Financial Times

Govt. sending wrong signals
The Ceylon Chamber of Commerce last week came out strongly against the prevailing political uncertainty, deteriorating law and order situation and attempts at government interference in the workings of the private sector.
A statement issued by the chamber declared that it views with “considerable concern” the announcement by the Secretary of the Ministry of Labour Relations and Foreign Employment that the government intends reintroducing legislation to intervene in private sector salaries and wages.

The chamber, in association with the Employers’ Federation of Ceylon, has constantly objected to such state interference in the determination of private sector wages outside the well-established framework of the Wages Board, Collective Agreements and market force mechanism.

The statement pointed out that this will act as a deterrent to trade and investment and be damaging to the competitiveness of Sri Lankan exports. It could also send the wrong signals to foreign investors at a time the country is desperate to attract such investments.

It is appropriate that the chamber is making such pronouncements as its members make a significant contribution to the country’s economic progress.
A study done some time ago revealed that over 60 percent of the value added by the private sector is distributed to the government in the form of taxation and to employees as emoluments.

In sharp contrast, the report said, shareholders get only four percent of the value added by the private sector in the form of dividends. As the chamber itself said at the time, these findings should disprove the myth that the country’s private sector is only concerned about its “bottom line”. The tax revenue from the listed companies studied represented almost a quarter of the total tax revenue of the government at that time.

It is indeed mighty strange that a government that says it is committed to a free market economy and to giving the private sector the lead role in economic progress, should seek to interfere in wage decisions. This is all the more puzzling given the fact that this government has some prominent private sector business leaders playing a key role in state enterprises and as advisors.

After all this is supposed to be a free market economy where the government is only supposed to create an environment conducive for business and leave the rest to the private sector. Attempts to interfere with wage decisions is disturbing not only because of the uncertainty it creates and the extra costs, but also because of the danger that it could set a precedent.

If the government is allowed to interfere in private sector wages today, then tomorrow it could very well interfere in private sector recruitment and insist that companies give jobs to supporters of ruling party politicians.

The chamber’s statement has also sharply criticised the behaviour of a newly appointed deputy minister. Although the chamber did not name the politician, it was obviously referring to the recent antics of Mervyn Silva and his son.
It was not too long ago that the chamber slammed the disgraceful behaviour of members of parliament in the House, when MPs exchanged blows.
These recent developments will no doubt renew private sector concerns about this government’s commitment to a free market economy.

These concerns were originally voiced even before this government was elected, when it spoke of a ‘mixed’ economy with references to price controls and caps on profit margins, although such heretical ideas were quietly dropped.

While the government could be concerned about preventing the exploitation of employees by unscrupulous businessmen, the private sector would not want too much interference in the employment of private capital. The government has to strike a fine balance between these two requirements.

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