establish productivity standards. Job
evaluation, as this is called, always ran into opposition from workers. They found
ways to defeat it. The emphasis now is on shifting the responsibility to those who
actually do the work.
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4. Decentralize Decision – making
It is good to push decisions to the lowest possible level. In most organizations, on
the other hand, even small decisions have a way of climbing to higher levels.
When pushed up in this way, decisions become slow, inefficient and difficult to
implement. When pushed down to lower levels, they become quicker and more
acceptable. Group work and continuous improvement are some examples of how
decisions can be decentralized.
5. Methods of Rewarding Employees
Since people are the most valuable asset, their motivation is important. Immediate
monetary reward is not the only way to motivate them. Incentive schemes which
offer more money in return for more effort have only a short life. HRM‘s promise
is different. It offers job security so that workers have no fear of unemployment. It
offers a career that spans an entire working life and not just a job. A career gives
the chance to grow by learning new skills, assuming new responsibilities and
moving to higher positions. HRM also offers workers the opportunity to give
expression to their creativity. This is called human capital formation. Human
beings are valuable capital. Organizations must do what they can to build that
capital through skill training.
6. The Importance of Training
The importance of skill training is obvious. It is only with skill that people can
grow and assume more responsibility. Behavioural training which teaches how to
cooperate with others, and problem – solving skills which teach how to identify
and solve problems at work, are also important. As part of the effort to improve
the quality of human capital, HRM lays great emphasis on training.
IV. Quality Circles
The most common HRM method is the quality circle (QC). QCs are small groups
made up of workers – including sometimes their supervisor – which meet to
identify and solve problems relating to work. These are voluntary groups which
decide when to meet, how often, and what problem or issue to discuss. They set
their own agenda without any interference from management. ‗Quality‘ is a
misleading word because it gives the impression that QCs are formed to improve
product quality. This is not true. They can pick up any work related issue. It is
really up to the group to decide, and the natural choice is a work related problem.
For example, a group may discuss the maintenance schedule for its machinery, a
safety problem, or the way it uses materials. Once a solution is identified, it is
presented to management. They are expected to implement good, workable
solutions. The group then moves on to another problem. The group continues to
exist so long as it can find a problem to discuss.
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1. Are QCs Effective?
The QC is an American idea, first suggested by two American management
experts – Juran and Demming. But it was Japan which used the idea and made it
popular. Other countries, including our own, have tried QCs in recent years, but
not with the same success. Their failure raises an important question – Do
workers have the power to change the organization? After all, QCs can only
suggest how something can be done better. It is management who has to
implement the change. Many organizations find that it is not easy to implement
QC suggestions. They are too hierarchical. Power is too centralized. And there is
too much resistance to change.
There are at least two other groups which must accept change as a fact of life.
One is top management. Major changes cannot happen unless top management is
determined to make them happen. The second group is middle management.
Middle managers who get used to a routine are not keen to implement QC
decisions which require a change in that routine. They are also used to thinking
that it is they, and not workers, who produce results. That makes suggestions from
workers difficult to accept.
2. An Example
Think of an example. A group of maintenance technicians form a QC. They know
what can go wrong with the machines. They think breakdowns can be minimized
with better preventive maintenance, but no one listens to them. Having formed a
QC, they decide on a new maintenance plan which is put up to management.
Their maintenance manager is probably not impressed. The plan will change his
routine, which he does not like. With a degree in engineering, he feels more
qualified than workers to decide these issues. His superiors in maintenance
management will only support him and not the workers.
There are other groups interested in maintenance schedules. Production is the
most important of them. The main interest of production is to keep the machines
running. They think that stopping a running machine for maintenance will affect
production. They, like all other managers, are also trained to think they know the
machines better than workers. The QC can expect little support from them.
The QCs plan will not be implemented just because it is good. That is not how
organizations work. There are powerful interests which block change. Workers
cannot break through these barriers – only top management can. It is easy to see
what will happen if top management lacks the will. The maintenance QC will
probably move on to another issue, hoping for a better response from
management. If successive recommendations meet with rejection or inaction, they
will lose interest. After all, nothing is coming out of their effort. What is the point
in holding QC meetings to discuss problems? The QC may continue to exist, but
only on paper. That is precisely what has happened in many places.
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V. Total Quality Management
Total Quality Management (TQM) was born out of the failure of QC. The
fundamental principles of HRM cannot be put into practice without strong effort
from top management. Managing people has always been left to personnel
managers. They are basically fire-fighters. They find solutions when trouble
breaks out, and sit back once calm is restored. Personnel managers have in any
case no power to change the way organizations function. They run into conflict
with line managers when they do look for more lasting solutions. Most of the
problems lie in relations on the shop floor, but engineers in line management
functions argue that managing people is not their job. Who can break this
deadlock? Only top management can, but the management of people has never
enjoyed much importance at this level.
1. Top Management is Responsible for people
TQM shifts the responsibility for people management to the highest levels. Top
management is required to have a long – term strategy for managing the human
resource just as it has for managing finance or the physical assets of the company
like plant and machinery.
2. Changing the Attitude of Line Managers
Changing the attitude of line managers towards workers is the second important
objective of TQM. This change is necessary because the new objectives are
different. The expectation of the old style was industrial peace. HRM‘s
expectation is very different. It wants commitment, skill, performance, flexibility
and team work. These are qualities that have to be displayed day after day on the
shop floor. The union cannot deliver them. Only workers can. Personnel managers
cannot get these results from workers. Only line managers can. But getting line
managers to accept this has never been easy.
3. The Internal Customer
TQM has come up with some strategies to ensure that line managers understand
their new role. One is the concept of the internal customer. Customer satisfaction
is the objective of all business activity. The customer of the company‘s product is
usually thought to be its customer. There is however a customer right inside. No
section of department of a factory exists in isolation. It receives materials,
services or semi – finished goods from some sections and in turn becomes
supplier to others. Those who are downstream are the customer for a department.
Production is the customer for maintenance. Production and maintenance are both
customers for materials supply. Staff departments like personnel and finance have
customers everywhere.
TQM makes managers answerable to the internal customer. The external
customer makes demands only on top management and departments like
marketing and after – sales service. The internal customer makes demands on
middle managers in every section and department. To satisfy the internal
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customer, a manager has to get better performance from his workers. Their
commitment and cooperation become important to the middle manager.
TQM has not left matters there. The evaluation of managers has been linked to the
satisfaction of the internal customer. In countries like the United States where the
level of competition is very high and companies have to struggle hard to survive,
technically competent managers have sometimes been dismissed because of their
failure to implement HRM.
4. The Revival of QCs
As we can see, the main objective of TQM has been to make the line manager
responsible for putting HRM in to practice. With this shift, line managers find that
QCs are a useful method of encouraging creativity and commitment among
workers. As a result, many dead QCs have come back to life.
VI. The Threat to Trade Unionism
HRM has posed a serious threat to unionism whenever it has been tried. It is
important to understand the source of this threat.
1. The Non – Union Strategy
Some firms have deliberately used HRM to keep union away. They adopt what is
called a non – union strategy. In this approach, the management‘s objective is to
prevent the formation of a union. Whenever possible, the plant itself is located in
a region where unions are weak or absent. Because there is no union, there is
nothing to bargain. However, these companies offer good wages and job security.
Their wages are the same as in firms which have bargained with a union, and
sometimes even more. In addition, HRM policies are implemented to ensure that
workers do not feel the need for a union. With good wages, security and the
personal attention that comes with HRM, the need for a union goes down. It is a
strategy which builds on the weakness of trade unionism. Good wages and job
security is after all what every union wants. If the employer offers this on his
own, where is the need for a union?
Non – union firms may sometimes use negative strategies. Workers who try to
unionize may be warned or even dismissed. But the main emphasis is on positive
methods – give to workers what they would have got through a union and make
trade unions unnecessary. It has worked quite well. There is a growing list of
companies in industrialized countries which have no union. IBM, the famous
computer company, is the best example. It has never had a union.
2. Limiting Unions to Wage Bargaining
The second method is to accept the existence of a union, but open up another
channel of communication with individual workers. This is the approach of
employers who have nothing against trade unionism in principle and do not want
to adopt negative strategies to put it down.
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Their reason for adopting HRM is quite different. They want a committed work
force, which is essential to face competition. Few managements think this can be
achieved through a union. No union will agree to such a demand. And it cannot
deliver commitment even if it wants to. Imagine a situation where the union
accepts commitment as an important requirement. Can it change the attitude of its
members?
Many managements in fact think that unions have the negative power to block
change but not positive power to implement it. So the ball is really in
management‘s court. It is their job to implement policies which promote worker
commitment and loyalty. That is precisely the essence of the second approach –
bargain a wage contract with the union, but turn to individual relationships to
achieve productivity and performance.
Trade unions do not like this method either. They think it is wrong for
managements to deal directly with individual workers.
3. HRM Appeals to the Individual
The fact is that HRM meets important human needs ignored by both trade unions
and old style management. People like the attention they get because they want to
be somebody. No one wants to be a faceless number in a crowd. All human
beings need some power over their work life and some ability to control it. They
need opportunities to become creative. They also want to grow, learn new skills
and rise to responsible positions. HRM caters to these needs.
It can be argued that HRM meets these needs only partially. Critics say that
workers get only limited power to shape their own work, limited opportunities to
learn new skills, and limited scope for creative problem solving. There is some
truth in this. In real life situations HRM delivers less than it promises. It is a
management method and its objectives are managerial. But let us compare these
limited gains under HRM against old – style collective bargaining and see what
comes out.
Old system puts even less power in the hands of ordinary workers. Power sharing
is between management and the union. Workers could be left out of this
arrangement completely. In theory workers can exert power through their union.
But in practice this is not how it works. Few workers have any power over their
union. When power is centralized, there is no opportunity for workers to be
creative. Neither the union nor management would encourage it.
Finally, the old system places little emphasis on skill formation. Even if
management is interested, unions take a negative view of multi – skilling. They
think it is a strategy to exploit labour. Without new skills, workers are condemned
to the same boring jobs, but unions never see this as a problem. They try to
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compensate for powerlessness, boredom, poor skill base and every other problem
by asking for more money. That has been the trade union method for more than a
century.
There is much that is good and positive about HRM from the workers‘ point of
view. It does not offer them everything. But it offers more than collective
bargaining does. This alone would make it impossible for anyone to lightly
dismiss HRM.
VII. Can Trade Unions Meet the Challenge?
How can trade unions meet the challenges of HRM? Not by stopping management
from embarking on the new strategy, because it is not in their power to do so. Not
by insisting on the right to bargain, because unions cannot survive any longer just
through wage bargaining. Not by attending to the everyday grievances of their
members, because HRM takes care of them. The question that has to be asked is
whether trade unions have anything to offer which management cannot. If there is
nothing, then trade unions are not necessary. If on the other hand, they have
something to offer, we must know what it is. That is the crux of the matter.
The main weakness of trade unionism is that its existence is built on management
failure. Any improvement in management therefore comes as a threat. To escape
this fate, trade unions must search for their ultimate objective. Demanding more
money or solving everyday grievances cannot be that objective. They are
important, but only so long as the management system is ineffective. When
management performs better – as they should – these traditional functions lose
much of their relevance. The more fundamental and lasting objective of trade
unionism is the pursuit of industrial democracy. Put simply. It is a voice for
workers in a wide range of decisions that affect their lives. It is participative rights
– and not collective bargaining rights – which gives workers a voice in these
decisions.
To be fair, HRM also offers workers some opportunity to participate in
managerial decisions. But it is management who decide what these issues should
be. They have so far been limited to the immediate work situation. HRM has
never extended participation to larger issues discussed at the board level. It is also
management who decide whether to actually implement what workers have
decided. In that sense, HRM is a system of consultation. It is not joint decision
making. What HRM offers is an extremely limited form of participation. To meet
the new challenge, trade unions must be in a position to push participation beyond
consultation in work – related issues. That is where the future of trade unionism
lies.
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Social issues and worker productivity in plantation
N. Yogaratnam
The ILO says ―Economic and Social development have far reaching implications for the
way society makes decisions about development and the values and principles on which
institutions are built and progress is made‖.
The UNDP says ―Economic growth and human development move together in the long
run, but there is no automatic link – a simple fact, often forgotten. Neither economic
growth nor advance in human development are sustainable without the other‖.
What ever may be said, the common goals of economic and social developments are;
alleviation of poverty, elimination of inequality and unemployment, provision of
maximum level of education, health, housing, food and broadening of economic and
social opportunities.
Privatization of management of a labour dominated plantation industry, brought about
some hope and aspirations for improving the working and living conditions of the
industry‘s vast workforce.
This gained recognition within the plantation management companies that a content and
motivated workforce is crucial for improving the productivity and profitability of estates.
This perception further gained ground in the context of the emerging labour shortage,
growing stigma attached to estate work and increasing tendency for out – migration
among younger persons in search of non – estate jobs.
Plantation workers were themselves pressing, through trade unions and government
support, for according priority in the matter of social development – an area that
everyone agrees has received a backseat in the scheme of estate administration.
Over the years, labour management has undergone a transformation.
Colonial style of management rooted in the distrust of workers and in the authoritarian
and negative use of power has been discarded, although its legacy may still be visible in
some forms. The de-colonization in labour management practices has already taken
place.
Social change and better awareness have contributed to this process. New changes and
challenges demand new responses and new initiatives.
It is accepted that during the colonial era, the derogatory expression ―cooolie‖ was used
for workers.
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It was subsequently replaced by the word ―labourer‖. Now a new concept of partnership
is emerging wherein a worker is a professional and ―knowledge worker‖ in his/her own
right because he/she has the intimate knowledge of the task preformed.
Thus, a ‗mental shift‘ has been taking place in plantation from the control orientation (IR
approach) to managing people (HRM approach), to partnership (HRD approach) and now
as human capital.
UNRESOLVED ISSUES
The plantation industry is also faced with many challenges. Besides external factors such
as world market prices, technological advances, development in competing countries, the
sector is also faced with a plethora of internal problems relating to production costs,
resource availability, resource allocation and management. Among these, the labour
related issues are fast gaining importance.
The public sector had launched several projects to facilitate and improve direct
productive investments and social development, with the hope of improving the sector‘s
competitiveness in the global market.
There have been few public sector projects funded by donor agencies, the government
and the plantation companies, viz. The Plantation Development Support Programme, The
Plantation Reforms Project, The Estate Housing Development Programme, The
Plantation School Development Programme, The Plantation Reform Project two /
Plantation Development Prgramme etc…
Although these investments had the potential to increase labour demand in the sector, yet
the labour supply to the estates and labour productivity have been deteriorating.
Increasing trends of labour out – migration and low out – turn resulting from rising
worker aspirations and opportunities for outside work have been noted.
LABOUR AVAILABILITY
Labour supply of estates is dependant on two main factors; the availability of workers
who are willing to work in estates and the frequency with which they report to work in
the estates when work is offered.
In addition to these two factors, the productivity of the labour – the efficiency with which
the allocated tasks are carried out – is also a very important labour performance indicator.
For the larger part, the plantations depend on the resident workforce (about 84% of the
worker population resides in the estates).
Increased access to information, citizenship rights and increased mobility, have opened
doors to the plantation community to participate in economic activities outside
plantations.
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Given the stigma attached to work on estates, traditional management practices and harsh
working conditions due to the nature of work, the estate inhabitants – the more educated
and politicized youth in particular do not give preference to estate employment. To
aggravate the problem further, even the workers who remain in the estates do not report
to work regularly when work is offered.
It may seem paradoxical that despite giving an attendance bonus, the industry is plagued
with rising absenteeism.
OUT – MIGRATION
In certain cases and situations, out – migration would be a welcome thing like when the
dependency ratio is high, leading to a growing number of frustrated unemployed youth on
the estate. It, however, becomes a problem affecting estate productivity when registered
workers or spouses (mostly men) while continuing to avail of the estate welfare
amenities, regularly absent themselves or seek early retirement to take up employment in
their adjoining towns or villages.
On the other hand, the considerations that make ‗out side‘ jobs more attractive also need
to be appreciated. With the mushrooming of townships (offering jobs in shops and related
establishments), construction activities, garment factories and tourist centres – not to
mention the lure of the city lights – young people who would otherwise have remained on
estates are now moving away from the so called ‗demeaning‘ field options associated
with plantation employment.
LABOUR PRODUCTIVITY
Low labour productivity has often been a worry for the plantation industry. Productivity
per worker at 15-20 kg of green leaf per plucker per day is low compared to 23 kg in
North India, 25 kg in South India and 30 – 35 kg in Kenya. Also, contribution of labour
towards COP is 60% in Sri Lanka as against 43% in Kenya.
The overall COP per kg in US$ is 1.75 in Sri Lanka, 1.3 in Bangladesh, 1.25 in India,
1.00 in Kenya and 0.75 in Vietnam. All these indicate the severity of this problem in Sri
Lanka.
Conventional solutions for improving labour productivity concentrated on giving wage
incentive to motivate the workers to work harder. But these alone are not expected to
address, the root causes of low labour productivity, relating to health, worker attitudes,
education, etc…
The health status of plantation workers had been a subject of discussion for quite some
time. These mainly centred around tea pluckers and pointed to occupational hazards and
long working hours and their effect on the worker‘s health and productivity.
References have been made to painful abrasions to the hand caused by continuous
plucking. It has been calculated that about 1200 hand movements are involved in
harvesting 1 kg of green leaf. That makes it 24000 hand movements (along with an
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unwavering eye for leaf standard and an alert mind) for a worker who brings in 20 kg of
acceptable leaf in a day.
Also, it is known that carrying the tea basket over the head affects the neck and brings
about degenerative changes in the cervical spine. Feet too require protection.
Harvesting shear machines are known to be capable of increasing worker productivity,
thus reducing the labour requirement for harvesting. The harvesting shear developed by
the TRI, is still not widely used in tea plantations. Several socio – economic factors
related to plantation labour appear to influence the slow rate of adoption of shear
harvesting.
The user friendly, light weight aluminum plucking basket that had been developed some
time ago, also still remains merely as an innovation and not widely used. This basket
appears to resolve many of the physical problems faced by the tea plucker in her work
and is expected to provide some benefits to the industry in terms of worker health, out –
turn and productivity besides improving made – tea quality. Likewise, ageing workers are
known to have poor eye site and despite the numerous eye camps, they have seldom been
provided with or encouraged to wear spectacles.
All these point towards negative attitude of workers as a result of ineffective HRM
system. Effective education of workers would rectify this. Attitude may be negative when
they are old, very efficient in manual harvesting and having long experience in
conventional systems. In contrast, younger workers with good knowledge of the
innovations are likely to be more receptive to use such technologies. Therefore, younger
workers who have less experience on manual harvesting and who bring below norm or
less crop could be advantageously selected and trained in such technologies.
PSYCHOLOGICAL ASPECTS
Although social and psychological factors are interrelated, their margins are not so clear –
cut. Low productivity can be a state of the mind, especially in pluckers. That is because
here is someone unwilling to put an effort to improve her living standards. Perhaps, it
could be because of mental weariness or boredom has set in or the job she is doing is
considered lowly or there is nothing to look forward to in life except retirement as a
plucker. What inputs can there be to shake her out of this state of mind?
A change in ―attitude‖ would help matters. This involves developing an element of
sensitivity to the negative forces that are at work in the community and to seek inputs that
will replace them. These inputs will add a little zest, a little entertainment and lot of
reasonable commonsense. The job it self can be invested with a technical / scientific aura
by organizing training programme that will shorten the period of accruing ‗skills in the
case of new recruits and upgrade the skills‘ of others.
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WOMEN IN DEVELOPMENT
The major and often over looked feature in developing countries is the important role of
women in agricultural production. Men perform the initial task of land preparation but
women do about 70 – 80% of the agricultural activities out of the total work. While
African women play the major role in subsistence farming and lesser role in the
production of plantation and cash cops, in Asia the situation is reversed. Nevertheless, in
both African and Asian plantation agriculture sectors, women have heavy responsibilities
within the home; housework, food preparation, child care. One of the main reasons for
the heavy burden is lack of capital and education. Unfortunately, little effort is been made
to improve women‘s productivity. Men are usually given access to credit and are taught
modern methods of production. As a result, the difference in labour productivity between
men and women is growing wider. Gender disparities in human development have been
evident in varying degrees in almost all communities, but are severe in the plantation
community. On the other hand, the migrant plantation workers brought in to the country
had a social system based on caste; religious and cultural practices that were patriarchal.
On the other, the management system that evolved in the plantation was exclusively
male, starting from the lowest level worker supervisors – the ‗kanganies‘. As a result, the
estate females have always been at a disadvantage at home and at work and have hardly
had the opportunities that were available to their male counterparts. Even as of now,
almost all decision – makers, from estate managers to union leaders, in the plantation
system are males. As a consequence to the factors, there are large differences in
educational attainment and other human development indicators between female and
males. These disparities persist despite the important role played by women as caretakers
and providers for families in the sector.
Numerous studies have pointed out the positive externalities to families and communities
associated with improving the health and educational standards of females. As such,
balancing the gender differences is important not only for an equity stand point but also
as a means of developing plantation communities. A critical step in narrowing the gender
gap in human development lies in understanding the nature and magnitude of these
differences.
EDUCATION AND HEALTH
Education and health is a joint investment in human development. The connection
between health and education include similar analytical treatment, since both are forms of
human capital.
The dual impact (spending effect) is an intra connection. The fundamental fact that when
we speak of investing in persons health and education, we are after all talking about the
same person.
We have to consider the relationship between income on the one hand and health and
education on the other. Health and education maybe highly unequally distributed in
plantations, just as income and wealth.
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It must be understood that greater health capital may rise the return on investment in
education, because health is an important factor in school attendance, healthier children
are more successful / learn more efficiently. On the other hand, dearth of children can
increase the cost of education per worker in plantations.
Also, greater education capital may rise the return on investment in health, because many
health programs rely on skills learned in school (literacy), as schools teach basic personal
hygiene and sanitation. Education is also needed to formation and training of health
personnel in the plantation setting, the concern should be more for ‗health‘ than ‗disease‘
that is more on prevention than cure and also, because of the overwhelming residential
population, the concern should be as much for ‗community health‘ care as it should be on
worker health. Improved health care is the means, not the end; the end should be to
optimize productivity for which the estate‘s prime asset – the workforce – should be kept
in good order.
CONFLICT ON CONFIDENCE
The traditional approach to labour management and industrial relations has been rooted in
the conflict scenario wherein labour and management are locked up in adversary
positions. Traditionally, union activity has drawn its sustenance from this approach. With
liberalization, globalization and increased competition survival has become a matter of
joint concern of the management and workers. Hence, in a competitive situation the
approach has to change from conflict to cooperation. This implies that lines of conflict
between the workers and management should turn into lines of confidence between the
two, i.e., a change should occur from dispute oriented approaches to development
oriented approaches.
In plantation, there are four categories of workers viz. active, assertive and aggressive.
Further, workers can be classified as work oriented and work shirkers. Usually, the
aggressive workers tend to be work shirkers and problem creators. Hence, our aim should
be to channelise the energies of such workers for productive purposes.
Though many plantation managers may prefer passive work performer, however in view
of the competitive environment, there is a need for increasing the proportion of active and
assertive workers with high work performance orientation because suggestions for
improvement in productivity, quality and value addition, would come only from a work
force that is active and assertive but not aggressive or militant. This kind of workforce
also prefers the harmonization approach to problem solving and decision making.
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KNOWLEDGE MANAGEMENT
Knowledge management has emerged as an important factor for competitive advantage.
The idea of knowledge management is not only applicable to ‗new economy‘ but also to
the ‗brick and mortar economy‘. The quality of the product and services offered depends
upon the ‗knowledge base‘ of the workers. If the knowledge base is not constantly
upgraded, the product and service quality suffers. An important task is therefore; to
continuously upgrade the knowledge base of workforce.
To summarise, in the ultimate analysis, it is a question of structuring the estate
management system to move away from a sectional to an integrated approach.
An in-depth appreciation of the industry‘s major assets – land, standing crop,
manufacturing facilities and equally the people who generate the wealth from these
assets, in relation to the internal and external milieu, is no doubt, of paramount
consideration. Yet, it is important to recognize that these factors of production overlap
and interact with one another and over varying periods of gestation, throw up issues that
have fallouts of larger significance. Thus, while the field and factory are maintained at
optimum functional levels, estate supplies made available without interruption and the
workforce kept in good health productivity, a coordinated effort involving community
participation is necessary to ensure a smooth working of the estate in pursuit of the
primary objective, viz. the production of wealth. It is in this overall context that the
dynamics of social and community behavioral pattern becomes an integral part of
plantation management practices.
FUTURE PERSPECTIVES
Despite the improvements registered in recent years, the plantation environment lacks the
social and psychological acceptability of an agro – industrial park that makes workers
comfortable in their avocation.
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Challenges facing Trade Unions in Sri Lanka
Leslie Devendra
The labour policy of Sri Lanka as contained in the Mahinda Chinthna: Vision for a new
Sri Lanka – A Ten Year Horizon Development Framework 2006 – 2016, hinges on four
strategic areas. ―The focus areas are employment generation, skill development and
labour productivity, increase the flexibility of labour laws and regulations and increase
employer – employee relations‖. The overall thrust of this policy is to move towards a
flexible and globally employable workforce.
The policy has to be seen in the context of the significant changes in the political and
economic environment globally which have had a negative effect on the position and
influence of trade unions. These may be listed as follows:
(i) Globalization has led to intense competitive pressure in enterprises
leading to vulnerability of labour.
(ii) Technological change and reshaping production process through new
forms of industrial reorganization have brought about the restructuring
of employment via sub – contracts, use of contract labour, employment
of casual / temporary labour and out – sourcing of production
activities.
(iii) Due to the shift in the industrial sector from manufacturing to services;
from formal to the informal sector, the composition and character of
labour force have undergone profound changes affecting union
membership.
(iv) Increased pressure for introduction of flexible labour market policies
that have an adverse impact on labour and trade unions.
These are formidable challenges facing labour.
The situation of Trade Unions
According to figures published in the Labour Gazette trade union membership has
dropped dramatically from 1975 to 2007.
This is not a phenomenon peculiar to Sri Lanka. It is happening all over the world due
mainly to the changes and pressure brought about by the process of globalization. The
density of union membership is now estimated to be a miserable 10%.
This dismal picture calls for intense soul – searching by trade unionists. If the process
is to reversed and trade unions are to regain the strength they displayed in the past,
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they have to be innovative in their approach and methods. Are the trade unions in our
country prepared to change with the times and be a pole of attraction to workers
coming into the labour market? It is not necessary that trade unions should abdicate or
abandon their responsibilities to provide economic and social justice to workers.
However, they have to take cognizance of the fact that the expansion of employment
brought about by the increased linkage with the global market have spawned new
employment practices that makes classical mode of membership drives difficult. One
way that may be tried out to make a break – through is to create an environment for
dialogue in unorganized enterprises that will ultimately lead to the formation of Trade
Unions. In such situations it is left to the trade unions to evolve appropriate strategies
to achieve their objective.
The multiplicity of unions, poaching of members from rival unions and continued
disunity in the trade union movement has contributed to low membership recruitment.
New management policies promote direct dealing with workers and not with unions
as unions are not disposed towards flexible use of labour. Some aggressive employers
are also using the new management strategies to discourage trade unions by offering
employment on union bargained wages, career progress etc… All this is being done
to wean away workers from unions. Trade Unions which had assumed that workers
would be distanced by a hostile and uncaring management are now called upon to
compete for their loyalty. Given the traditional make – up of the unions this is not an
easy task.
The growth of contract labour, temporary employment, out – sourcing, casualisation
and the pernicious practice of employing labour through labour contractors have all
made union organization that much difficult. The unions are presently engaged in
bringing a halt to employment through labour contractors. The growth of the informal
sector is also posing a problem for union organizing. It has never been easy for trade
unions to organize workers engaged in this sector. Some modest headway in this
regard has been made by unions involved in the Irish ICTU supported Trade Union
Technical Assistance Programme (TUTA) in organizing the unorganized in the
Tsunami affected Ampara District.
At the present time the image and popularity of the unions are also at stake due to the
misdoings of some unions especially those connected to the life of the community.
The public by and large is not against unions in principle because people everywhere
recognize that employers might ill treat unprotected workers. The hostility is against
the way some unions and their leaders function. The union movement itself has to
address this issue if its public image is to be made acceptable.
Present worries of Trade Unions
To be productive and competitive the employers seek flexible laws. In my view the
trade unions in Sri Lanka have already moved far enough in this direction by
accepting the amendments proposed to the TEWA Act in 2002 and on the issue of
night work for women. The trade union movement is reluctant to concede any further
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space to employers in this regard especially in view of the fact that there is no social
safety net which would cushion the adverse impact arising from any further
emasculation of the TEWA. Employers and trade unions need to focus on creating
mechanisms for discussion and agreement about adapting quickly and efficiently to
changes in technology and trade that have a bearing on competitiveness of
enterprises. Despite stringent laws to ensure security of employment it is the global
market with its constant pressure on competitiveness that ultimately decides the
keeping of jobs. The need to balance workers and trade unions desire for security of
employment with the pressure of the market is acknowledged.
A further matter of concern to trade unions is the failure of the government to
implement in law and practice ILO core conventions already ratified by Sri Lanka
more particularly, conventions No.87 and No.98 which have been ratified several
years ago. The apparent lack of interest on the part of the government to ensure
effective implementation of these important conventions has stood in the way of our
efforts to achieve broader trade union unity.
The situation arising from the global economic crisis on labour is also worrisome to
trade unions as some 50,000 jobs have been affected bringing hardships to workers.
The employers are pleading that the crisis is not of their making and due to business
downturn they are unable to meet the statutory obligations relating to workers to be
retrenched or laid off. The government in announcing a bail – out package to
industries that are affected by the crisis has insisted that no labour should be shed if
they are to qualify for stimulus supports. The labour authorities have come forward to
give additional relief to employers to keep their enterprises afloat. These relate to
temporary lay – off of workers, a 5-day work week and delayed EPF / ETF payments.
The trade unions have called upon labour authorities to subject such requests to
neutral scrutiny as employers are prone to take unfair advantages of the crisis
situation to cut down on labour costs. The 5 – day work week that is being requested
by the employer is on the basis of allowing them to increase the 8 – hour work day
without any compensation for the additional hour that will be added to the work day.
This is contrary to the very first convention adopted by the ILO on 8 hour working
day. Regarding the EPF it is the trade union request that the component of worker
contribution in the EPF, which is deducted from their wages be remitted without
delay in allowing the employer the facility of delayed payments. In addition the trade
unions request that when workers are laid off or retrenched they must be made
entitled to compensation for the period they are out of work. During this period of
uncertainty the trade union have urged the authorities to ensure that statutory and
contractual commitment be maintained by the employers.
The challenges facing trade unions in Sri Lanka are daunting. Nevertheless they are
not insurmountable. Trade unions need to realize that the challenges posed can be
successfully met by building greater unity and cohesion around identified issues.
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The Evolution of the Ethnic Problem and the Labour
Movement in Sri Lanka
An Outline
T.M.R. Rasseedin
The organized trade union movement in the country assumed national importance only
after the entry of A.E. Goonesinghe, a nationalist and social democrat to the trade union
field. In 1922 the Ceylon Labour Union under the leadership of A.E. Goonesinghe was
formed. The first meeting of the union was presided over by E.R. Thambimuttu, a Tamil
member of the legislative council. Soon after its formation the new union received
overwhelming support of Colombo workers and led the country‘s first General strike in
1923. This strike of 20,000 workers of all sectors of the economy and all ethnic groups
was over long delayed wage increases which were eventually granted in 1925.
The 1923 General strike gave national prominence to A.E. Goonesinghe. He was able to
command the loyal support of workers of minority communities during the great struggle
of the 1920s.
The leadership of the Ceylon Labour Union in the twenties also reflected the multi –
ethnic nature of the island‘s working class. One of the biggest trade union successes of
the Ceylon Labour Union was the port strike of 1927, when ethnic solidarity proved to be
a key factor in the struggle. The port workers consisted of Sinhala, Tamil and Malayalis –
the minorities forming a large proportion of the unskilled labour force. Workers brought
from India to serve as ‗black – legs‘ refused to replace the strikers. The workers won
their demand. There were many other successful strikes in the mid – twenties. The climax
of this militant phase of the 1920s was the Tramway strike of 1929. The workers were of
all ethnic groups. Their struggle was supported by the rest of the Colombo working class
who picketed the trams; in addition.
The strike had begun as a demand for wages, leave and overtime and took a violent form
with street battles, rioting, and stoppages of work in the railways, harbor, government
factory and private firms. The strikers came on to the streets and according to the press
―scenes of the widest disorder‖ occurred when buildings and gas installations near the
Maradana Police Station were set on fire resulting in police firing which killed 05 and
injured 250.
In the years following the historic tramway strike the trade union leadership gradually
took the workers on the path of communal agitation and ethnic conflict. However, one
has to give credit to the leaders of the period up to 1929 for their non – racialist positions.
For a time Sinhala and Indian workers joined hands to fight for their rights and better
working conditions. K Natesa Iyer, a South Indian Brahmin begun organizing labour on
the plantations since 1925, joined Goonesinghe‘s Labour Union and became its Vice
President. With Natesa Iyer‘s growing influence and leadership among the Indian
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workers both in Colombo and in the plantations it looked as if the workers as a whole in
the country would rapidly advance to new heights of class consciousness. But it was not
to be. The situation immediately thereafter began to drift rapidly. Natesa Iyer was
expelled from Ceylon Labour Union over differences with Goonasinghe in 1929 and
Goonasinghe‘s stance took an increasingly communal trend. It is interesting that these
developments took place immediately after the Donoughmone recommendation in 1928.
The new constitution introduced by the colonial authorities in 1931 had granted a
measure of self government with a legislature (State Council) of 50 members selected by
universal franchise.
Adult franchise and the prospect of political power through elections tended to give a
new fillip to the Buddhist revivalist movement with its communal orientation.
By the end of 1920s the world wide economic depression had set in and with it there
were threats of mass unemployment. This led to competition for employment between
Sinhalese and Indian workers and Goonesinghe who was able to unite and organize under
one banner quite a large number of workers belonging to all ethnic groups had cause to
complain of under – cutting of Sinhalese workers by their Indian counterparts.
The key area of agitation and ethnic tension was that of unemployment. In the State
Council the question was frequently taken up by Goonesinghe who had been elected from
the working class constituency of Colombo Central; he alleged ―hundreds of Malayalis
are coming here and depriving Ceylonese labour of work by undercutting them‖.
(Hansard, 7 Oct, 1931:506). Even the May day processions of the period reflected this
animosity. The anti – Malayali campaign was carried out at several levels; the state
council, A.E. Goonesinghe urged the government to repatriate Malayalis and give local
workers their jobs; appeals were made to the employers not to be tempted by the cheap
supply of Malayali labour; house owners were requested to refuse to rent houses to
Malayalis and to boycott their shops and tea boutiques.
Under the impact of seriously deteriorating economic conditions, the policies of the trade
union movement underwent a drastic change. Trade Union leaders either did not
recognize, or preferred to soft – pedal the fact that the retrenchment of workers and the
shortage of employment opportunities were a direct – consequence of the economic
crisis. Unable or unwilling to argue this line with their members, they sought to preserve
the employment opportunities available for the group which formed their major base of
support - the Sinhala workers. For the first time, trade union leaders spearheaded an
organized campaign against an ethnic component of the working class itself. The Ceylon
Labour Union led by A.G. Goonesinghe who had sponsored ethnic unity in 1920s
launched a campaign against the Malayalis which became very virulent in the mid 1930s.
The poverty, unemployment and lack of opportunities in a colonial economy, rent by the
economic crisis of a severe world recession proved to be a fertile ground for rampant
chauvinism among workers who a few years earlier had participated in joint struggle
against the employers.
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A.E. Goonesinghe had come to espouse the cause of the workers as a fervent nationalist
and social reformer drawing inspiration from persons like Anagarika Dharmapala. He
was essentially a man imbued with the growing nationalist sentiments of his time. He was
motivated to a very large extent by that spirit of national resurgence which moved the
leaders of the Sinhala Buddhist majority in the country. Goonesinghe showed remarkable
agility in moving from radical political stances to racist positions. A.E. Goonesinghe
abandoned his militant policies of the 1920s and finally ended up on the side of the
employers and the ruling party. According to Kumari Jayawardana this Sinhala Buddhist
consciousness spread to the Sinhala working class as well. The fact that the workers came
under the spell of such ideologies forgetting very quickly the feelings of worker solidarity
that had been built up during the earlier phase of joint militant action is relevant today.
Kumari Jayawardena states: it provides a pointer to the under – lying strength of the
Sinhala Buddhist consciousness among all classes of people, which may be dormant in
certain periods, but can be swiftly aroused especially when their material survival is
thought to be at stake. Moreover, the power of racism to retard the growth of class
consciousness, and the way in which such ideologies can be used by ruling groups for
their own purposes, are some of the lessons to be learnt from a study of this phase of
class and ethnic consciousness in Ceylon‖.
A.E. Goonesingha‘s trade union leadership came to be challenged in 1933 by a group of
educated militant young men who had returned to the country after their education abroad
and who came to form the country‘s first left party in 1935, the Lanka Sama Samaja
Party (LSSP). In 1933 this left group made the first entry in to trade union terrain and
captured the trade union of the Wellawatte Spinning and Weaving Mills from
Goonesinghe. A large proportion of these textile workers were Malayalis. Thereafter one
by one Goonesinghe‘s unions went out of his control and came under the influence of the
LSSP. However, it was a significant fact that the workers in Ceylon‘s major plantation
industry especially tea stood outside the main stream of this movement and failed to
integrate within it. Even today in spite of the great advance made in trade unionism on
the plantations the position is not very much better. Communalism still continues to cut
across class affiliation and unity.
When Pundit Nehru visited Ceylon at the request of Indian associations in Ceylon the
leaders of the LSSP who met him sought to dissuade him from forming an Indian based
trade union in the plantations. However, the Ceylon Indian Congress was allowed to be
formed in 1939.
The first concerted attack on the rights of the plantation workers by the Sinhala
nationalists occurred when the question of universal suffrage was raised in the late 1920s
during discussions on constitutional reforms. Plantation workers were considered vital to
the economy but not to the political process. In 1927 the Donoughmore Commission on
constitutional reforms made a significant recommendation that the franchise be granted to
men and women over 21, stating however that the privilege of voting should be confined
to those who have an abiding interest in the country!
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The issue of universal suffrage and especially the enfranchisement of Indian workers
aroused much public controversy in 1928. Sinhala representatives in the legislative
Council openly voiced their fears that the Kandyan electors would be politically
swamped by the Indian vote. The one exception among the Sinhala legislative councillors
was C.H.Z. Fernando a member of the Labour Party. He refuted the alarmist views on
‗swamping‘ calling them ‗unfounded in fact, and derided the ‗mythical dangers of Indian
domination‘. The trade union leader A.E. Goonesinghe who was at the height of his
power not only as the head of the Ceylon Labour Union but also as the leader of the
Ceylon Labour Party supported the franchise rights of Indian workers since his policies
was based on class affiliation and ethnic unity. The courageous stand that A.E.
Goonesinghe took in those years, risking criticism and unpopularity by championing the
rights of the plantation workers was in stark contrast to his complete change of position
on minority rights in the thirties.
When the amended reforms were finally, implemented a section of plantation workers
were able, for the first time, to exercise franchise rights. At the first general election to
the State Council in 1931 two candidates of Indian origin got elected and one of them
Perisunderam became the Minister of Labour, Industry and Commerce in the new State
Council. The grant of the franchise (even with certain limitations) to plantation workers
led to a renewed political awakening in plantation areas and facilitated the spread of trade
unionism after 1939. Having failed to disenfranchise the plantation workers at the State
Council level, an effort was made to deprive them of franchise at the level of the local
government on the ground that they did not form an organic part of village life. The
Village Committees Ordinance of 1889 was amended in 1937 to exclude the plantation
workers from a share in local government. There were loud protests against this
amendment. Dr. N.M. Perera, a member in the State Council and a leader of the LSSP
made a frontal attack on the discriminatory legislation:
―They have no objection to enfranchising European planters… those… who have
property, who exploit the people in the true sense of the word are enfranchised.
But when it comes to the poor labourers who has not the future to posess land, he
is not enfranchised… this bogey of swamping is entirely imaginary and has been
created by a handful of people… the interests of the Indian labourers and vast
mass of peasants and workers in this country are the same. The fight is against the
capitalist class, whether they are Indians or Ceylonese. (Hansard 1937: 4150)
As a result of the protests there was another amendment depriving all plantation workers
irrespective of ethnic origin of the village franchise. However, since there were only a
few Sinhala residents on estates the effect of the legislation was to discriminate against
Indian workers. The LSSP formed in 1935 made an early impact among plantation
workers. The Bracegirdle episode, the militant strikes at Mooloya and Wewesse in which
Dr. N.M. Perera played a prominent role made a big impact. The Ceylon Indian Congress
inaugurated with Nehru‘s patronage in 1939 also began trade union activity, organizing a
wave of strikes which engulfed the estate sector in 1940.
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The sudden eruption of violence and labour agitation on the plantation also unnerved the
Sinhala leaders who began to see the ‗danger‘ of organized plantation proletariat having
links with the newly emerged Left Party. Alarms about the ‗red peril‘ were further
sounded after the end of the world war, when urban labour led by the Left erupted in a
series of militant strikes in 1945 and 1946 culminating in the general strike of 1947. The
prelude to the 1947 elections was the strike of government clerks for full trade union
rights. The strike was led by the Government Clerical Services Union and it received the
support of members belonging to all communities and when the police opened fire on the
strikers and killed one of them, a Tamil (Kandasamy) he was regarded as the Martyr of
the movement. The specter of joint revolutionary agitation involving plantation and urban
labour was to further haunt the propertied classes especially after the unforeseen success
of Left parties in the parliamentary elections of 1947 when their representation increased
(from 2 at the previous election in 1936 to 20) and Dr. N.M. Perera of the LSSP became
the leader of the Opposition in the first Parliament of Ceylon.
Post – independence Situation
On 4 th February 1948, Ceylon was proclaimed independent. Only six months after
independence D. S. Senanayaka, first Prime Minister of Ceylon by his Citizenship Acts
disenfranchised quite a large number of Indian plantation workers. This not only helped
to marginalize socially and politically the Indian worker as a kind of natural outcast but
also served to strengthen the communal division and give fillip to the growth of trade
unions with a strong Indian communal consciousness in the plantations.
In the debate on the Ceylon Citizenship Act (August 1948); the Emigrants Act (August
1948) and the Indian and Pakistani residents (citizenship) Act of 1949 the Sinhala leaders
were to voice their fears and suspicions about the presence of persons of Indian origin in
Ceylon. It was feared that the Indian vote would result in ‗swamping‘ the Sinhalese in
general and the Kandyans in particular and that Kandyan would not be adequately
represented in parliament as a result. The picture of a helpless, landless Kandyan
peasantry was often raised in these debates and it was said that this economically
dispersed segment of the population would be politically unrepresented and that their
grievances would therefore not be adequately represented or solved.
Behind this fear was that of an ever present ‗Indian threat‘ The fear was expressed by
Sinhala leaders that India had expansionist designs on Ceylon and wished to fill the
vacuum credited by the withdrawal of the British.
The 1947 election results also instilled fears among Sinhala leaders. The UNP obtained
42 out of 95 seats; the Left – 20 and the Ceylon Indian Congress (CIC) 07 seats. As it did
not have a clear majority the UNP had to win over several of the 21 independents to its
side to form a government. Since the CIC voted mainly with the opposition, there was
also a belief among Sinhala ruling politicians that the Left posed a major threat to the
system and that the Indian vote had gone to the Sinhala Left candidates in many
constituencies.
105

