Business

4th November 2001

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J-Biz support to Elections chief

The Joint Business Forum (J-Biz) has offered all its support - even election-monitoring facilities, if necessary - to the Elections Commissioner to ensure the December 4 general election is free and fair.

The offer was made at a meeting between representatives of the J-Biz and Commissioner Dayananda Dissanayake last week.

Political analysts said there are widespread fears of poll rigging at the election a continuation of bad practices from past polls - given the growing urban dissatisfaction against the government.

Opposition parties and even the business community have complained to the Elections Commissioner's office over large-scale transfers of police officers soon after the date for elections was announced as an attempt by the government to manipulate the poll.

Commissioner Dissanayake told J-Biz officials that the issue of police transfers was out of his hands. "If you want, why don't you try and meet the IGP and raise this issue," he was quoted as saying. Earlier Dissanayake made a request to the police chief to suspend the transfers till the polls were over but the police chief responded by saying the transfers were routine and not politically motivated. He also said the issue of transfers was a police matter and didn't come within the Elections Commissioner's jurisdiction.

Analysts said the business community was taking a much bigger interest in the polls than before. The J-Biz parley with the Elections Commissioner has been preceded by calls from other chamber groups urging a clean and violence-free poll.

J-Biz is one of the most powerful business groups in the country with the Ceylon Chamber of Commerce, the Federation of Chambers of Commerce and Industry and the National Chamber of Commerce amongst its membership. It was formed some months ago out of a need for the business and trade chambers to come together and initiate a dialogue with the government on ways of ending the ethnic conflict and tackling the economic crisis.

The chamber representatives offered their fullest cooperation to the Elections Commissioner in the conduct of a clean poll. "Tell us what we should do and we will stand by you," one of the chamber officials was quoted as saying at the meeting as J-Biz pledged its backing to the commissioner.

J-Biz raised a whole heap of issues during the meeting like police impartiality during the election campaign and conduct of the poll, security precautions in areas where election malpractices were reported in the past, adequate publicity to the public on their rights and proper supervision of the count.

"When we asked him whether he had any 'special plans' to prevent bogus ballot papers being used like the past poll, Dissanayake smiled and said 'no plans'," one J-Biz participant said.


Wage demands and business competitiveness

By Dr. S. Colombage

The Employers' Federation of Ceylon has resisted the government's request to extend the interim allowance, which is offered to public servants under the relief package, to private sector employees. It emphasises that private sector wages should be left to be determined by market forces or by collective bargaining depending on affordability and productivity. The Federation has requested the government to refrain from intervening in private sector wages.

The sentiments expressed by the private entrepreneurs are a reflection of the challenges faced by them in the face of trade liberalisation. With the opening up of the economy, entrepreneurs have been exposed to increased foreign competition. In the domestic market, they can sell their products, if and only if the prices and quality of their products have a competitive edge over imported goods. Similarly, the local exporting firms should have a comparative advantage over other suppliers in foreign markets. In sustaining competitiveness, cost of production is crucial. If local production costs pertaining to labour and capital are higher, the prices of final products will also be higher and consequently, local producers would lose their shares in the domestic and foreign markets and this would result in bankruptcies, plant closures and job retrenchment. Thus, domestic entrepreneurs are extremely vulnerable to foreign competition as a result of the trade liberalisation. They are no longer protected by import controls and high tariffs. Therefore, it has become important nowadays to protect business competitiveness.

With the pace of globalisation, the labour relation mechanisms, which had been restricted conventionally to wage increases based on tripartite agreements, have to be shifted to broader perspectives. This has arisen from the need to accommodate wage increases to compensate workers adequately while sustaining business competitiveness. For this purpose, human resource management should be integrated into business strategies. In this process, wages can be linked to employee performance at the levels of individual, work group or firm. Productivity-linked incentives and profit sharing are found to be effective in compromising wage demands and enterprise competitiveness.

Sri Lanka has made very little progress in integrating wage demands and business competitiveness, largely as a result of the weaknesses inherent in the labour market. The labour market is fragmented into a formal or highly regulated sector and an informal or unregulated sector. The formal sector, which is protected by labour laws, consists of government sector, state owned enterprises, plantations, and medium and large private enterprises. It accounts for about one third of the work force. In the government sector wages are determined by directives. In the organised private sector, collective bargaining and agreements are used to determine wages. Productivity is not taken into consideration in wage determination. The remaining two thirds of the work force is in the informal sector consisting of agriculture (excluding plantations), small-scale manufactures, and services. This sector, which is growing faster, is not covered by any labour law and most workers in this sector do not enjoy regular incomes. Thus, the fragmentation of the labour market has given rise to wage distortions creating adverse implications for resource allocation and economic growth. No effective labour market reform has been adopted yet to overcome these impediments.

Employees demand wage increases from time to time mainly to compensate for any erosion of their real wages due to inflation. If nominal wage increases do not sufficiently compensate for inflation, real wages will continue to fall. This can be observed in several sectors now. For example, in the plantation sector, although nominal minimum wages rose by 6 percent during the twelve months ending June 2001, real wages fell by 8 percent. In industry and commerce, nominal wages increased by 6 percent, but real wages declined by 8 percent. In services, although nominal wages rose by as much as 21 percent, the increase in real wage was only 6 percent. Thus, inflation has siphoned off the benefits of nominal wage increases. The annual inflation rate has now shot up to 14 percent, and therefore, the real wages deteriorate much faster.

With free flows of trade and capital globally, enterprises, in a way, have become more autonomous and powerful. If the local conditions are unfavourable, they have the choice to relocate their enterprise to some other country, which may have low labour costs and industrial peace. In fact, several entrepreneurs are reported to have threatened recently to pull out their industries from Sri Lanka due to labour unrest. Such actions will ultimately result in job losses. Granting any wage increase without due consideration to productivity, will only weaken enterprise competitiveness and retard economic growth.


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