It is in the light of these attitudes to the ‗Indian Menace‘ and the ‗Red Peril‘ the
Citizenship Acts, which excluded the Indian workers in Ceylon from the political process
came to be introduced. Dr. N.M. Perera of the LSSP participating in the debate on the
Citizenship Bills alleged that the legislation embodied the principles of ‗racialism and
exclusiveness‘ and stated:
―I thought that racialism of this type ended with Houston Chamberlain and
Adolph Hitler … I did not believe it possible that any person claiming to be a
Statesman … would ask us to accede to a Bill of this nature… we cannot proceed
as if we are God‘s chosen race quite apart from the rest of the world; that we are
and we alone have the right to be the citizens of this country‖.
Speaking on the income restrictions regarding citizenship, Dr. Perera pointed to the racial
bias in the Bill:
―If an unemployed so – called Sinhalese man is fit enough to get rights, why should any
Indian who has no income be deprived of those rights? If that is the criterion, is that not
racial prejudice of the worst type? … Racial prejudice does not come from the bottom. It
always comes from the top. (Hansard, 10 Dec. 1948)
Pieter Keuneman, M.P. of the Communist Party while claiming that the legislation
‗operated in favour of the rich and educated and militated against the poor people, the
working people of this country‘; emphasized that class, more than race was the main
determinant (Hansard, 19 August 1948)
Even on the government benches there were some who had reservations about the Bill,
the best example being the Minister of Home Affairs S.W.R.D. Bandaranayake. In
winding up the debate he distanced himself from the government. Bandaranaike‘s
position was that a ‗safe absorbable maximum of Indians were needed‘ they should be
given ‗full rights and the fullest amenities of labour in this country‘; those who wanted to
return to India were to ‗fair and just and if necessary, generous terms‘. (Hansard, 20 th
August 1948).
S.J.V. Chelvanayagam, then a member of the Tamil Congress (TC), a member of the D.S.
Senanayake government strongly dissented from these bills and left the TC to form a new
political party, the Ilangai Tamil Arasu Katchi (The Ceylon Tamil State Party); popularly
known as the Federal Party. The FP was dedicated to, accordingly to its founding
resolution: ―the attainment of Freedom for the Tamil speaking people of Ceylon by the
establishment of an autonomous Tamil state on the linguistic basis within the framework
of a Federal Union of Ceylon‖
Though the move was to disenfranchise Indian Plantation workers it was primarily a
blow – and a deadly blow at the working class political movement.
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Background to the emergence of Tamil Nationalism
Referring to the developments in the post – war period of Home Rule, Dr. Colvin R de
Silva in his – 1935 – 1985: From Democratic Progress to Repressive Reaction: A
Backward glance over the last 50 years notes the ―widespread resurgence of the national
language, especially the Sinhala language which developed a powerful challenge to and
direct assault on the dominance of English and the English Speaking elite in Sri Lankan
society and politics. The assault reached its highpoint and its most signal success in the
passage of law in 1956 making Sinhala the Official language displacing English. In that
regard, however, the development showed a strong tendency in the Sinhala majority to
see independence in narrow terms of the restoration of the Sinhala power that foreign
imperialism had destroyed. The Tamil language … in the dethroning of English, received
a lesser status than Sinhala in its official use‖.
Kumari Jayawardana commenting on the revivalism in the post colonial period in her
Ethnic and Class conflict in Sri Lanka states: ―in the early 1950s, Sri Lanka went through
a new upsurge of Sinhala Buddhist nationalism, based on the language question and
religious fervor. The two issues, language and religion, were combined in the Sinhala
mass consciousness …. because Sinhala was the linguistic medium by which Buddhism
was ‗reproduced‘ among the Sinhalese‖.
―Associated with resurgence of Sinhala was another important phenomenon, namely the
emergence of an aggressive Buddhist movement which brought the Maha Sangha to the
forefront as an active social and even a political force. Although the revivalist character
of this resurgence must not be overlooked, it too reflected the strong tendency in the
Sinhala majority to see independence in narrow terms of the restoration of Sinhala
power…‖ (Dr. Colvin R de Silva – Ibid)
Between 1953 and 1957 Sinhala only‘ cry swept the country.
The main Left parties which were working class based came out in favour of parity of
status to both Sinhala and Tamil languages in law and practice. In 1955 in the midst of
emotionally packed agitation for ‗Sinhala only‘ and three days after the LSSP rally at
Colombo Town Hall had been broken up by Sinhala extremists, Dr. N.M. Perera
proposed in parliament that Sinhala and Tamil be made state languages on a basis of
parity. He referred to the mounting chauvinism in the country:
―It would have been easy for me and the members of my party to have sponsored
the very popular idea Sinhalese only and we would have been acclaimed as heroes
as a good many others have been. But our party has taken up a consistent position.
Ever since our party was launched we have never faltered or wavered from that
position because we felt that was the correct line to take. That position we still
adhere to. However unpopular that line of action might be, I am convinced myself
of the correctness of that attitude. It might even mean going into the political
wilderness for some time, but still we the members of the LSSP are prepared to
face that. Let there be no mistake about this‖ (Hansard, 19 th October 1955)
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In the debate in Parliament, Leslie Goonewardane with great foresight warned that the
consequences of forcing the Sinhala language on an unwilling minority would be ethnic
rioting and separatism:
―There is the grave danger … if those people … feel that a grave and irreparable
injustice is done to them, there is a possibility of their deciding even to breakaway
from the rest of the country‖.
(Hansard, 8 th June 1956)
In the aftermath of the 1958, 1959 communal flare – ups the FP resorted to civil
disobedience, non-violent struggles and sathyagraha to win Tamil rights. The
Bandaranaike Government‘s ‗Sri Campaign‘ to introduce Sinhala number plates on
vehicles in Jaffna evoked strong protests led by the FP. As part of the resistance to the
Government‘s action the FP introduced a postage stamp as defiance to government
authority. In 1961 as a protest against the introduction of the Court‘s Bill that imposed
the use of Sinhala only policy throughout the north east the FP barricaded government
offices in the north. The mounting tension brought reprisal from the government which
kept the leaders of the FP under house arrest.
During this period the FP organized Tamil Public servants in Arasanka Eluthuvinargnar
Sangam (AES) an exclusive union for Tamils in the public service. In December 1962,
the FP formed a trade union for estate workers, the Ilankai Tholiiar Kazaham the
professed purpose of which was to demonstrate the Federalists‘ concern for and solidarity
with the Tamil speaking estate workers. After the FP entered the Dudley Senanayake
government in 1965 the party expanded its labour activities to include a few other types
of Tamil speaking workers, principally port workers in Trincomale.
The eruption of communal issues in politics created particularly grave problems for trade
unions with multi – communal composition and ethos of hostility towards communalism.
The worst affected was the Government Clerical Service Union (GCSU) which contained
a sizable non – Sinhala membership. The GCSU had for years disparaged sentiments and
appeals which threaten the solidarity of the union and the labour movement.
The union‘s 1965 annual report condemned ―attempts to raise communalism and thereby
disrupt the working class and trade union movement‖, and urged that the GCSU ―should
show itself as a model organization where members belonging to various communities,
professing different religious beliefs and holding divergent political views, carry on their
activities smoothly‖.
The GCSU‘s two principal rivals for members among government clerks were the Sri
Lanka Rajaye Lipikaru Sangamaya (SLRLS) which consisted exclusively of Sinhala
clerks and the Arasanka Eluthuvinargnar Sangam (AES) which sought explicitly and
solely to represent the Tamils in the General Clerical Service. The SLRLS came into
being in 1956 as a breakaway group of the GCSU.
The dilemmas the GCSU faced with the reappearance of the official language
controversy stemmed not only from its partisan alignment with the SLFP - Left Alliance
108

ut also from its changing composition. A decade earlier, the entire membership had been
recruited on the basis of competence in the English language. By 1966 however, many
government clerks who were educated in Sinhalese had been recruited. The GCSU had
for years had agitated for the protection of the ―old entrants‖ public servants recruited
before the adoption of Sinhala as the official language in 1956.
It has been claimed that the idea for the political protest strike on the language issue
staged on 8 January 1966 originated with the labour organizations rather than with the
political parties involved.
During 1965 the SLRLS joined in forming a ―front‖ of trade unions, mostly small public
servants organizations with the declared objective of protecting the Sinhala language
from the action of the UNP – led ‗National‘ Government. This front was claimed to have
been instrumental in proposing the January 1966 strike. There was widespread
victimization of strikers in the public service and other public institutions such as the
Ceylon Transport Board (CTB).
During this period there was to be seen a vulgar communal campaign in the country and
the working class based parties who had coalesced with the SLFP for governmental
power were not absolved of responsibility for the situation.
The Tamil parties boycotted the Constituent Assembly that promulgated the 1972
Republican Constitution on the ground that their proposals for inclusion in the
constitution were not considered. The end result was that all Tamil political parties came
together and formed the Tamil United Liberation Front (TULF) to strive for a separate
state of Tamil Eelam. The separatist movement gathered momentum and the leadership
came to be headed by militant armed youth and eventually the Liberation Tigers of Tamil
Eelam (LTTE) came to lead the movement through a process of physical annihilation of
other militant groups.
JR Government
1977 elections was a watershed in the political evolution of the country. An authoritarian
Presidential System of government was introduced and the country was opened out for
economic exploitation by local and foreign capital. The Tamil militancy in the north –
east was treated as a military problem rather than an extension of ethnic conflict. The
detailed publication of the University Teachers for Human Rights (Jaffna) documents
much of the indiscriminate violence unleashed by the state‘s armed forces during the
period of UNP rule (UTHR 1990, 1991a, 1991b, 1991c, 1992, 1993, 1994).
Sasanka Perera in his Political Violence in Sri Lanka: Dynamics, consequences and
Issues of Democratization refers to the prominent role played by the Jathika Sewaka
Sangamaya (JSS) in the anti Tamil violence (Black July) of 1983. He states: ―while still
being in the opposition, the UNP under the skilful organizational abilities of J.R.
Jayawardena re-organized its trade union JSS into a well oiled trade union capable of
immediate industrial strikes when required as well as a private army of thugs who could
operate with impunity. The JSS‘s latter capability came into play in the immediate post-
109

election period when the UNP assumed power and continued throughout UNP‘s long rule
of seventeen years. It was in the context of this latter function of the JSS that political
violence in Sri Lanka saw a spectacular growth both under Jayawardena and Premadasa.
The efficiency and the destructive power of the JSS were clearly visible in the prominent
role it played in the anti – Tamil violence of 1983‖. The President of the JSS at that time
was Cyril Mathew a powerful member in the Jayawardena Cabinet and a virulent
opponent of any concessions to the Tamil community.
During the 1994 – 2004 periods some onerous attempts took place to defuse the situation
and opt for political settlement of the armed conflict. An environment conducive to such
an eventuality was seen to be taking place. A trade union alliance for peace came into
being but LTTE intransigence and its irreconcilable demands exacerbated issues. The
2002 ceasefire agreement failed to produce the desired results and as a consequence the
communal tide that took over the country in 2004 brought the country to open war with
the LTTE fighting for a separate state. The Janatha Vimukthi Peramuna (JVP) the key
element of whose ideology is based on Sinhala nationalism had no difficulty in teaming
up with Jathika Hela Urumaya (JHU) to promote the values and rhetoric of Sinhala
Buddhist platform in the run up to the election of Mahinda Rajapakse as President of Sri
Lanka in 2005.
Prelude to Tamil Militancy
In his Way out for the Tamil speaking people first published in 1963, V.
Karalasingham a trenchant critic of FP and politics of Tamil exclucism enumerates the
very many decisive steps taken against the Tamil speaking people by successive
governments in the post – independence period. He states: ―it is no exaggeration to say
that Tamil speaking people have been reduced to the position of an oppressed national
minority. This oppression is manifest in all fields – in open legislation, in concealed
administrative actions and regulations and finally, in the direct connivance at, if not
actual encouragement… of programist activity against the Tamil speaking people‖.
In the legislative sphere he refers to (1) the passing of the citizenship acts – which
at one stroke deprived a million Tamil speaking people in the plantation of their political
and civil rights; (2) the Sinhala Only Act of 1956 which denied to the Tamil language an
equal status before the law. (3) The language of the Courts Act of 1961 which imposed
on the law courts at all levels and in the wholly Tamil speaking areas of the Northern and
Eastern provinces the Sinhala language.
In the administrative field the government pursued discriminatory land
colonization polices in the Northern and Eastern provinces. Appointments to the public
services and other public institutions were not on the basis of merit; and unofficially a
quota system was introduced to the grave prejudices of the Tamil speaking people. And
where no quota system operated there was to be seen flagrant and open discrimination
against Tamil speaking people in the matters of appointments to and promotions within
the public services. Even institutions of higher learning were not free of such
discrimination.
110

Development projects were determined not on economic considerations but were
so formulated as to exclude as far as possible, the Tamil speaking from their benefits.
There were even disparity in wages at that time between equally qualified Sinhalese and
Tamil speaking persons for identical work – while a Sinhalese pundit was paid a
graduate‘s salary his opposite a Tamil pundit was paid on a much lower scale‖.
According to Karalasingham more ominous than legislative and administrative
discrimination against the minorities was the resort to pograms against them by the ruling
authorities. The tragic events of 1956 in the Galoya valley and the communal
disturbances of 1958, 1959; the broken promises of 1959 (Bandaranaike Chelvanayagam
Pact) and 1965 (Dudley – Chelvanayagam Agreement); the failure to concede the
reasonable proposals of the moderate Tamils in the 1972 constitution, the standardization
issue; the pogroms unleashed in 1977 and 1981, the fraudulent District Development
Council elections, burning of the Jaffna Library, the use of Prevention of Terrorism Act
and indiscriminate use of emergency regulations against Tamil youth and the holocaust of
1983 which was unprecedented in time, brought Tamil militancy that was developing to
the fore to articulate the demand for a separate state of Eelam through military means.
Eelam war IV that began in 2006 ended in 2009 with the military defeat of the
LTTE and the physical decimation of its leadership. The war is over. With that Tamil
exclusivist politics has reached a dead end. What next?
The labour movement across the north – south ethnic divide has to come together
to forge links with each other and build alliances with those political forces in the south
that are supportive of the legitimate rights and political aspirations of the Tamil speaking
people and that are in struggle for greater democracy, economic equity, pluralism and
against discrimination, oppression and chauvinism. Such a movement needs to be set
going without delay.
111

The Right to Strike
The applicability of international standards in Sri Lanka
S.H.A.Mohamed
Introduction
The right to strike is a topic of intense discussion in industrial relations. The limits within
which it can be exercised and the applicability of international standards has always
remained a grey and contested area in Sri Lanka‘s industrial relations process. This paper
seeks to critically appraise the applicability of international standards in Sri Lanka on the
right to strike. In doing so, the paper examines five specific aspects which have a direct
bearing on the subject, namely the impact of the ILO, its instruments and principles on
member States, ILO Principles on the Right to Strike, Precedents on the application of
principles of Conventions and the customary international law, Economic imperatives
and the ILO Governing Body Committee on Freedom of Association Case No. 2519 (Sri
Lanka) on the right to strike.
1. The impact of the ILO, its instruments and principles on member
States
Sri Lanka was admitted as a member of the International Labour Organization in 1948
and thereby it is obliged to act in terms of the Constitution of the ILO.
The principle of freedom of association is set out in the preamble to the Constitution of
the International Labour Organization (ILO) adopted in 1919. This was further
strengthened and reemphasized in the Declaration of Philadelphia to provide more clarity
to the aims and purposes of the ILO. The declaration was adopted on 10 th May 1944 and
annexed to the Constitution of the ILO in 1946.
In terms of the constitution of the ILO, all member states are bound to adhere to the basic
principles of freedom of association and subject them to the scrutiny of the ILO. This
provision is applicable irrespective of a member state‘s ratification of Conventions
dealing with the right to freedom of association or its connected rights.
Article 19, paragraph 5(e) of the ILO Constitution requires all member countries to
report to the Director-General of the International Labour Office, at appropriate intervals
as requested by the Governing Body, the position of its law and practice with regard to
the matters dealt with in the Convention, showing the extent to which effect has been
given, or is proposed to be given, to any of the provisions of the Convention by
legislation, administrative action, collective agreement or otherwise and stating the
difficulties which prevent or delay the ratification of such Convention 41 .
41 Constitution of the ILO
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All member states of the ILO are also bound to respect a certain number of principles,
including the principles of freedom of association which have become customary rules
above the Conventions. The ILO Fact Finding and Conciliation Commission on Freedom
of Association, a ―quasi-judicial‖ body set up by the common consent of the ILO and the
Economic and Social Council of the United Nations held this view in defining the
applicability of the principle of freedom of association in examining a complaint alleging
an infringement of trade union rights against Chile in 1975.
In its conclusions the ILO quasi-judicial body held that Chile has not ratified the
Freedom of Association and Protection of the Right to Organise Convention, 1948 (No.
87), which, accordingly, has no binding effect for this country. However, by its
membership of the International Labour Organisation, Chile is bound to respect a
certain number of general rules which have been established for the common good of the
peoples of the twentieth century. Among these principles, freedom of association has
become a customary rule above the Conventions. As the Committee on Freedom of
Association of the Governing Body indicated in a report approved by the latter at its
session in March 1952, in connection with trade union rights, "the function of the
International Labour Organisation in regard to trade union rights is to contribute to the
effectiveness of the general principle of freedom of association as one of the primary
safeguards of peace and social justice". The Committee further indicated that, in
fulfilling its responsibility in the matter, it must not hesitate to discuss in an international
form cases which are of such a character as to affect substantially the attainment of the
aims and purposes of the ILO as set forth in the Constitution of the Organisation, the
Declaration of Philadelphia and the various Conventions concerning freedom of
association 42 .
The ILO Declaration on fundamental principles and rights of work adopted in 1998,
asserts “…that all Members, even if they have not ratified the Convention in question,
have an obligation arising from the very fact of membership in the organization, to
respect, to promote and to realize in good faith and in accordance with the Constitution,
the principles concerning the fundamental rights…”.
By virtue of being a member of the ILO the aforementioned provisions are equally
applicable to Sri Lanka and the Government is bound to bring its laws and practices to
conform to the principles of the ILO.
The obligation of an ILO member State to adhere to ILO principles is much greater in the
event that it ratifies any Convention on freedom of association or its connected rights.
The Government of Sri Lanka at present is a signatory to ILO Convention No.87 on
Freedom of Association and Protection of the Right to Organize and ILO Convention
No.98 on the Right to Organize and Collective Bargaining.
42 Report of the Fact-Finding and Conciliation Commission on Freedom of Association concerning the
situation in Chile, 1975, para. 466.
113

The ILO is a specialized agency of the United Nations. Certain UN constitutional
provisions have overarching effects on its specialized agencies. In view of Sri Lanka‘s
membership in the United Nations, it is bound to comply with the provisions of Article
102 of the Charter of the United Nations, which states as follows:
Article 102 of the Charter of the United Nations:
(i) Every treaty and every international agreement entered into by any member of
the United Nations after the present Charter comes into force shall as soon as
possible be registered with the secretariat and published by it.
(ii) No party to any such treaty or international agreement which has not been
registered in accordance with the provisions of paragraph 1 of this Article
may invoke that treaty or agreement before any organ of the United Nations.
The Government of Sri Lanka, in terms of the Article 102 of the Charter of the United
Nations and Article 20 of the Constitution of the ILO registered its ratification of ILO
Conventions No.87 and No.98 with the Secretariat of the United Nations, respectively on
15.9.1995 and 13.12.1972.
These ILO Conventions are similar to international treaties, specific to the field of labour
law, and are subject to ratification. When a member state ratifies a Convention, the
country pledges itself to apply the Convention‘s terms and provisions. It is through the
ratification of an ILO Convention that a member state formally undertakes to make the
provisions of the Conventions effective both in law and practice.
Treaties such as Conventions adopted by the ILO represent a unique sphere in the
international treaty making because they require individual States that ratify them to
guarantee certain social, labour or human rights to its own citizens as well as to
foreigners residing in its territory, in terms of Article 19, para. 5(d) and (e) of the
Constitution of the ILO. These provisions embedded in the Constitution of the ILO affect
the traditional concept of national sovereignty, since States acknowledge through the
ratification that there is in these fields an international law transcending frontiers, to
which governments must adhere even as regards matters that are ordinarily within their
own domain (domaine réservé).
In order to give practical effect to this principle, the ILO has sought from the start to
establish methods of supervision that practically work and are also acceptable to member
States. Firstly, there are the provisions contained in the Constitution of the ILO under
which governments have to report to the ILO on:
(a) the measures they have taken to submit newly adopted standards to
the competent national authorities;
(b) the measures they have taken to give effect to the Conventions that
they have ratified; and
114

(c) the position of their law and practice as regards the matters dealt
with in Conventions that they have not ratified and in
Recommendations.
Obligations in sub paragraph (a) and (c) above arise under Article 19 of the Constitution
of the ILO and the obligations in sub paragraph (b) arise under Article 22 of the
Constitution of the ILO.
Requirements under Article 19 and 22 of the Constitution of the ILO are further
reinforced by two methods of proceedings where a state is felt to be failing in its
obligations of respecting Conventions that it has ratified. Article 24 and 25 of the
Constitution of the ILO provides for the examination by the Governing Body of
complaints formally designated as ―representations‖ by the workers‘ or employers‘
organizations.
Article 26 to 29 and 31 to 34 of the Constitution of the ILO also provide for a
considerably more elaborate procedure for the examination of complaints. Under this
procedure any member State may file a complaint with the ILO if it is not satisfied that
another member State is securing the effective observance of any Convention which both
have ratified. Similar proceedings may be initiated by the Governing Body of the ILO,
either on its own or on receipt of a complaint by a delegate to the International Labour
Conference.
It is commonly accepted that based on the recognition of the fact that, if international
supervision is to have any meaning, the reports of governments must be carefully
examined and evaluated. Accordingly, this task has been carried out each year since 1927
by the Committee of Experts, which is appointed by the Governing Body of the ILO
consisting of 20 independent persons of the highest standing, with eminent qualifications
in the legal and social fields, drawn from all parts of the world. The report of this
committee is submitted to and discussed by a standing tripartite Committee of the
International Labour Conference each year. The Committee of Experts on the Application
of Conventions and Recommendations have made observations and directives to the
government of Sri Lanka on many issues dealing with the application of ratified
Conventions of the ILO and also especially on the rules to be observed in exercising the
right to strike.
In 1951, the ILO established a tripartite body named the Committee on Freedom of
Association to examine complaints alleging violations of the Conventions on freedom of
association, regardless of whether or not the countries concerned have ratified those
instruments. The consent of the governments concerned is not necessary for the
examination of these complaints. The legal basis for this concept rests in the Constitution
of the ILO and the Declaration of Philadelphia, according to which member states, by
virtue of their membership in the ILO, are bound to respect the fundamental principles
contained in its Constitution, particularly those concerning freedom of association, even
though they have not ratified the Conventions on this subject.
115

The Committee on Freedom of Association systematically examines the substance of the
cases submitted to it and presents conclusions to the Governing Body of the ILO,
recommending, with attention to the governments concerned to any principles called into
question, and in particular to any recommendations made with a view to settling the
difficulties raised in the complaint. The Committee on Freedom of Association meets
three times a year and has examined over 2500 cases, which are often of a very serious
nature. During this process, it has established a series of principles, which according to
the ILO constitutes a veritable international law on freedom of association. In 1953, the
Chairman of the ILO Committee on Freedom of Association held that it is ―a kind of
customary rule in common law, outside or above the scope of any Conventions or even of
membership of one or other international organizations‖ 43 .
The ILO Committee on Freedom of Association since its inception has built up a very
balanced and coherent body of principles on freedom of association and collective
bargaining, based on the provisions of the Constitution of the ILO and of the relevant
Conventions, Recommendations and resolutions. This body of principles has been created
by a specialized and impartial international body with a high reputation, which adopts a
tripartite perspective and whose work is based on real situations, namely concrete, varied
and frequently very serious and complex allegations of violations of trade union rights
throughout the world; it has therefore acquired a broadly recognized authority at both the
international and national levels, where it is increasingly being used for the development
of national legislation, as well as in the various bodies responsible for the application of
trade union law, for the resolution of major collective disputes and in publications on
jurisprudence 44 .
In terms of Article 32 of the Constitution of the ILO a government that does not accept
the final decision of the aforementioned ILO supervisory process is only entitled to refer
the complaint to the International Court of Justice in order to affirm, vary or reserve the
findings or recommendations of the ILO. This clearly vindicates the cogent effectiveness
of the provisions of ILO Conventions and the corollary body of principles enshrined in
the customary rules.
2. ILO Principles on Right to Strike in brief
Convention No.87 of the ILO on Freedom of Association and Protection of the Right to
Organise, for the purpose of the Convention, defines workers organizations as any
organization “for furthering and defending the interests of workers”. This definition is
clearly of fundamental importance not only in that it sets down guidelines for
differentiating such organizations from those of other types, but also because it specifies
that the purpose of such organizations is for “furthering and defending the interests of
workers” thereby demarcating the boundaries within which the rights and guarantees
43 ILO minutes of the 121 st session of the Governing Body, 3-6 March 1953, page 39
44 Introduction to the Digest of Decisions and Principles of the Freedom of Association
Committee, 1996
116

ecognized by the Convention are applicable, and consequently protected in so far as they
achieve or seek to achieve stated objectives 45 .
In accordance with the principles of the ILO, some types of trade union action can take
the form of a slow down in work (go-slow strike) or when work rules are applied to the
letter (work-to-rule); these forms of strike action are often just as paralyzing as a total
stoppage. The ILO Committee on Freedom of Association, a quasi judicial arm of the
ILO supervisory process, has strongly held and interpreted them to be an accepted form
of trade union ―strike action‖ in accordance with the provisions of ILO Convention No.
87 on Freedom of Association and Protection of the Right to Organise, provided that they
are conducted in a peaceful manner 46 .
From its very earliest days, during its second meeting, in 1952 the ILO Committee on
Freedom of Association declared strike action to be a right and laid down the basic
principles underlying this right, from which all others to some extent derive. This
recognizes the right to strike to be one of the principle means by which workers and their
organizations may legitimately promote and defend their economic and social interests 47 .
Convention No.87 on Freedom of Association and Protection of the Right to Organize,
establishes the right of workers‘ and employers‘ organizations to ―organize their
administration and activities and to formulate their programmes‖ (Article 3), and the aims
of such organizations as ―furthering and defending the interests of workers or of
employers‖ (Article10) 48 . On the basis of these provisions, the two bodies set up to
supervise the application of ILO standards, the ILO Committee on Freedom of
Association (since 1952) and the ILO Committee of Experts on the Application of
Conventions and Recommendations (since 1959), have frequently stated that the right to
strike is a fundamental right of workers and of their organizations, and have defined the
limits within which it may be exercised, laying down a body of principles in connection
with the right to strike, giving rise to substantial ―case law‖ in the broadest senses of the
term which renders more explicit the extent of the provisions mentioned above 49 .
In this context it is interesting to note that the ILO has further strengthened its
commitment towards the recognition of the right to strike as part of the right to freedom
of association through two resolutions at its international labour conference which
provide guidelines for ILO policy. Firstly, the ―Resolution concerning the Abolition of
Anti-Trade Union Legislation in the States Members of the International Labour
Organisation‖ was adopted in 1957, called for the adoption of laws ensuring the effective
and unrestricted exercise of trade union rights, including the right to strike, by workers 50 .
45
ILO Principles Concerning Right to Strike – page 13
46
ILO Committee on Freedom of Association Cases Nos. 997,999 & 1029 on Turkey - Paragraphs 496-
497, Digest of decisions and principles of the Freedom of Association Committee of the Governing Body
of the of the ILO, 1996).
47
Paragraphs 473-475, Digest of decisions and principles of the Freedom of Association Committee of the
Governing Body of the of the ILO, 1996
48
ILO Principles Concerning Right to Strike – Page 8
49
Ibid.
50 th
Record of Proceedings. International Labour Conference, 40 Session 1957. Geneva.
117

Secondly, the ―Resolution concerning Trade Union Rights and their Relation to Civil
Liberties‖, adopted in 1970, invited the ILO Governing Body to instruct the Director
General to take action in a number of ways ―with a view to considering further action to
ensure full and universal respect for trade union rights in their broadest sense‖, with
particular attention to be paid, inter alia, to the ―right to strike‖ 51 .
Restriction of the right to strike
Over the years, the supervisory bodies of the ILO have helped to shape and bring greater
precision to the concept of essential service in the strict sense of the term (for which
strike action may be prohibited). In 1983, the ILO Committee of Experts on the
Application of Conventions and Recommendations defined such services as those ―the
interruption of which would endanger the life, personal safety or health of the whole or
part of the population‖ (Report of the ILO Committee of Experts on the Application of
Conventions and Recommendations) 52 .
The ILO Committee on Freedom of Association also held that the principle regarding the
prohibition of strikes in essential services might lose its meaning if a strike were declared
illegal in one or more undertakings which were not performing an "essential service" in
the strict sense of the term, i.e. services whose interruption would endanger the life,
personal safety or health of the whole or part of the population 53 . The Committee on
Freedom Association has considered it essential services in the strict sense, where right to
strike may be subject to major restrictions or even prohibitions, only on sectors such as
the hospital sector, electricity services, water supply services, the telephone service, air
traffic control 54 .
The only other instance in which the Committee on Freedom of Association considers
that a general prohibition of strikes can be justified is ―in the event of an acute national
emergency and for a limited period of time‖ 55 . Clearly this concept applies only in
exceptional circumstances, for example, against the backdrop of an attempted coup d’
ètat against the constitutional government, which gives rise to a state of emergency ‖ 56 .
The ILO Committee on the Application of Conventions and Recommendations also
considers that prohibition of recourse to strike action can be justified in case of an acute
national crisis and then, only for a limited period and to the extent necessary to meet the
requirements of the situation. According to the said ILO Committee of experts ―this
means genuine crisis situations, such as those arising as a result of a serious conflict,
51 Record of Proceedings. International Labour Conference, 54 th Session 1970. Geneva.
52 Report III (Part 4B), International Labour Conference, 69 th Session, 1983. Geneva – ILO General Survey
1983.
53 Paragraph 400, Digest of decisions and principles of the Freedom of Association Committee of the
Governing Body of the of the ILO, 1985.
54 Paragraph 544, Digest of decisions and principles of the Freedom of Association Committee of the
Governing Body of the ILO, 1996.
55
Paragraph 527, Digest of decisions and principles of the Freedom of Association Committee of the
Governing Body of the of the ILO, 1996.
56
Paragraphs 528-530, Digest of decisions and principles of the Freedom of Association Committee of the
Governing Body of the of the ILO, 1996.
118

insurrection or natural disaster in which the normal conditions for the functioning of the
society are absent 57 .
Freezing of trade union action and requisitioning of workers
Under no circumstances is it possible in terms of the principles of the ILO Conventions to
order a freezing of a trade union or a strike action or a requisitioning of workers contrary
to the provisions set out for that purpose. In two Committee on Freedom of Association
Cases against Canada (Case Nos.1430 and 1438), it was held that whenever a total and
prolonged strike in a vital sector of the economy might cause a situation in which the life,
health or personal safety of the population might be endangered, a back-to-work order
might be lawful, if applied to a specific category of staff in the event of a strike whose
scope and duration could cause such a situation 58 . Requisition is not an open discretion,
but shall be subject to the criteria specified.
The use of the military and requisitioning orders to break a strike over occupational
claims, unless these actions aim at maintaining essential services in circumstances of the
utmost gravity, constitute a serious violation of freedom of association 59 . As regards the
intervention of the Police during a strike, the Committee on Freedom of Association has
stated the opinion that, while workers and their organizations have an obligation to
respect the law of the land, the intervention by security forces in strike situations should
be limited strictly to the maintenance of public order and only if there is a serious threat
to law and order 60 .
Similarly, ―the authorities should resort to calling in the police in a strike situation only if
there is a genuine threat to public order. The intervention of the police should be in
proportion to the threat to public order and governments should take measures to ensure
that the competent authorities receive adequate instructions so as to avoid the danger of
excessive violence in trying to control demonstrations that might undermine public
order‖ 61 .
57
Paragraph 152, Freedom of association and collective bargaining. General Survey of the reports on the
Freedom of Association and Protection of the Right to Organise Convention, 1948 (No.87), and the Right
to Organise and Collective Bargaining Convention, 1949 (No.98). Report III (Part 4B), International
Labour Conference, 81 st Session, 1994 Geneva.
58
Paragraph 572, Digest of decisions and principles of the Freedom of Association Committee of the
Governing Body of the of the ILO, 1996.
59
Paragraph 573, Digest of decisions and principles of the Freedom of Association Committee of the
Governing Body of the of the ILO, 1996 – Case No. 1201.
60
Paragraphs 580-581, Digest of decisions and principles of the Freedom of Association Committee of the
Governing Body of the of the ILO, 1996.
61
Paragraph 582, Digest of decisions and principles of the Freedom of Association Committee of the
Governing Body of the of the ILO, 1996 – Case No.1541.
119

3. Precedents on the application of principles of Conventions and the
customary international law
The complete isolation of constitutional law from the dynamic impact of international
law and the obligations arising out of ratifications of ILO Conventions is neither possible
nor practical today. In this context national courts have a duty, as much as possible, to
interpret their constitutional texts and statutory laws in a manner that is generally
harmonious with the basic principles of international law, taking into consideration the
principles of human rights and fundamental freedoms that are contained therein.
In a ―dualist‖ legal system such as the one prevalent in Sri Lanka, there is significant
precedent for International Law and ILO Conventions to be used and applied in similar
ways in different countries. The only specific limitation to their application is in the
situation where the national law is clearly and unambiguously inconsistent with
international law and international Conventions of the ILO. In particular, dualist
countries have an additional feature not possessed by ―monist‖ countries, namely the
application of common law not embodied in statute but instead evolved by interpretation
in the courts. This provides an added opportunity for international law and principles of
ILO Conventions to be used and accepted by way of judicial precedent.
Incorporating principles of Conventions
The fact that a particular dualist country may have ratified an international convention
but not incorporated it into domestic law, does not mean that the convention is thereby
rendered ineffectual in that country. The Vienna Convention on the Law of Treaties 62 ,
effectively provides that every treaty in force is binding upon the parties to it and it must
be performed by them in good faith (pacta sunt servanda). Therefore States are legally
bound to implement ratified international conventions in a manner similar to international
treaties.
Today it is possible to observe many dualist countries resorting to incorporating
principles of international Conventions and/or Treaties to which they are a party, despite
the fact that legislation for their incorporation are at times not provided for.
India is a strict dualist State, but in the case of Vishaka and others Vs. State of Rajasthan
and others 63 it sought to positively adopt international principles into its body of laws.
Article 32 of the Indian Constitution empowered the Supreme Court to issue guidelines
for the enforcement of constitutionally guaranteed rights. Since domestic law did not
address the issue and did not formulate effective measures to prevent sexual harassment
of working women at the workplace, the Court decided to formulate general principles in
order to define the concept of sexual harassment and to ensure its eradication. The Court
referred to the Convention on the Elimination of All Forms of Discrimination against
Women and on the statements of the United Nations Committee on the Elimination of
62 United Nations Treaty Series, vol.1155, p331. Article 26
63 13 August 1997, 3 L.R.C. 361 Supreme Court of India
120

Discrimination against Women (the international body responsible for supervising the
application of this Convention).
In this instance the Supreme Court of India held that ―Gender equality includes
protection from sexual harassment and the right to work with dignity, which is a
universally recognized basic human right. The common minimum requirement of this
right has received global acceptance. The international conventions and norms are,
therefore, of great significance in the formulation of the guidelines to achieve this
purpose.‖
It is also possible to observe that further consensus was reached on the domestic
application of International Human Rights norms in dualist countries through the
―Bangalore Principles‖ of 1998. A Judge of the Supreme Court of the Democratic
Socialist Republic of Sri Lanka was also officially involved in the deliberations leading
to the development of these principles which consisted of a high level judicial colloquium
administered by the Commonwealth Secretariat.
In essence the ―Bangalore Principles‖ articulate that it is within the proper nature of the
judicial process and well established judicial functions of domestic courts to have regard
to international obligations which a country undertakes whether or not they have been
incorporated into domestic law, for the purpose of removing ambiguity or uncertainty
from constitutions, legislation or common law as well as if the law is incomplete or there
is a gap. 64 The ―Bangalore Principles‖ clearly state that:
―however, where national law is clear and inconsistent with the international obligations
of the State concerned in common law countries the national court is obliged to give
effect to national law. In such cases the court should draw such inconsistency to the
attention of the appropriate authorities since the supremacy of national law in no way
mitigates a breach of an international legal obligation, which is undertaken by a
country” 65 .
Integrating ILO principles through customary international law
Customary international law also contributes greatly to the application of principles of
International Conventions and/or Treaties such as that of the ILO into local legal systems.
The adoption of customary international law is perfectly possible, subject to certain
conditions. States following the dualist system such as Sri Lanka and many countries of
the British Commonwealth have consistently observed this rule. The general principle
applied by courts in dualist-type systems is that ―customary rules are to be considered
part of the law of the land and enforced as such, with the qualification that they are only
incorporated so far as is not inconsistent with Acts of Parliament or prior judicial
decisions of final authority‖ 66 .
64
Justice Layton, Judge of the Supreme Court of Australia and Deputy President of the Commonwealth
Administrative Appeals Tribunal
65
Ibid.
66
Ian Brownlie, Principles of Public International Law, 1995, p.43.
121

The issue in respect of this in Sri Lanka was to a significant extent settled in the decision
of the Supreme Court in the Offences Against Aircraft Bill of 1982 – (Retrospective
criminal legislation) 67 . By 1982 Sri Lanka had ratified international conventions (Tokyo
Convention [1963], the Hague Convention [1970], and the Montreal Convention [1971])
that made hijacking an illegal act and gave jurisdiction over the offender to the State in
which he or she is found.
Article 13(6) of the Constitution of the Democratic Socialist Republic of Sri Lanka
generally prohibits retrospective criminal legislation:
“No person shall be held guilty of an offence on account of any act or omission which did
not, at the time of such act or omission, constitute such an offence, and no penalty shall
be imposed for any offence more sever than the penalty in force at the time of such
offence was committed”.
Article 13(6), continues to set out an important exception to the general prohibition
against retrospective criminal laws:
“Nothing in this Article shall prejudice the trial and punishment of any person for any
act or omission which, at the time when it was committed, was a criminal law according
to the general principles of law recognized by the community of nation”.
As Sri Lanka pursues a dualist legal system, under ordinary circumstances it requires
enabling legislation to give effect to the anti-hijacking Conventions which it has ratified.
Since hijacking was considered a criminal act under the customary international law, it
was not incumbent upon the Sri Lankan legislature to have enacted domestic enabling
legislation due to there being no prior inconsistent Act of Parliament or contrary judicial
precedent.
The Supreme Court of Sri Lanka in its decision on the constitutionality of the Offences
Against Aircraft Bill, held that ―The offences referred to in the Bill are all criminal
according to the general principles of law recognized by the community of nations‖. This
gave recognition to the fact that hijacking is a crime under the customary international
law and therefore the absence of necessary enabling domestic legislation to give effect to
the precise provisions of the anti-hijacking Conventions will not hinder the application of
the principles of the relevant international Convention.
In the above circumstance it was proved possible to invoke the principle of International
Conventions in Sri Lanka, especially by the Supreme Court despite specific enabling or
incorporating legislation not being adopted.
This is a classic example of Sri Lanka‘s smooth harmonization with the application of
customary international law while pursuing a dualistic legal system.
67 Parliamentary Bills, 1978-1983, Vol.1, p.137.
122

This ability to incorporate customary international law has a positive impact in
strengthening and reinforcing the applicability of International Conventions in Sri Lanka.
The ILO Conventions come into action by the requirement that States take such actions
as may be necessary to make the provisions effective, in terms of Article 19(5)(d) of its
Constitution. Judicial decisions are therefore an important means to ensure and strengthen
state compliance with international law. It should also be noted that decisions by judicial
bodies contrary to international obligations may lead to governments being held
responsible at the international level for not honouring their commitments and lead to
many other disputes that may involve various international and regional stakeholders.
Ratification without incorporation does not transform in to a ―platitudinous or ineffectual
act‖. As illustrated above due to both domestic and international precedent and obligatory
provisions embedded in them, they have a greater applicability in the given context of the
current situation.
Application of ILO Principles on the right to strike in Sri Lanka
Sri Lanka in the recent past has demonstrated its commitment and willingness to comply
and observe principles of ILO concerning the right to strike. Interestingly it has avoided
confronting the conclusions and decisions of the ILO supervisory body in this regard. A
careful examination of these supervisory body proceedings makes it evident that Sri
Lanka seeks to pursue a positive approach of exploring the possibility of adopting them
to suit the specific domestic practices and circumstances.
The approach of Sri Lanka in the following instance is a clear example to this policy of
integration and observance of ILO benchmarks.
The Government of Sri Lanka in the year 2000, clamped a blanket ―essential service
order‖ covering a large section of services as ―essential‖ under the Emergency
Regulations of 3 May 2000, taking in to account the then prevalent war situation in the
country in the aftermath of the Elephant-Pass military debacle in the Northern Province.
These ―essential services orders‖ prohibited industrial or trade union actions at
workplaces that were declared as essential.
The ILO Committee of Experts on the Application of Conventions and
Recommendations examining a Complaint against the government of Sri Lanka on the
aforesaid ―essential service order‖ restricting strike or any other type of trade union
action held after exploring the reply of the government, the circumstances used to justify
the ―essential service orders‖ to restrict, right to strike or any other industrial action did
not fall in to the norms and principles of the ILO as required and raised a certain number
of points in a request addressed directly to the Government to rectify the situation at the
earliest. The Government was also asked to report in detail about this situation to the ILO
Committee of Experts on the Application of Conventions and Recommendations in the
year 2001 68 . As requested by the ILO Committee of Experts on the Application of
68 Report of the Committee of Experts on the Application of Conventions and Recommendations, Report
III(1A) International Labour Conference 89 th Session 2001 – pages 316-317.
123

Conventions and Recommendations, in the year 2001, the government of Sri Lanka
complied with the relevant obligations arising out of the Constitution of the ILO, its
Conventions and other principles and amended the 3 May 2000 Emergency Regulations
by the Emergency Regulations No.1 of 6 April 2001, which lifted the blanket ―essential
service order‖ and thus removed all obstructions or restrictions on the right to strike or
similar trade union action 69 .
As in the aforementioned incident, Sri Lanka has on many occasions complied with the
requests of the supervisory bodies and has taken measures necessary to be in conformity
with the principles of the ILO. Thus, the Government of Sri Lanka has continued to
create a positive precedent of not only honoring principles of the ILO but also not
allowing its laws or practices to violate ILO norms, though specific enabling legislation
giving effect to the matter concerned, is absent.
4. Economic imperatives
Preferential trade arrangements based on compliance with Core ILO
and UN Conventions
The Government of Sri Lanka gained eligibility to the European Union (EU) Generalised
System of Preferences Plus (GSP Plus) trade regime on the condition that it would ratify
and effectively enforce the 27 core human and labour rights UN/ILO Conventions. Out of
these 27 Conventions, 20 of them have to be ratified and implemented effectively by the
beginning of 2006, by beneficiary countries. This includes 16 core human rights and
labor rights, UN/ILO conventions. The remaining 7 Conventions relate to environmental
protection and governance principles, and should be ratified and effectively implemented
by 2009.
The EU granted the government of Sri Lanka the GSP Plus ―Zero Tariff‖ preference as
an incentive to the governments undertaking and commitment given at the beginning of
2005 to ensure that provisions of all these Conventions are enforceable and citizens can
have access to the rights enshrined in those international legal instruments. ILO
Convention No.87 on Freedom of Association and Protection of the Right to Organise is
also in the list of undertaking of the government given to the EU that it is possible to
effectively implement the rights enshrined in them. Had the government of Sri Lanka
made the European Union understand that these international Conventions are only
confined to mere ratification and cannot be implemented locally because no enabling
legislation exists or the citizens of Sri Lanka cannot in any way have access to the rights
enshrined in them due to administrative, legislative, legal and/or judicial restrictions, Sri
Lanka would never have been granted the trade preference as they would go against the
tariff rules of the EU and the World Trade Organization.
69 Report of the Committee of Experts on the Application of Conventions and Recommendations, Report
III(1A) International Labour Conference 90 th Session 2002 – pages 291-292.
124

This EU GSP Plus tariff preference covers over 6000 products, which can enter customs
barriers of the EU region on a ―Zero Duty‖ basis. However the government of Sri Lanka
is subject to the condition that the relevant Conventions including the ILO Convention
No.87 shall be effectively implemented. The EU GSP Plus tariff regime is extremely
beneficial to local exporters and especially to apparel exporters, in view of the strong and
dominant competition posed by China and India in the aftermath of the phasing out of the
Multi-Fibre Arrangement.
Sri Lanka was granted this unique trade preference strictly on the basis of the undertaking
given implying that it is possible to effectively implement the relevant ILO and UN
Conventions as pledged.
If it is to be established that Sri Lanka cannot effectively comply with the Conventions as
required by the EU GSP Plus trade regime, Sri Lanka runs a serious risk of completely
losing the said preferential trade facility at a crucial time when economic recession is
turning out be a phenomenal global issue.
The current cycle of GSP Plus regime encompasses the 2009 to 2011 period. Sri Lanka
has been granted a temporary extension of the facility till the end of 2009 subject to an
investigation on the application of provisions of three UN international human rights
instruments 70 .
Issues arising out of the effective application of the ICCPR is also a subject of contention.
Article 22 of the ICCPR refers to the right to freedom of association. On the subject of
freedom of association the ICCPR provides that nothing in it shall authorize State parties
to the ILO Convention No.87 on Freedom of Association and Protection of the Right to
Organise to take legislative measures which would prejudice, or to apply the law in such
a manner as to prejudice, guarantees provided for in that Convention. This makes it clear
that on the issue of Freedom of Association ILO Convention No.87 prevails as the
benchmark.
The current EU GSP investigation process has admitted that its scope of scrutiny focuses
on the application of ILO Convention No.87 71 . In this regard the conclusions of the ILO
quasi-judicial body on a complaint against the Government of Sri Lanka on the recent
judicial restriction of the right to strike stands to figure prominently. This goes to prove
that the obligation on the application of labour standards has transcended its traditional
legal frontiers and reached economically vital trade regimes, making the compliance with
them a necessary economic imperative.
70 The International Covenant on Civil and Political Rights, the Convention against Torture and other
Cruel, Inhuman or Degrading Treatment or Punishment and the Convention on the Rights of the Child.
71 Annual Survey (2008) of violations of trade union rights – International Trade Union Confederation
(ITUC), Brussels.
125

5. ILO Governing Body Committee on Freedom of Association Case
No. 2519 (Sri Lanka) on the right to strike
In September 2007, seven trade unions filed a Complaint before the ILO Governing Body
Committee on Freedom of Association (Case No.2519), alleging that in July 2006, the
Joint Apparel Association Forum (JAAF) a third party unconnected to a trade union
dispute between 14 port-workers‘ unions and the Sri Lanka Ports Authority (SLPA),
obtained a court order 72 to quash a trade union action. This Case was also supported by
the International Textile, Garment and Leather Workers‘ Federation (ITGLWF) and the
International Transport Workers‘ Federation (ITF).
The JAAF in its fundamental rights application before the Supreme Court claimed that, as
a result of the ―go slow 73 ‖ trade union action initiated by the Port unions, their normal
import and export business activities were affected and therefore their fundamental right
to equality and lawful occupation was being violated by the trade unions. The Supreme
Court having accepted the JAAF claim ordered all trade union action in the Ports to be
banned until the conclusion of the case and instructed the deployment of the Police and if
necessary the Armed Forces. The court‘s interim order came into effect from July 2006.
The port workers in their submissions to the ILO quasi-judicial body stated that the
determination of terms and conditions of the ―service contract‖ between the 14 Port
unions (employees) and their employer (the port) is strictly a matter of contractual
relationship between the independent contacting parties. Hence, terms and conditions of
that service contract can only be determined by the said two parties.
The unions also claimed that no third party (a business client of the port such as members
of the JAAF) only utilizing the services of the port may determine, compel or exert
pressure of judicial, political or any other nature on the terms and conditions under which
the14 Port unions shall offer their services to their employer and/or restrict the legitimate
right to resort to trade union action based on reasons of a merely monetary nature.
The Government in its legal submissions to the ILO Governing Body Committee on
Freedom of Association objected to the ILO‘s examination of the trade union complaint
on the basis that the case is sub judice, and it would be inappropriate to pass judgement,
as a suit concerning these matters was still pending before the Supreme Court. rejecting
the argument put forward by the Government, the ILO concluded that its responsibilities
and competence to examine allegations is not subject to the exhaustion of national
procedures. The ILO decided to proceed with the case, while bearing in mind the fact that
72 SC FR 248/2006
73 The unions claim that it only engaged in a ―work to rule‖ campaign and no evidence was submitted by
the JAAF, or cited by the Court, to establish that members of the 14 port trade unions had worked below
the stipulated work norm specified in the service contract they entered into with their employer. The unions
further allege that the characterization of their action as ―go-slow‖ is misleading, false and arbitrary. See
348 th Report of the ILO on Committee on Freedom of Association, adopted by the Governing Body of the
ILO at its 300 th Session (Geneva, November 2007), paragraphs 1117 and 1123.
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certain matters raised in the complaint are currently pending before the courts, and while
respecting the independence of the courts and due legal process underway.
The ILO Governing Body Committee on Freedom of Association recalled that the right
to strike may be restricted or prohibited : (1) in the public service only for public servants
exercising authority in the name of the state; or (2) in essential services in the strict sense
of the term – that is, services the interruption of which would endanger the life, personal
safety or health of the whole or part of the population. The ILO noted that apart from
JAAF‘s pleading of economic loss suffered as a result of the action – no evidence has
been put forward to establish the existence of a clear and imminent threat to the life,
personal safety or health of the whole or part of the population. In these circumstances
the ILO‘s quasi-judicial body has concluded that the Supreme Court‘s interim order is
contrary to the principles set out in ILO Convention No. 87 on Freedom of Association
and the Protection of the Right to Organise and ILO Convention No.98 on Right to
Organise and Collective Bargaining.
The Government of Sri Lanka in principle, hitherto has neither confronted nor rejected
this decision of the ILO. In terms of Article 37 of the Constitution of the ILO, member
States can challenge any question of dispute relating to the interpretation of the ILO
Constitution or Convention before the International Court of Justice. Sri Lanka as a
policy has always sought to adopt a policy of soliciting the technical expertise of the ILO
to make its laws and practices conform to international standards.
The policy of compatibility and conformity with ILO standards has continued to remain
an important ingredient of Sri Lanka‘s relations with the supervisory bodies. This was
amply demonstrated in the Government of Sri Lanka‘s submission to the ILO where it
clearly indicated it would abide by the recommendations of the ILO supervisory bodies
on the contested right to strike issue 74 .
74 348 th Report of the ILO on Committee on Freedom of Association, adopted by the Governing Body of
the ILO at its 300 th Session (Geneva, November 2007), paragraph 1135
127

348th Report of the Committee on Freedom of
Association
300 th Session of the ILO Governing Body – November 2007
CASE NO. 2519
Complaint against the Government of Sri Lanka
presented by
— the Health Services Trade Union Alliance
— the Free Trade Zone and General Services Employees Union
— the Jathika Sewaka Sangamaya
— the Suhada Waraya Sewaka Sangamaya
— the United Federation of Labour
— the Union of Post and Telecommunication Officers
— the Dumriya Podhu Sewaka Sahayogitha Vurthiya Samithiya
supported by
— the International Textile, Garment and Leather Workers‘ Federation
(ITGLWF) and
— the International Transport Workers‘ Federation (ITF)
Allegations: The complainants allege that the Sri Lanka Ports Authority (SLPA)
refused to negotiate wage increment issues, despite several attempts by the
complainants to compel negotiations, including a peaceful “work to rule” action
in which 14 trade unions participated. They also allege the filing of a complaint
by a third party unconnected to collective bargaining and judicial intervention
restricting the right to strike of trade unions.
1113. The complaint is set out in a communication of 27 September 2006. The International
Textile, Garment and Leather Workers‘ Federation (ITGLWF) and the International
Transport Workers‘ Federation (ITF) affiliated themselves with the complaint in
communications dated 30 October and 6 December 2006, respectively.
1114. The Government submitted its observations in communications of 8 February and 14 May
2007.
1115. Sri Lanka has ratified the Freedom of Association and Protection of the Right to Organise
Convention, 1948 (No. 87), and the Right to Organise and Collective Bargaining
Convention, 1949 (No. 98).
128

A. The complainants‘ allegations
1116. In its communication of 27 September 2006, the complainants allege that in March 2006 a
dispute over the issue of wage increments arose between the Sri Lanka Port Authority
(SLPA) – a state-owned enterprise responsible for the development, maintenance, and
operation of the nation‘s ports, including those of Colombo, Galle and Trincomalee – and
several unions representing SLPA workers. The complainants state that they had tried all
possible means of resolving this dispute through negotiations, and had written to both the
management of the SLPA and the Minister responsible for ports to ask that their demands
be met, or for an opportunity to discuss the matter. Despite these repeated appeals the
SLPA and the Minister refused to enter into negotiations on the issue raised.
1117. The complainants subsequently commenced a ―work-to-rule‖ strike action on 13 July
2006, during which normal contractual duties as specified by the service contracts of the
workers were performed to the letter, whereas ―optional‖ or additional work was declined.
The complainants maintain that the action was totally peaceful, with no incidents of breach
of peace reported during the strike period, and that a total of 14 trade unions participated in
the said action.
1118. On 19 July 2006 – the peak of the trade union action – the Minister for ports held a news
conference, in which he stated that the Government would not negotiate with trade unions
with respect to the strike‘s underlying demands. The Government‘s refusal to negotiate
compelled the striking workers to continue their action. On the evening of 19 July 2006,
however, the Minister held discussions with the portworkers and subsequently agreed to
grant some of their demands and appoint a committee to look into the others, pledging a
final solution to the demands within a period of three months. As a result of the Minister‘s
assurances, the unions decided to suspend their action as of 20 July 2006. Negotiations
followed the suspension of the industrial action, during which a number of issues were
tabled for discussion. It was amidst these negotiations and positive developments, the
complainants allege, that the Joint Apparel Association Forum (JAAF), an association of
employers in the apparel sector, brought a legal action before the Supreme Court.
1119. On 21 July 2006, the JAAF filed a petition before the Supreme Court of Sri Lanka
claiming that, as a result of the ―work-to-rule‖ trade union action initiated by the port
unions, their normal import and export business activities had been affected, and therefore
their fundamental right to equality and lawful occupation was being violated by the trade
unions. The JAAF therefore sought to quash the trade union action and obtain a requisition
order to compel the workers to resume normal working hours.
1120. The complainants state that the JAAF is an organization primarily engaged in the
protection and furtherance of the interests of the apparel, fabric and accessory
manufacturers, as well as the garment buyers of Sri Lanka. Its membership includes a large
number of businesses in the above-noted categories, operating mostly in export processing
zones (EPZs) and special economic and tax concession enclaves in Sri Lanka.
1121. On 21 July 2006 the Supreme Court issued an interim order in which, upon consideration
of the ―prima facie illegality‖ of the trade union action, and the extensive, ongoing loss
suffered by the country as a whole, it granted the JAAF‘s petition the right to proceed and
also granted the JAAF interim relief by prohibiting all trade union action in the ports until
25 July 2006. The Court further ordered the Inspector General of Police to deploy
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sufficient numbers of officers and, if necessary, to secure the assistance of the armed
forces to ensure compliance with the interim order. On 25 July 2006 the Supreme Court
issued an order extending the prohibition on trade union action until 25 November 2006.
1122. The complainants state that as a result of the Court order the members of the port trade
unions were forcibly compelled to give up their industrial action and offer their services to
the SLPA on terms and conditions not of their own choosing, so as to ensure the JAAF‘s
economic stability.
1123. The complainants allege that the Supreme Court‘s characterization of the unions‘ action as
a ―go-slow‖ action is misleading, false, and arbitrary. No evidence was submitted by the
JAAF, or cited by the Court, to establish that members of the 14 port trade unions had
worked below the stipulated work norm specified in the service contract they had entered into
with their employer; had such proof been furnished, the complainants maintain,
disciplinary actions could have been pursued against the workers concerned, for having
violated the terms of the contract. However, not a single worker has been charged with
working below the contractually specified work norm, thus proving the legitimacy of the
workers‘ conduct in exercising their rights. The complainants add that the action engaged
in by the port unions, whether characterized as a ―go-slow‖ or ―work-to-rule‖ action, is an
acceptable form of strike action under the ILO‘s principles on freedom of association. It is
also lawful and protected under national legislation – the Trade Unions Ordinance in
particular.
1124. The complainants state that the JAAF is a third party that uses the SLPA‘s ports for the
import and export of apparel and raw materials. As such, it has no standing in the industrial
dispute between the 14 port trade unions and the SLPA, as the said dispute is a matter
lying strictly within the contractual relationship between the latter two parties. The
complainants allege that the JAAF‘s petition to compel the 14 port unions to resume full
productivity levels in fact undermines the right of workers to determine their own terms
and conditions of employment freely and voluntarily. The JAAF petition, moreover, rests
upon an alleged fundamental right to equality and lawful occupation not recognized by the
Constitution.
1125. With respect to the interim order issued by the Supreme Court, the complainants state that
for an infringement of fundamental rights to be invoked, the action complained of must be
an executive or administrative one, as set out in article 126 of the Constitution. The action
complained of, however, is purely industrial action, as recognized in section 2 and
protected by sections 26 and 27 of the Trade Unions Ordinance. The complainants
maintain that the Court had erred in determining that the trade unions‘ action amounted to
executive or administrative action and, moreover, had established a grave precedent that
would curtail the exercise of the right to strike by allowing future third-party petitions
claiming fundamental rights violations, such as the one submitted by JAAF, to quash
legitimate trade union actions and thus weaken the ability of trade unions to compel
employers to engage in collective negotiations. The interim order has also made trade
union activists fearful of engaging in future industrial action. In light of the above, the
Supreme Court order should be declared to be invalid and inconsistent with the provisions
of ILO Conventions Nos 87 and 98.
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1126. The complainants further allege that, in response to the major trade union action in the
ports, the Government had, on 3 August 2006, amended the Emergency (Miscellaneous
Provisions and Powers) Regulation No. 01 of 2005 through the addition of a schedule of
services deemed essential. The schedule includes a substantial number of services that are
not essential in the strict sense of the term, as defined by the ILO, including the following:
services provided by the Central Bank; services connected with the supply of fuel,
petroleum products and gas; telecommunications and postal services; services in
connection with the export of commodities, garments and other products; and rail and
public transport services. The schedule also lists all services required of officers or
servants of all ministries, government departments and public corporations – of which the
SLPA is one. The amended regulation, the complainants maintain, represents a severe
restriction on the right of unions to engage in strikes and other industrial action.
1127. Several annexes are attached to the complaint, including the following documents: a list of
trade unions that had participated in the industrial action; a copy of the JAAF‘s 21 July
2006 petition to the Supreme Court; a copy of the Supreme Court‘s 21 July 2006 interim
order; a copy of the Supreme Court‘s 25 July 2006 interim order; and a copy of the
3 August 2006 amendment to Emergency (Miscellaneous Provisions and Powers)
Regulation No. 01 of 2005. The latter document is herein reproduced as Annex 1.
B. The Government‘s reply
1128. In its 8 February 2007 communication, the Government states that the industrial dispute
between the port trade unions and the SLPA began in March 2006. Negotiations to settle
the strike had taken place but failed in the initial stages. During this time the unions did not
avail themselves of the dispute mechanism provided for in the Industrial Disputes Act, nor
did they submit their demands to the Commissioner General of Labour.
1129. With respect to the legitimacy of the trade union‘s action, the Government indicates that
although the right to strike is recognized by the labour law of Sri Lanka, particularly the
Industrial Disputes Act (IDA) and the Trade Union Ordinance (TUO), it is subject to
certain limitations, as set out in the relevant sections of the IDA and Chapter 40 of the
Public Security Ordinance. Section 32 of the IDA provides for a requisite notice period
before calling a strike in an essential service, whereas section 40 restricts the right to strike
where such action is in violation of a collective agreement, arbitration award or court
decision. Furthermore, new regulations concerning essential services, made under the
Public Security Ordinance, were issued on 3 August 2006 – three weeks after the
commencement of the port trade unions‘ action.
1130. The Government refers to a District Court decision, Case No. 7662, issued on 19 July
2006, in which the SLPA had petitioned the Court for an injunction against alleged acts of
intimidation, by the union and against workers not involved in the ―go-slow‖ action that
commenced on 13 July 2006, as well as an injunction to prevent the unions from
continuing with the ―go-slow‖ action itself (a copy of the case is attached to the
Government‘s reply.) According to the Government, both injunctions were granted for a
one-week period pending the hearing on the merits.
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1131. With respect to the injunctions granted by the District Court, the Government maintains
that such temporary restrictions or prohibitions on the right to strike, where industrial
action could cause serious hardship to the nation as a whole, are permissible under the
freedom of association principles elaborated by the ILO.
1132. The Government adds that subsequent to the injunctive relief granted by the District Court,
the Minister in charge of Ports and Aviation held discussions with the unions involved in
the go-slow and settled the industrial dispute, following which the SLPA withdrew its case
pending before the District Court and freed the trade unions from the restrictions imposed
on their action by the District Court.
1133. With respect to the JAAF‘s fundamental rights application to the Supreme Court on
21 July 2006, the Government states that the SLPA and the Minister of Ports were
themselves named as respondents in the action. Among the JAAF‘s pleadings were that the
garment sector exports approximately 1 billion rupees worth of manufactured apparel and
imports approximately 500 million rupees worth of raw materials per day, primarily
through the port of Colombo. As a result of the unions‘ action, activity in the Colombo
port had fallen by 60 per cent, severely affecting the apparel sector and causing extensive
loss to JAAF members. The JAAF further pleaded that union members were also engaging
in threats and other acts of intimidation, thus preventing SLPA employees from
discharging their normal duties, and that the situation at the Colombo port had engendered
a crisis of national proportions, affecting the entire country‘s economy. The Government
indicates that on 21 July 2006 the Court had issued an injunction against the actions and
granted the JAAF leave to proceed with its application; hearings for the arguments had
been fixed for 19 March 2007. The Government maintains that as the case is sub judice, it
is not proper to comment upon its substance. Furthermore, as the complainants have yet to
exhaust all possible domestic remedies, the Supreme Court, rather than the ILO, remains
the appropriate forum for raising the matters relating to the present complaint.
1134. The Government maintains that, the complainants‘ representations notwithstanding, the
illegality of ―go-slow‖ actions is well-established in Sri Lankan jurisprudence, as
demonstrated in numerous judicial cases.
1135. The Government indicates that though it would abide by the recommendations of the ILO
supervisory bodies, it cannot interfere with cases pending before the judiciary. Such
interference, in the first instance, would be premature, as the Supreme Court has yet to
hand down a final decision with respect to the issues raised by the JAAF‘s application and
contained in the present complaint; it would also violate the fundamental rights of the
litigants and compromise the entire judicial system. It would therefore be inappropriate for
the ILO or any other international body to pass judgement upon a decision of the Supreme
Court of Sri Lanka, particularly when the decision in question has yet to be issued.
1136. As concerns the essential services order recently promulgated under the Public Security
Ordinance, the Government states that although the 3 August 2006 essential services order
referred to by the complainants did include an expanded schedule of services, after its
publication, the President had clearly expressed that the said regulation would not be
implemented against the trade unions. The order was further discussed at the National
Labour Advisory Council and, in view of the concerns expressed by the unions, the
President repealed the schedule of services by an order published in Gazette notification
No. 1456/28 of 4 August 2006. [The latter notification, though referred to as document A5
132

and said to constitute part of the reply, is not attached to the Government‘s
communication.] The Committee has nevertheless obtained a copy of Gazette notification
No. 1456/28. The notification is a Presidential proclamation stating that, due to a public
emergency in Sri Lanka, the provisions of Part II of the Public Security Ordinance shall
come into operation throughout Sri Lanka on 4 August 2006. The notification is herein
reproduced as Annex 2.
1137. In its 14 May 2007 communication, the Government attaches a communication of 7 March
2007 from the SLPA indicating that, upon the commencement of the industrial action on
13 July 2006, two meetings between the port authorities and representatives of the trade
unions participating in the action were held – on 14 July and 20 July 2006, respectively.
The SLPA communication further states that the latter meeting, in which the Minister of
Ports participated, produced several decisions, including decisions to refer the salary
proposals of the trade unions to the National Salaries and Cadre Commission and obtain
their recommendations in three months; to pay allowances to SLPA employees pending the
issuance of the Commission‘s recommendations; and to hold a meeting with the SLPA, the
Minister of Ports and the trade unions to review the progress made once in every three
months.
C. The Committee‘s conclusions
1138. The Committee notes that the present case involves the following allegations: a
courtordered
injunction against an alleged go-slow action initiated by several trade unions in
ports run by the SLPA, and the amendment to the Emergency (Miscellaneous Provisions
and Powers) Regulation No. 01 of 2005 so as to include an expanded schedule of services
deemed to be essential.
1139. The Committee first notes the Government’s statement that it would be inappropriate for it
to pass judgement, as a suit concerning these matters was still pending before the Supreme
Court. In this respect, the Committee recalls that although the use of internal legal
procedures, whatever the outcome, is undoubtedly a factor to be taken into consideration,
the Committee has always considered that, in view of its responsibilities, its competence to
examine allegations is not subject to the exhaustion of national procedures [see Digest of
decisions and principles of the Freedom of Association Committee, fifth edition, 2006,para. 30
of Annex 1]. The Committee, while bearing in mind the fact that certain matters
raised in the complaint are currently pending before the courts, and while respecting the
independence of the courts and due legal processes under way, shall therefore proceed
with its examination of the case.
1140. The Committee notes the complainants’ allegations that, following a dispute with the SLPA
over wage increments, 14 trade unions commenced a work-to-rule action on 13 July 2006.
Discussions between the unions and the Minister of Ports were held on 19 July 2006, in
which the Minister agreed to grant some of the unions’ demands and appoint a committee
to examine the others; subsequent to these discussion the unions decided to suspend their
action as of 20 July 2006. On 21 July 2006, however, the JAAF – an employers’
association that is not a party to the dispute filed a petition before the Supreme Court of
Sri Lanka seeking an injunction against the action initiated by the unions and claiming
that, as a result of the action, their normal import and export business activities had been
severely affected, thus violating their fundamental right to equality and lawful occupation.
The Government, for its part, states that the SLPA had sought an injunction against the
133

unions’ action and was granted a one-week injunction by the Colombo District Court on
19 July 2006. The SLPA subsequently withdrew its case on the merits still pending before
the District Court, but was then named – together with the trade unions and the Minister of
Ports – as a respondent in a petition before the Supreme Court brought by the JAAF on 21
July 2006. The Government adds that in its petition the JAAF pleaded extensive financial
loss to its members as a result of the reduced activity caused by the trade unions’ action.
On 21 July 2006 the Supreme Court, upon consideration of the “prima facie illegality” of
the trade union action and the extensive loss suffered by the nation as a whole, issued an
injunction against the industrial action and granted the JAAF leave to proceed with its
fundamental rights action; hearings for the said action had been scheduled for March
2007.
1141. The Committee notes that, in granting the injunction against the go-slow action, the
Supreme Court had cited the extensive loss to the nation as a whole as a factor in its
determination. Further noting the Government’s indication that temporary restrictions on
the right to strike are permissible where industrial action could cause serious hardship to
the nation as a whole, the Committee recalls that the right to strike may be restricted or
prohibited: (1) in the public service only for public servants exercising authority in the
name of the State; or (2) in essential services in the strict sense of the term – that is,
services the interruption of which would endanger the life, personal safety or health of the
whole or part of the population [see Digest, op. cit., para. 576]. To determine situations in
which a strike could be prohibited, the criterion which has to be established is the
existence of a clear and imminent threat to the life, personal safety or health of the whole
or part of the population [see Digest, op. cit., para. 581].
1142. The Committee recalls that, generally speaking, ports do not constitute an essential service
in the strict sense of the term [see Digest, para. 587]. The Committee further recalls that
what is meant by essential services in the strict sense of the term depends to a large extent
on the particular circumstances prevailing in a country. Moreover, this concept is not
absolute in the sense that a non-essential service may become essential if a strike lasts
beyond a certain time or extends beyond a certain scope, thus endangering the life,
personal safety or health of the whole or part of the population. Finally, the Committee
recalls that the principle regarding the prohibition of strikes in essential services might
lose its meaning if a strike were declared illegal in one or more undertakings which were
not performing an “essential service” in the strict sense of the term, i.e. services whose
interruption would endanger the life, personal safety or health of the whole or part of the
population [see Digest, op.cit., paras 582–583]. The Committee observes, that the strike
action had lasted for 6 days before the issuance of the District Court’s injunction, and that
– apart from the JAAF’s pleading of economic loss suffered as a result of the action – no
evidence has been put forward to establish the existence of a clear and imminent threat to
the life, personal safety or health of the whole or part of the population. In addition, the
Committee observes, with concern, that the injunction would appear to have an extended
validity until the final hearing by the Supreme Court, first scheduled for October 2006 and
later postponed until March 2007. In these circumstances, the Committee is inclined to
view the restriction placed on the portworkers’ action by the injunction issued by the
Supreme Court as contrary to the principles set out above.
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1143. As concerns the alleged illegality of the go-slow action, the Committee recalls that,
regardless of whether the action in question is a work-to-rule or actually a go-slow, it has
always recognized the right to strike by workers as a legitimate means of defending their
economic and social interests, and that various types of strike action (wild-cat strikes,
tools-down, go-slow, working to rule and sit-down strikes) fall within the scope of this
principle; restrictions regarding these various types of strike action may be justified only if
the strike ceases to be peaceful [see Digest, op. cit., para. 545]. Noting that a hearing for
the JAAF’s application had been scheduled for March 2007, the Committee requests the
Government to indicate whether a final decision on the question of the alleged go-slow
action has been rendered, and if so to transmit a copy of the Supreme Court’s judgement.
Should the case still be pending before the Supreme Court, the Committee requests the
Government to take the necessary measures to expedite the judicial process and ensure
that the Committee’s conclusions, particularly those concerning the exercise of the right to
strike, are submitted for the Supreme Court’s consideration.
1144. As for the essential services order, the Committee notes that the schedule contained in the
Emergency (Miscellaneous Provisions and Powers) Regulation No. 01, as amended on
3 August 2006, enumerates a number of services not considered essential in the strict sense
of the term, including services in the petroleum sector; the postal service; the Central
Bank; export services; rail and public transportation; public corporations; tea, coffee and
coconut plantations; and broadcasting services. As regards workers in public
corporations, the Committee recalls that public servants in state-owned commercial or
industrial enterprises should have the right to negotiate collective agreements, enjoy
suitable protection against acts of anti-union discrimination and enjoy the right to strike,
provided that the interruption of services does not endanger the life, personal safety or
health of the whole or part of the population [see Digest, op. cit., para. 577]. Although the
Government indicates that the schedule of services had been repealed on 4 August 2006,
the Committee observes that Gazette notification No. 1456/28 (Annex 2) does not appear
to have done so as it apparently only states that the provisions of Part II of the Public
Security Ordinance shall come into operation on 4 August 2006. The Committee therefore
requests the Government, in consultation with representatives of workers and employers
organizations, and taking into account the particular circumstances in the country, to
review and take the necessary measures to amend the schedule of essential services
provided for in Emergency (Miscellaneous Provisions and Powers) Regulation No. 01, as
amended on 3 August 2006, if it is indeed still in force, so as to bring it into conformity
with Conventions Nos 87 and 98. If the schedule has since been repealed, the Committee
requests the Government to provide a copy of a the repealing order.
1145. Finally, the Committee reminds the Government that it may avail itself of the technical
assistance of the Office.
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The Committee‘s recommendations
1146. In the light of its foregoing conclusions, the Committee invites the Governing
Body to approve the following recommendations:
(a) The Committee requests the Government to indicate whether a final decision
to consider the question of the alleged go-slow action has been rendered,
and if so to transmit a copy of the Supreme Court’s judgement. Should the
case still be pending before the Supreme Court, the Committee requests the
Government to take the necessary measures to expedite the judicial process
and ensure that the Committee’s conclusions, particularly those concerning
the exercise of the right to strike, are submitted for the Supreme Court’s
consideration.
(b) The Committee requests the Government, in consultation with
representatives of workers and employers organizations, and taking into
account the particular circumstances in the country, to review and take the
necessary measures to amend the schedule of essential services provided for
in Emergency (Miscellaneous Provisions and Powers) Regulation No. 01, as
amended on 3 August 2006, if it is indeed still in force, so as to bring it into
conformity with Conventions Nos 87 and 98. If the schedule has since been
repealed, the Committee requests the Government to provide a copy of a the
repealing order.
(c) The Committee reminds the Government that it may avail itself of the
technical assistance of the Office.
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Annex 1
The Gazette of the Democratic Socialist Republic of Sri Lanka – Extraordinary (No. 1456/27)
(Thursday, 3 August 2006)
Part I: Section (I) – General
Government notifications
The Public Security Ordinance (Chapter 40)
REGULATIONS made by the President under section 5 of the Public Security Ordinance (Chapter 40).
Mahinda RAJAPAKSA, President, Colombo, 3 August 2006.
Regulations
The Emergency (Miscellaneous Provisions and Powers) Regulation No. 01 of 2005 published in
Gazette Extraordinary No. 1405/14 of 13 August 2005 and deemed to be in force by virtue of Section 2A of
the Public Security Ordinance, and amended from time to time, is hereby further amended as follows:
(1) by the amendment of regulation 2 of that regulation by the insertion immediately after definition of
the expression ―emergency regulation‖ of the following definition:
―‗essential service‘ means any service which is of public utility or is essential for national security or
for the preservation of public order or to the life of the community and includes any Department of the
Government or branch thereof, which is specified in the Schedule hereto and shall also include any service
which may at any time thereafter be declared in terms of regulation 40 of these regulations‖;
(2) by the insertion immediately after regulation 39 of those regulations of the following new
regulation:
40. (1) Where any service is declared by order made by the President under regulation 2 to be an
essential service, any person who, on or after 13 August 2005 was engaged or employed in any work in
connection with that service –
…
(b) fails or refuses after the lapse of one day from the date of such Order, to perform such work as he
may from time to time be directed by his employer or a person acting under the authority of his employer to
perform at such time or within such periods as may be specified by such employer or such person for the
performance of such work (whether such time or period is within, or outside normal working hour or on
holidays) he shall, notwithstanding that he has failed or refused to so attend or to so work in furtherance of
a strike or other organized action –
(i) be deemed for all purposes to have forthwith terminated or vacated his employment, notwithstanding
anything to the contrary in any other law or the terms and conditions or any contract of employment; and
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(ii) in addition, be guilty of an offence.
…
(4) Where the President is of the opinion that the members of any organization are committing, aiding
and abetting the commission of any act referred to in paragraph (3) of this regulation, he may by Order
published in the Gazette declares such organization to be a proscribed organization;
…
(3) by the addition immediately at the end of these regulations, of the following Schedule:
―Schedule
(a) the services provided by the Central Bank or any banking institution as defined in subsection (1) of
Section 127 of the Monetary Law Act (Chapter 422), or the State Mortgage and Investment Bank,
established under the State Mortgage and Investment Bank Law, No. 13 of 1975;
(b) all services, work or labour of any description whatsoever necessary or required to be done in
connection with the maintenance and the reception, feeding, nursing care and treatment of patients in
hospitals, dispensaries and other institutions, under the Ministry of Health and Women‘s Affairs;
(c) all services connected with the supply or distribution of fuel, including petroleum products and gas;
(d) all services connected with the supply of electricity;
(e) all services, work or labour of any description whatsoever, necessary or required to be done in
connection with the maintenance of postal and telecommunications services, including the overseas
telecommunication services;
(f) all services, work or labour of any description whatsoever necessary or required to be done by
officers or servants of all Ministries, Government Departments and Public Corporations;
(g) all services, work or labour of any description whatsoever necessary or required to be done in
connection with the maintenance of road, rail and other public transport services;
(h) all services, work or labour of any description whatsoever necessary or required to be done in
connection with the maintenance and management of tea, rubber and coconut plantations or the production
and manufacture of tea, rubber and coconut;
(i) all services, work or labour of any description whatsoever necessary or required to be done in
connection with the export of commodities, garments and other products;
(j) all services, work or labour of any description whatsoever necessary or required to be done in
connection with the maintenance of all broadcasting and television services;
(k) all services, of any description, necessary or required to be done in connection with the sale, supply
or distribution, of any article of food or medicine or any other article required by a member of the public.‖
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Annex 2
The Gazette of the Democratic Socialist Republic of Sri Lanka – Extraordinary (No. 1456/28) (Friday,
4 August 2006)
Part I: Section (I) – General
Proclamations &c., by the President
A proclamation by His Excellency the President
WHEREAS I am of opinion that by reason of a public emergency in Sri Lanka, it is expedient so to do,
in the interests of public security, the protection of public order and the maintenance of supplies and
services essential to the life of the community;
Know ye that, I Mahinda Rajapaksa, President, by virtue of the powers vested in me by Section 2 of the
Public Security Ordinance (Chapter 40) as amended by Act No. 8 of 1959, Law No. 6 of 1978 and Act No.
28 of 1988, do by this Proclamation declares that the provisions of Part II of that Ordinance, shall come
into operation throughout Sri Lanka on 4 August 2006.
Given at Colombo on 4 August 2006.
By His Excellency‘s command, Secretary to the President.
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International Trade Union Confederation and its role
vis-à-vis Sri Lankan Trade Unions
Gerald Lodwick
The International Trade Union Confederation (ITUC), with its primary mission of
promoting and defending the rights of workers through its main areas of activity – (a)
trade union and human rights, (b) economy, society and the workplace, (c) equality and
non-discrimination, and (d) international solidarity, adheres to the principles of
democracy in, and independence of trade unions, representing 158 million workers in 155
countries and territories in addition to having 311 national affiliates.
Trade Unions have as their main focus to better working conditions, to make the lives of
working women, men and their families better, while striving for human rights, social
justice, equality, peace, freedom and democracy. ITUC, since its formation in Brussels,
Belgium, in 2004, continued to work on the principles of its predecessors, calling on
workers worldwide to unite in its ranks and to make of it the instrument needed to call
forth a better future nor only for them (the workers) but for humanity as a whole.
Along with ITUC, all its members (Sri Lanka included) have a proud history of
campaigning for the rights of workers not only at the workplace but within society as a
whole. Trade Unions are now seen to change their focus in approaching a problem by
using as a tool measures that combine both industrial and public advocacy to obtain the
desired results for workers. ITUC also advocates the participation of workers at the
grassroots in campaigns – a move that is aimed at having a strong, vibrant and democratic
trade union movement that is essential to improve the lives of workers with a ‗bottom up‘
approach. This move is bound to have a positive cascading effect since it would create
broader awareness of the good work that trade unions undertake in addition to giving a
clear message that the overall benefits would accrue to people at all levels.
ITUC is currently involved in campaigning for the following:
1. Decent work, Decent Life – to ensure that all people benefit equally from the
process of globalisation;
2. Fair Play at the Olympics – urging the International Olympic Committee and the
major sports brands to respect the rights of workers employed in the sportswear
industry;
3. Global Call to Action against Poverty – to ensure that the Millennium
Development Goals as set out by the United Nations to lift billions of people out
of poverty are achieved;
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In addition, ITUC is also working on issues pertaining to:
1. HIV/AIDS – working to maximise prevention programmes whilst at the same
time fighting discrimination in and outside the workplace, and ensuring everyone
has access to life-saving medication;
2. Re Child Labour – working to ensure that every child is in full-time education and
not being forced to work;
3. Re the World Trade Organisation, the World Bank and the International Monetary
Fund – that the workings of these organisations vis-à-vis the global governance
strategies pursued by them are changed to benefit all workers and the poor;
4. Working with other stakeholders on issues such as Equality on Youth, Migration
and Women‘s Issues, and with departments that have trade union rights as their
mandate, on defending the fundamental rights of workers in countries where they
are endangered.
In Sri Lanka, ITUC has four affiliates – the National Workers Congress (NWC), the
Ceylon Workers Congress (CWC), the National Trade Union Federation (NTUF) and the
Sri Lanka Nidhahas Sevaka Sangamaya (SLNSS). In addition, these bodies are affiliated
to the Global Union Federation (GUF) that also has other affiliates – the Ceylon
Mercantile Union (CMU), the Free Trade Zone Unions and the public sector unions. The
Global Union Federation (comprising 12 such GUF‘s) as its main role, builds
international cooperation, joint action and global solidarity among trade unions in
different countries that share common employers – grouping national trade unions by
sector or occupation. These for example are the Textile and Leather, Food and Beverage,
and Transport sectors, amongst others.
At the World Day for Decent Work held on October 7, 2008, organised by ITUC trade
unions in more than 100 countries, from Fiji across the globe to Alaska, workers
mobilised to demand change in the world economy in view of the looming financial crisis
that would undoubtedly threaten the livelihoods of millions and millions of people
worldwide. This initiative of ITUC made at the Founding Congress in 2006, was
launched to mark this day as one of action to demand a fundamental transformation of
globalisation, ending the policies of free market neo-liberalism – the negativities of
which has led to the brink of a catastrophic global recession. Thus ITUC declared that the
‗time for change is now,‘ rightly foreseeing the disastrous consequences of such policies
that would impact on the millions of workers and those who depend on them, around the
world.
The event drew wide media coverage for the range of activities that were held – rallies,
demonstrations, educational and cultural events, workplace meetings, concerts, one-onone
contacts between trade union members, seminars, amongst other events – with the
participation of workers worldwide. There was ‗live‘ internet coverage of the activities
online with a special website launched for ‗World day for Decent Work.‘ Trade Unions
activities in this regard from 115 countries were registered for this online coverage.
It is a fact that through such policies that have been in practice for decades and decades,
working people who have in real terms worked hard to produce the goods and services of
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the real economy which have in turn delivered vast amounts of wealth to a tiny few who
have profited from lax or non-existent regulation of financial markets, they (the workers)
have not had the benefit of their labour cascade down to them in terms of high wages.
Their wages basically have been stagnant, or have fallen.
The campaign for ‗Decent Work – Decent Life for Women‘ through the activities of
young trade unionists in every continent were mooted – the focus of which were
pertaining to major concerns to women and men at work, pay equity, maternity rights, et
al. All these activities were linked to the three main themes for the World Day – vis-à-vis
Rights at Work, Solidarity, and Ending Poverty and Inequality. In addition, a number of
national actions focused on international solidarity with trade unionists facing severe
repression in countries such as Burma (Myanmar), Colombia, Swaziland and Zimbabwe.
At this point in time, millions of people the world over (Sri Lanka included) face many
crippling issues – being jobless, not being promoted, underpaid, and/or being subject to
intimidation and harassment on account of their gender, religion, colour, nationality,
ethnic origin, sexual orientation, political opinions/affiliations, social origin, age or
disability. ITUC‘s Equality Department works to ensure that such workers, millions in
number, can live and work in conditions that are underscored by equality, dignity and
justice. While gender issues are a reality across the globe not only at work but within
society as well, the fact that women are discriminated in many areas of employment is
being addressed by unions supported by the initiatives of ITUC.
Also of importance is promoting diversity at work and in society, and implementing
effective measures to combat racism and xenophobia, particularly in the workplace and
the labour market – all of which are given priority in effectively addressing issues related
to such negative traits that take away rather than promote goodwill from workers. ITUC
and its affiliates worldwide run campaigns to combat discrimination and unfair practices
that lead to workers being subject to abusive working and living conditions, especially for
women workers, migrant workers and members of their families in all parts of the world.
Notably, it is the young men and women workers (another vulnerable group) who
represent the world‘s present and its future, and their concerns and expectations should be
effectively met through their involvement in trade unions. These are areas of priority
within the overall workforce, worldwide.
Global governance is necessary for a globalised world economy. Towards this end, ITUC
seeks inter-governmental cooperation to ensure that the social dimension of globalisation
that encompasses decent wage and fundamental rights of workers is given due place in
the centre of decision making in the world‘s major global and regional institutions. These
institutions include the World Bank, the International Monetary Fund, the World Trade
Organisation, the United Nations and its specialised agencies, especially the International
Labour Organisation (ILO) that has a tripartite structure and mandate to set international
social standards.
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ITUC along with its partners in Global Unions promote effective rules governing the
behaviour of private business activities so as to ensure that these institutions and
companies support, rather than undermine, the achievement of decent work for all. This
leads to a major focus of ITUC – to have full and universal respect for the Fundamental
Workers‘ Rights of the ILO that guarantees the right to organise a trade union, the right
to collective bargaining, protection from discrimination, and the elimination of child
labour and forced labour.
ITUC goes on to carry out campaigns together with its affiliates, its regional
organisations, the Global Union Federations and non governmental organisations for the
universal respect of trade union rights as guaranteed by the Conventions of the
International Labour Organisation. As a protective body, ITUC also defends trade
unionists when their fundamental human rights are violated as a result of their trade union
activities. It goes onto protect workers by taking action against other labour rights
violations and other violations of human rights, especially when these violation affect
working people.
Sadly, scores of trade unionists are killed every year due their engagement in union
activities. Thousands of workers are imprisoned, beaten during demonstrations, tortured
by law enforcement personnel and are often sentenced to long term imprisonment. Each
year, thousands of workers lose their jobs when they merely engage in organising a trade
union. Worldwide, millions of women and children are subject to forced labour, much
against their will. To all of this, Sri Lanka is no exception.
All these measures have had their impact on Sri Lanka‘s working population affiliated to
trade unions that number over 1000. This transcends to around 11% of the total
workforce. However, not all trade unions are active, while the informal sector comprising
those engaged in agriculture – farmers, chena cultivators and those engaged in fishing,
mining, domestic workers, amongst others, are not part of any trade union.
Since 2005, Sri Lanka has been enjoying the access to GSP Plus concessions in the
garment industry. However, the findings of the ILO supervisory bodies in recent years
point out the many lapses on the part of the authorities in implementing national laws and
the non-enforcement of labour laws. The recommendations of the ILO Committee on the
Freedom of Association (CFA) regarding several ILO cases have not been addressed by
the state. Ironically, all the cases referred to are cases in the apparel sector which exports
approximately half of its products to the European Union countries under the GSP Plus
tariff facility. Under these circumstances, as a first step, the key enabling rights dealing
with the ILO Conventions No. 87 and No. 98 need to be addressed so as to create an
atmosphere that is conducive for the fostering of the principles of all core ILO
Conventions.
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ITUC thus made the following recommendations for Sri Lanka:
1. The government should issue a statement that the rights recognised by the ILO
Conventions are consistent with the Constitution of Sri Lanka which would then
ensure that these rights are therefore ratified by the State.
2. It went on to add that the restrictions placed on the rights of public officers to join
organisations of their choice should be removed, consistent with the requirements
of ILO standards. Article 2 and 5 of ILO Convention No. 87 guarantee the right of
public servants to join and establish organisations of their own choosing. In
contrast, a committee of ILO experts noted that Section 21 of the Trade Unions
Ordinance and the Establishment Code restricted membership in a union to public
servants employed in any one specified department or service of the Government,
or specified class or category and that public officers are prohibited from
becoming members of any trade union which permits persons who are not public
officers to be members. Through ILO‘s repeated calls the government responded
that it would take necessary action to ensure that organisations of government
staff officers may join confederations of their own choosing. It has been observed
that such responses from the state have not been rectified in the Trade Union
Ordinance.
3. The introduction of a four week time period to conclude holding all union
certification polls and giving effect to interconnected polling procedures. Despite
the law giving space for the purpose of collective bargaining through sufficient
minimum representation these provisions are not in force leading to employers
being able to subject those involved to acts of discrimination. To remedy this
situation it was recommended that the polls be held within four weeks of the
original request of the union for union certification.
4. Lowering the 40% threshold for compulsory recognition of trade unions and
enabling joint claims by unions for collective bargaining. ITUC and similar
international bodies have repeatedly raised this matter before the ILO Committee
of Experts on the Application of Conventions and Recommendations and the ILO
Governing Body Committee on Freedom of Association. It was recommended
that the new threshold in the law for the compulsory recognition of trade unions
be lowered to 25% of the workers on whose behalf such trade unions seek to
bargain. It was also recommended that even if the new minimum threshold is not
covered as per the ILO supervisory bodies, collective bargaining rights should be
granted to all unions in this unit to enable them to negotiate on behalf of their own
members.
5. To adopt necessary changes to the Industrial Disputes Act specifying a fixed
maximum period of time for the Department of Labour to institute action before a
Magistrate‘s Court on Complaints of Unfair Labour Practices/Anti-Union
Discrimination. This is in view of unfair labour practices where cases are brought
before the Magistrate‘s Court with no specific time frames within which such
cases could be heard giving wide discretion to labour authorities to delay issues
until the union is made defunct. As such, it is deemed essential that a maximum
time period to file complaints is specified with the recommendation that such
periods should not exceed four weeks. The means of redress should be
expeditious, inexpensive and fully impartial in law and practice.
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6. Strengthen the law on anti-union discrimination, legal provision for which was
first introduced in Sri Lanka in 1999. This recommendation is in view of the
prevailing low rate of unionisation and the very few number of collective
bargaining agreements, especially in export industries – the garment industry is a
case in point where the apparel workers contribute significantly to the country‘s
exports but have to bear the brunt of ‗sweatshop‘ working conditions. As such the
laws in this connection should be amended progressively to provide for these
workers to exercise their legitimate rights.
7. Increase the fine for contravening provisions concerning anti-union discrimination
to a degree that would result in creating a dissuasive character in the law. This
deals with the fine imposed on anti-union discrimination that should be increased
from the present level to a higher specified level with a penalty added on for each
day of default on a conviction of a sufficiently dissuasive level.
8. Introduce an amendment to the Industrial Disputes Act to guarantee that the
reference of labour disputes to compulsory arbitration is done only at the request
of both parties to the dispute.
9. On the restrictions on the right to strike, new amendments to the Trade Unions
Ordinance which sets out the instances in which the right to strike that is
recognised by this statute can be restricted as per the recommendations of the ILO
Governing Body on Freedom of Association Case No.2519 on Sri Lanka, be
introduced.
10. That workers and trade unions should be entitled to legal processes to invoke
provisions of the ILO supervisory bodies as established in the Constitution of the
ILO.
Thus the ITUC, through its engagement through the ILO has been working to ensure that
the rights of workers are not hampered with in Sri Lanka and across the board whilst
continuing to diligently and effectively address all related issues pertaining to trade
unions in its day to day affairs.
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Appendix I
Trade Unions and Labour Reforms
Extracts from General Secretary‘s Report to the Biennial General Meeting
of NATURE - 2007
The Present Government‘s Labour Policy
The Government‘s Labour policy is spelled out in its 10 Years Development Plan
Part 11 – Towards a Flexible and Globally Employable Work Force ( P 175 –
217) Broadly taken this document is no different to earlier policy declarations relating
to labour. It lays emphasis on increasing flexibility of labour laws and regulations
while acknowledging that ―some reforms that were initiated despite protests by
workers or employers have by and large been difficult to implement in practice‖
The Document‘s focus areas are: employment generation, skills Development,
increased flexibility of labour laws and regulations and increased employer –
employee relations.
Despite the emasculation of TEWA in favour of the employer the employers continue
to insist on further ‗streamlining‘ termination procedures including a review of the
power of Labour Tribunals to reinstate employees unfairly dismissed. They call for
flexibility in regard to contractual arrangements, workforce size, working time and
functions. It is clear that employment generation is specially sought to be achieved
through a process of dismantling the legal structure that is protective of labour. The
employers pillory the published compensation formula as too excessive and insist on
the revision of the right of the Commissioner of Labour to determine applications for
non-disciplinary termination.
The TEWA is necessary from the point of view of trade unions as it provides some
relief in the present situation of vulnerability of employment to market forces and
external trade caused by liberalization of trade and investment. In such a situation it is
necessary that employers‘ unilateral discretion to dismiss employees be subject to
neutral scrutiny. Sri Lanka as part of its history and development has created a body
of law that affords reasonable but important job and income security to the employed
that must support families on a periodic wage. There is no convincing evidence that
the laws are unduly harsh on employers or deter foreign investors. Our labour
regulations are not at the root of the problem. In fact it is closely linked with both
macro and micro economic management of the country. An environment of peace
political stability, improved infrastructure and good labour practices are important to
draw investment and create jobs.
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LABOUR REFORMS
On the matter of labour reforms many proposals from trade unions as adopted at
workshops held with the participation of all major trade unions in the country were
placed before the Minister of Labour Relations and Manpower. Apart from
acknowledging the proposals and stating that they ―relate to amendments to many
labour laws which are presently in operation. Most of these suggestions involve
policy decisions which require detailed discussion in appropriate forums‖ no
meaningful steps have been taken either at the level of the National Labour Advisory
Council (NLAC) or the Labour Reforms Committee to involve the unions in a
dialogue to sort out matters.
The issues awaiting action are:
(i) Amendment to the Factories Ordinance to bring down the number of
overtime (OT) hours in keeping with international norms and to make OT
work Voluntary.
(ii) Amendment to the Industrial Disputes Act No. 56 of 1999 to provide for
more clear and explicit provisions for recognition of trade unions and also to
establish the right of trade unions irrespective of whether they have 40%
membership or not to represent their members in all matters concerning their
employment and to have their membership dues deducted from their salaries
and remitted to the union concerned.
Unfair labour practices to be clearly defined. Employer action to dismiss or
otherwise take disciplinary action against any workman for working towards
forming a trade union; being a member and / or office bearer of the union
should be treated as unfair labour practice. Penalty for unfair labour practice
needs to be increased to serve as a sufficient deterrence.
(iii) Trade Union Ordinance No. 14 of 1935
Suitable amendments to the Trade union Ordinance and / or provide in the
Regulations thereunder for the conduct of referendum to ascertain union
membership within 21 days of a dispute being intimated to the
Commissioner General of labour either by the union or the employer.
(iv) Minimum age restriction for membership in a trade union
The recommendation is to the minimum age for trade union membership to be
the same as for employment and that the age for employment shall not be
below the required school going age limit.
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(v) Removal of restrictions to the right of public officers to join organizations
of their choosing.
The removal of part iv of the Trade Union Ordinance as it restricts
registration of public sector unions unless they limit membership to specific
services, specific department or specific category of public servants.
The Establishment Code too needs revision.
(v) Contract Labour / Out sourcing
Atypical employment practices such as contracting out work, outsourcing of
core business activities need to be disallowed by law.
Hiring of contract labour for work within the premises of an enterprise /
business / workplace needs to be barred. If contract labour cannot be
prohibited it shall be recognized by law that no employer can give job
contract at such low prices that the contractor cannot obey labour laws or pay
living wages to his workers.
The principal employer shall be made liable to all statutory entitlements of
the workers hired on contract if the contractor defaults in his obligations to
his workers / state.
(vi) Home-based Workers / self-employed persons
These categories of workers should receive appropriate legal safe-guards to
enable them the protection of existing labour laws. If the way they work is
subject to supervision or authority of another person or organization that
engage them for work and the raw materials, tools and materials are supplied
by them such person / organization shall be made liable for meeting all
statutory obligations including payment of wages arising out of such
employment relationship.
(vii) Casual Employment
The abuse of casual labour and its employment in large numbers to perform
work of a regular nature should be prevented.
(viii) Categories of workers mentioned in vi and vii need to be given social
security benefits to ensure subsistence during their period of un-employment.
(ix) Workers and trade unions must be given the right to file complaints directly
to the Magistrate Court in order to ensure that they have unfettered access to
legal remedy in cases of victimization, refusal to recognize a legitimate
union and unfair labour practice.
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(x) Labour Tribunals
LTs should remain as forums untrammeled by purely legalistic
procedures such as regular court of law so as to redress the just
grievances of the worker at the point of termination of service taking into
account his peculiar disabilities and to make awards based on social justice
and equity.
It is urged that the proposed draft regulations prepared by the Ministry of
Justice and Judical Reform under sub-section (2) of sec.61A of the
Industrial Disputes Act (chap.131) as amended by Act No. 32 of 1990 be
withdrawn.
(xi) Special Tribunal to inquire into violation of the right to Freedom of
Association and Right to Collective Bargaining.
This is to serve as the first instance forum to inquire into complaints
regarding violations of Freedom of Association and the Right to organize
and bargain collectively. The tribunal to posses magisterial powers and
should provide easy access as in the case with applications to Labour
Tribunals at present.
(xii) Protection of earned wages and statutory entitlements of workers affected
by ‗fly-by night‘ investors and due to employer insolvency.
Conventions No. 87 & 98
The second tripartite workshop on the implementation of Conventions 87 and 98
held on 10 th ‘ May 2002 made several recommendations and fixed a time frame for
implementation of recommendation by the Ministry of Labour. Some of the most
important proposals were;
(i) to amend the respective laws to exempt industrial action from essential
service declarations as defined by the ILO and with due consideration to
provisions in the constitution.
(ii) Amend the Industrial Disputes Act to accommodate the general
acceptance of minimum period notice of strike action subject to certain
conditions as outlined in the report of the last biennial meeting held in
November 2004 which stated: ―The proposal that a minimum period of
written notice be given is accepted in principle subject to the proviso
that spontaneous strikes due to sudden provocation are excluded from such
requirement. The modalities to be followed in this regard should be
discussed and decided with trade union participation‖.
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―In the event of the strike notice being made mandatory by law, lock-out
resorted to by employers should also be similarly covered under the law
and employers too should be required to give notice of intended lock-
out to the union / unions and the Commissioner-General of labour. In
such instances employers should make good the loss of wages of
employees.‖
(iii) State policy on the full implementation of Amendment No. 56 of the
Industrial Dispute Act (1999) needs to be declared Unfair labour practices
to be identified and the law to be amended accordingly.
(iv) Effective implementation of collective bargaining agreements.
Five full years have elapsed since these decisions were taken and the
proposals remain shelved for reasons unknown.
Direct Contact Mission
Many of the proposals come within the scope of conventions No. 87 and No. 98
and the lakadaisical attitude of the authorities in giving effect to these were taken
up by the ILO sponsored Tripartite workshop on International Labour
Standards and follow up on Ratified Conventions held on 24 th ‘ – 26 th ‘ October
2005 at which the following conclusions were arrived at-
(i) Joint meeting of all trade unions with the Ministry of Labour to discuss the
state of implementation of ratified conventions.
(ii) Request for a ‗direct contact mission‘ to be made if all attempts to reactivate
national instruments and mechanisms fail.
(iii) NATURE to co-ordinate the process
98 th Session of the ILC – Labour Standards Committee
It was in this situation the worker member (T.M.R. Rasseedin) in the Labour
Standards Committee of the 98 th ‘ sessions of the International Labour Conference
(ILC) held in Geneva in June 2007 had to place on record the non-implementation of
the conclusions and recommendations of various workshops held to enlist proper
implementation of ratified conventions and the failure of the authorities to give
attention to the important role of workers‘ and employers in the application of
conventions and Recommendations.
The Committee of Experts on the Application of Conventions and Recommendations
has requested the Government of Sri Lanka to include in the report due between 1 st
June and 1 st September 2007 replies to the points raised by them on the application of
the following conventions.
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C.81 - Labour Inspection
C.90 - Night Work of Young Persons
C.95 - Protection of Wages
C.131 - Minimum Wage Fixing
C.138 - Minimum Age
C.182 - Worst Forms of Child Labour
Labour Administration / Inspection
There is no single composite national labour policy to serve as a guiding instrument for
labour administration in the country. This situation is primarily because of the segmented
nature of our employment sector i.e public and private sector. Labour inspection is nonexistent
in the public service. In the private sector labour inspection leaves much to be
desired and this was highlighted at the ILC sessions this year when Sri Lanka was listed
for special discussion at the 9 th session of the Committee on Labour Standards. The
strengthening of the machinery to implement statutory provisions that impose obligations
on employers would ensure the overcoming of most of the problems encountered in this
field. A drawback in this area is the delay in the enforcement procedures available. There
has to be proper legal avenues to ensure speedier enforcement of the relevant provisions
of law. Trade Unions have urged the authorities that a maximum time limit of four weeks
be clearly specified for the filing of complaints before the magistrate courts. The unions
have also suggested that they be enabled to seek remedy from the courts of the country in
the event of procrastination on the part of the authorities to ensure proper compliance of
provisions of law by employers. The enforcement of legal provisions needs urgent and
extensive attention as it has been found that indifference to settlement of disputes has
become endemic in the IR and Factories Divisions of the Department of labour resulting
in adverse impact on industrial relations in the country.
Labour Tribunals, though they have the jurisdiction to determine matters relating to
employment and grant relief to workmen in the event of wrongful or unjustifiable
termination of employment have no jurisdiction to enforce such orders. At present LT
Presidents are designated as Additional Magistrates; this move should enable LT
Presidents to enforce their orders. But the failure of the authorities to put in place certain
amendments that are required to be made to the Industrial Disputes Act is delaying the
process. If this is made possible there would certainly be less delay in implementing
orders made by Labour Tribunals. However such orders can be subjected to an appeal
firstly to the High Courts and thereafter to the Supreme Court.
Specific reforms suggested to get over the problem would include
1. Introduction of administrative guidelines for completion of all inquiries,
settlement of disputes and conciliations in an expeditious manner.
2. Revising the lengthy legalistic procedures currently in operation which
creates delay and increases litigation and equipping labour officials with skills
in mediation and dispute resolution.
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3. Specialisation of functions and the development of specialist personnel trained
in key areas. For instance, officers assigned to hear applications in the
Termination of Employment unit must necessarily have a basic knowledge of
legal provisions and principles and should be encouraged to specialize in that
unit.
4. Improving resources and training for personnel providing support services,
such as recording of proceedings in dispute settlement inquiries.
At the 9 th ‘ sitting of the Committee on the Application of Standards of the 96 th ‘ session of
the ILC held in Geneva this year it was observed that considerable progress in the
application concerning labour inspection had been made. However it was also stressed
that a number of issues remained unresolved and further action was needed. Some of the
matters highlighted in this regard by the tripartite gathering included:
1. Indication regarding the number of labour inspectors in relation to number of
workplaces.
2. Effective implementation of legislation to ensure access to workplaces including
in export processing zones.
3. Payment of traveling allowances to Labour Inspectors and compliance with the
requirement concerning annual inspection reports.
4. To ensure respect for social standards.
5. Enactment of necessary legislation to ensure the prerogative of the labour
inspectorate to suspend any activity in case of imminent danger.
6. Monitoring and follow-up on inspections were deficient and cases for prosecution
were excessively delayed.
7. The capacity of labour inspectors and inspector supervisors need to be improved
by means of training for inspectors in data collection, follow-up and monitoring
skills as well as in the use of information collected for initiating legal
proceedings.
The Right to strike and the judiciary
The work to rule trade union action initiated by 14 trade unions in the Port of Colombo in
July 2006 as a consequence of the refusal of the Port Authorities and the Minister
concerned to negotiate on the dispute raised by the unions had its repercussions in the
Supreme Court. The parties to the dispute were the 14 Unions and the Sri Lanka Ports
Authority. A third party i.e. a set of apparel exporters united under an organization called
Joint Apparel Association Forum (JAAF) filed an action before the Supreme Court
seeking to declare the trade union action of the Port unions as amounting to a violation of
their right to lawful employment and equal treatment before the law and to quash the
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trade union action of the Unions of the Port and issue an order compelling trade unions to
get back to work and the deployment of the police and armed forces to abort the trade
union action.
The Supreme Court having heard the fundamental right application of the JAAF in the
absence of the 14 Respondent Port trade unions on 21 st July 2006 concluded that the trade
union action of the Unions to be a ―GO-slow‖ affecting the business of the members of
the JAAF and the country at large. This is acknowledging that the trade union action of
Port unions amounts to a violation of the fundamental rights of JAAF. This is a matter of
concern to trade unions as it opens out opportunities to third parties unconnected with
industrial disputes that arise between employers and employees to intervene on grounds
of violation of fundamental rights.
The Supreme Court issued interim orders restraining the unions in the Port from engaging
in any trade union activity which would affect the productivity of Sri Lanka Ports. The
Court also directed the police and the armed forces to ensure compliance of its orders.
These rulings of the Court have posed serious threat to the right to strike and resort to any
legitimate activity in furtherance of the strike. For an infringement of fundamental rights
to be invoked before the Supreme Court under Article 126 of our Constitution the alleged
action needs to be established as an executive or administrative action. The trade union
action of the 14 Port unions in the SLPA is neither executive nor administrative action
but action legitimately recognized by the Trade Union Ordinance of the country. This
action is a matter of exercising their legitimate collective bargaining rights. They were
not exercising any authority in the name of the state that may tantamount to any sort of
executive or administrative action. The legal determination of the Supreme Court that
leave to proceed can be granted on the basis that trade union actions in state enterprises
and state institutions constitute an executive or administrative action has now established
a very detrimental legal precedent.
A further matter that caused concern among trade unions was some reports that appeared
in the Press as to the stand taken by the Court on the irrelevancy of international
covenants to the given situation. Being a member of the ILO Sri Lanka has enjoined itself
to strictly adhere to ILO‘s eight core Conventions on which the principal labour laws of
our country are based. Sri Lanka has also contracted to observe the stipulations under the
GSP+ scheme for duty free concessions to the EU market. This entails compliance with
ILO conventions.
The implications of the Court pronouncements and the situation arising there from as
affecting freedom of association, the right to trade union action and the immunity the
trade unions presently enjoy are issues that trade unions cannot ignore. NATURE
organized a discussion on these issues among trade unions on 23 rd August 2006. The
discussion also focused on the Right to strike and the intervention of third parties
unconnected to industrial disputes to frustrate legitimate trade union activity. As an
aftermath, seven unions have filed a complaint with the ILO Govering body‘s Committee
on Freedom of Association against the government of Sri Lanka on the infringement of
ILO Conventions No. 87 and 98.
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Appendix II
Consultative Workshop Recommendations on the ―Ten
Year Horizon Development Framework‖ 2006 – 2016
of the Sri Lankan Government
The workshop for consultation of employer and trade union representatives on the Ten Year
Development Framework (2006-2016), facilitated by the ILO, was held on 14 th February 2007 at
the Ceylon Continental Hotel, Colombo. Ms. Tine Staermorse, Director ILO, Colombo Office, in
her welcome address explained the objectives of the workshop and the importance of input of the
participants for the successful finalization of the Ten Year Development Framework (TYDF) of
the Government. Thereafter, Mr. U.G. Ratnasiri, Deputy Director, Department of National
Planning, presented a macro-economic perspective of the TYDF, and Mrs. S. Ranaraja made a
brief presentation of the contents of Chapter 11 (Towards a Flexible and Globally Employable
Workforce) and outlined its linkages with policies and objectives of other chapters.
The representatives of employers and trade unions considered Chapters 3, 7, 8, 11, 15 and 16 and
after separate deliberations the trade unions made the following recommendations.
Chapter 11: Towards a Flexible and Globally Employable Workforce
The policies that are set out are well documented even in past development plans,
but implementation has been week. For instance, the TYDF recognizes that labour
policy and labour regulations are obsolete and needs revision, although this has been
recognized previously too, no action has been taken to identify them for remedial
action. Reforms and revisions to existing labour legislation need to give priority to
changes that are necessary to address employee concern.
The implementation of National Productivity Policy prepared by tripartite
consultation has been completely overlooked. As the 2007 budget has made
provisions to create a National Productivity Task Force reporting to the president,
the implementation of the policy should be a priority of the TYDF.
It is incorrect to consider productivity only as being a factor of the endeavour of
labour. Other factors such as shortcomings in infrastructure, capital, management
needs to be acknowledged, and an acceptable measure of productivity should be
developed to understand the correct situation.
The needs of the plantation communities should be highlighted in this section, with
reference being made to specific policies in other sections.
The importance of improving links between MSMEs and the market needs
emphasis, especially in relation to improvement of rural infrastructure such as roads.
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Protecting rights of migrant workers in host countries must be given special
attention, especially through bi-lateral agreement.
The Government should focus on creating a public sector pension fund as the current
practice of utilizing the consolidated fund for pension payments is not financially
prudent.
The reference to ―reconstitute‖ the NLAC (p.185) should be changed to
―strengthened‖ as this term may lead to misinterpretation.
In relation to the demand and supply of skills development tools such as the Labour
Market Information Bulletin published by the TEVC should be used to structure
both educational and TEVT delivery systems.
The enforcement of existing legislative protection must be given priority in order to
improve labour standards. The Government should also encourage socially
responsible practices by employers in relation to their work by seeking and obtaining
preferential access for Sri Lankan exports based on higher standards of labour.
Overall Framework
The poverty analysis should highlight clearly the poverty levels in the estate sector
in order to ensure that appropriate actions are developed to address high levels of
poverty in this sector. Land management in the plantation sector and the
fragmentation of land are also issues that need to be addressed in the long term.
There is insufficient investment by the Government as setout in the investment plan
in the tea ands rubber industries for the development period.
At each stage of implementation, oversight / monitoring mechanisms, which should
also include the participation of civil society organizations, must be created to ensure
the targets are achieved. These oversight mechanisms should be at all levels,
national, regional and local levels, to ensure the successful conversion of the TYDF
to a plan of action. Such a plan of action must be fully discussed to ensure that it
meets the objectives of the TYDF in a socially responsible manner.
The macro economic framework appears to be very similar to the earlier Structural
Adjustment Programs and the PRSP, Regaining Sri Lanka, NDF, and the suitability
of such policies for Sri Lanka‘s developing economy should be reconsidered if the
twin goals of poverty eradication and employment generation are to be achieved.
It would be more appropriate if the TYDF does not refer to the Mahinda Chinthana
in its title; the latter is a political manifesto and its inclusion in the title may reduce
its acceptance at a national level. Also the term ―Chinthana‖ refers to a vision /
ideology and is not suitable for a Development Framework.
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List of Participant Unions
1. Sri Lanka Nidahas Sewaka Sangamaya - (SLNSS)
2. Jathika Sewaka Sangamaya - (JSS)
3. Ceylon Bank Employee‘s Union - (CBEU)
4. Ceylon Workers Congress - (CWC)
5. Ceylon Federation of Trade Unions - (CFTU)
6. Ceylon Federation of Labour - (CFL)
7. Lanka Jathika Estate Workers Union - (LJEWU)
8. United Federation of Labour - (UFL)
9. National Worker‘s Congress - (NWC)
10. Confederation of Public Services Independent Trade Unions - (COPSITU)
11. FTZ Workers and general Services Employee‘s Union - (FTZ-GSEU)
12. National Association for Trade Union Research and Education - (NATURE)
13. Ceylon Mercantile, Industrial and General Worker‘s Union - (CMU)
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Appendix III
Trade Unions and the Ethnic Problem
At our invitation 31 Trade Unions took part in a meeting in Colombo on 19 th January
2006 to discuss the situation in the North and East of the country since H.E. Mahinda
Rajapakse assumed office on 17 th November 2005.
The meeting took note of the fact that three important grievances amongst others led
to the rise of Tamil consciousness and eventually to Tamil nationalism assuming
armed manifestation: The Citizenship Acts of the 1940s, the Official Languages Act,
the land development and settlement particularly in Eastern Province. The failure to
redress these grievances and the several acts of violence against the Tamils, the
standardization issue, and the 1972 constitution drove the Tamils into the secessionist
demand based on the principle of the right to self-determination which the TULF
came to adopt by 1976. Prior to this, attempts made by two Prime Ministers to settle
the felt grievances of the Tamils through the B-C pact of 1957 and the Dudley-Chelva
pact of 1966 was baulked by Sinhala Chauvinists forces. In 1978 the Govt. introduced
the DDC system which the TULF accepted despite it being unworkable and this cost
the TULF its credibility among the Tamil people.
The riots of 1977, the Prevention of Terrorism Act of 1979, the 1981 arson in the city
of Jaffna (during the DDC elections) and burning down of the much acclaimed Public
Library and the escalation of violence by the armed forces and finally the anti- Tamil
pogram of 1983 paved the way for militant Tamil groups to take up arms. The rise of
the LTTE has to be seen in this context.
The meeting also noted that it was only with the widening of the armed activities of
the Tamil militants and with Indian mediation that the Government recognized the
need for a political solution of the ethnic problem. The resulting flow of events led to
the 13 th amendment to the Constitution and the introduction of the Provincial
Councils System. The Government‘s failure to transfer real power helped in no way
to commend the Provincial Council System to the Tamil People as a solution to the
their problems.
The LTTE‘s intransigence and its irreconcilable set of demands exacerbated issues
and as consequence its armed conflict with the Sri Lankan State continues to date
despite onerous attempts made by governments during the 10 year period 1994-2004
to diffuse the situation and opt for political settlement of the conflict.
The Communal tide that overtook Sri Lanka since 2004 has now brought the country
to open war with the LTTE fighting for a separate state. The LTTE is not blame- free
in precipitating and perpetuating the present turn of events. Its resort to terrorist
methods negates the very cause it seeks to advance. By his relentless pursuit of a
military option against the LTTE, President Mahinda Rajapakse has shown that he is
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of the same mindset as the JVP and the JHU. The war that is on is terrible and
horrible one.
It is unfortunate that the protagonists fail to realize the value of human lives in their
insatiable quest for supremacy of narrow nationalistic undertaking. The number of
lost lives, those maimed, injured and disabled, the plight of the displaced whose lives
have been disrupted from both sides of the ethnic divide, the defenseless civilians
including children who have fallen victims of this senseless war is an affront to
human conscience.
The Government has the prime responsibility in bringing normalcy to the country by
assuring the ethnic minorities of their rights, life and security. The Government can
no longer avoid revealing its stance on the ethnic issue and what it hopes to achieve
as final outcome. The perceptible ebb in international support for separation can well
turn into a upsurge if it becomes clear to the outside world that the Government is
acting with a hidden agenda to deny to the Tamil speaking people the right to manage
their own affairs within an undivided country. In our considered view only a solution
based on acknowledging the right of the Tamil-speaking people (Tamil and Muslim)
for autonomy and self-government that would help kindle the confidence of the Tamil
speaking people in a just and durable peace.
List of Participant Unions (In alphabetical order)
Association of Educational Professionals
Ceylon Bank Employees Union
Ceylon Estate‘s Staff Union
Ceylon Federation of Labour
Ceylon Federation of Trade Union
Ceylon Mercantile Industrial and General Employees Union
Ceylon Tamil Teachers Union
Ceylon Workers Congress
Confederation of Public Sector Independent Trade Unions
Federation of Media Employees Unions
FTZ Workers and General Employees Union
Government Clerical Services Union
Government Press Printers Union
Government Service Labour Officers Association
Government Workers Trade Union Federation
Health Services Trade Union Front
Jathika Sewaka Sangamaya
Joint Council of Professional Supplementary to Medicine
Joint Plantation Trade Union Centre
Lanka General Services Union
Lanka Jathika Estate Worker‘s Union
National Workers Congress
Progress Union
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Public Service Trade Union Federation
Public Service United Nurse‘s Union
Samastha Lanka Rajaye Kalamanakarana Sahakara Niladaringe Sangamaya
Sri Lanka Nidahas Rajaye Vurthiya Samithi Sammelanaya
Sri Lanka Nidahas Sewaka Sangamaya
Telecommunication Officer‘s Union
Union of Post and Telecommunication Officers
United Federation of Labour
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Member Unions of NATURE
(In alphabetical order)
1. Association of Educational Professionals (AEP)
2. Ceylon Workers Congress (CWC)
3. Ceylon Federation of Labour (CFL)
4. Ceylon Estates Staff Union (CESU)
5. Ceylon Tamil Teachers Union (CTTU)
6. Ceylon Federation of Trade Unions (CFTU)
7. Government Service Labour Officers Association (GSLOA)
8. Jathika Sewaka Sangamaya (JSS)
9. Joint Plantation Trade Union Centre (JPTUC)
10. Lanka Jathika Estate Workers‘ Union (LJEWU)
11. National Workers Congress (NWC)
12. Public Service Trade Union Federation (PSTUF)
13. Public Service United Nurses Union (PSUNU)
14. Public Service Management Assistant Officer‘s Union (PSMAOU)
15. Sri Lanka Nidahas Rajaye Vurthiya Samithi Sammelanaya (SLNRVSS)
16. Sri Lanka Nidahas Sewaka Sangamaya (SLNSS)
17. Telecommunication Officers‘ Union (TOU)
18. Union of Post and Telecommunication Officers (UPTO)
19. United Federation of Labour (UFL)
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