Confronting excess labour
Running on empty taps
Confronting excess labour
A fabric-manufacturing factory in Sri Lanka's Biyagama free trade zone
was confronted with a major problem last month – a militant union that
virtually forced the closure of the unit for six days.
For days, employees led by the Progressive Front and the JVP-controlled
Inter-Company Workers' Union struck work demanding higher wages. Company
officials had earlier offered a wage increase of 11 percent saying it couldn't
afford anything more for economic reasons, company lawyers said.
Workers demanded a 25 percent increase and then negotiated for 15 percent,
which the company was unable to accept.
The workers then physically took over the building and held sway for
six days intimidating senior management while the CEO was abroad with the
result that production came to a standstill. Since this factory is a major
fabric supplier to other garments production units in the zone, these factories
too were faced with a crisis of supply.
The police then stepped in and asked the workers to end their protest
on the grounds of unlawful assembly, which they complied with. Union officials
were not immediately available for comment.
The company management then took back 500 out of the 800-strong workforce,
terminated the services of 130 workers and applied to the Labour Commissioner
for the retrenchment of 95 others and resumed production.
In a related development, a security guard at the factory was stabbed
by unknown persons and was hospitalised, company lawyers said.
"Where does this end?" asked a lawyer handling industrial disputes.
"In this case the management was held to ransom and demands were made.
Foreign investors in such a situation will wind up and leave if they have
to face problems like this. Also this factory was said to be one of the
best paymasters in the zone."
Factory closures or downsizing of staff are a common occurrence these
days as Sri Lanka goes through a twin crisis - an economic downturn here
and a global one aggravated by the US crisis.
At least three to five companies on a daily average are facing a financial
crunch, forcing them to either close down or lay off staff, with the once-lucrative
apparel sector being the worst hit by the US fallout.
This, according to industrial experts, raises the question of proper
laws to enable employers to lay off staff when their businesses becomes
economical and overheads rise.
This is the key focus of a seminar organised by Corporate Legal Conference
Services titled, "The impact of recessionary trends on garments and other
export oriented enterprises in Sri Lanka" to be held at the Trans Asia
Hotel on November 13.
The keynote address will be made by Lyn Fernando, chairman/managing
director of Creations (Pvt) Ltd and past chairman of the Apparel Exporters'
Association which recently sought permission from the labour commissioner
to retrench staff from a recession-hit garment sector. Fernando will speak
on: "How does the law provide for coping with excess staff?"
"We will be providing guidelines to employers on how to handle crises
like the Biyagama factory issue and the legal remedies available towards
retrenching staff in a loss-making situation," a conference official explained.
"We also plan to discuss a proposal to amend current labour legislation
to make it mandatory for 14 days notice to be given by unions before strike
action is resorted to, and forward the recommendation to the government.
This is a simple way of approaching strikes," he added.
Other speakers include retired Labour Commissioner, Gamini Weerakoon
and Neville Joseph, a legal luminary on industrial disputes. The session
will end with a panel discussion on the issues with retired appeal court
judge F.N.D. Jayasuriya joining Weerakoon and Joseph as the panelists.
Looking beyond: Recessionomics
Running on empty taps
By Arjuna Mahendran
With exports out of Asia falling to unprecedented levels, I wouldn't be
surprised if Sri Lanka's exports contract by more than 20% this year. Fortunately
imports have also fallen thus far, and oil prices have all but collapsed
so our official foreign exchange (FX) reserves hover around the US $ 1
What bothers me, however, is the impact the current spate of pre-election
spending by the government will have on our FX reserves in the coming months.
In small import-dependant economies like Sri Lanka, sudden increases in
government spending have a high propensity to leak out of the country by
increasing imports of consumer goods.
Since the bulk of the extra-budgetary salary increases will benefit
the lower echelons of the public service who arguably have a higher propensity
to spend rather than save, it is almost inevitable that Sri Lanka's balance
of payments and FX reserve position will come under pressure during the
The precarious balance on the external front was reflected last week
when the exchange rate fell to US$/LKR 92 as a consequence of falling domestic
The Central Bank of Sri Lanka (CBSL), according to press reports, is
preparing for such an eventuality by issuing US dollar government bonds
to local banks to the tune of US$ 250 mln. It has already been borrowing
dollars through the Bank of Ceylon (BoC), which has been issuing its own
However, there is a limit to how much the CBSL and BoC can keep on borrowing
dollars especially when the IMF loan agreement is in abeyance and there
is little prospect of exports improving at least for another year.
Even inward remittances from our approximately one million housemaids
are reported to have fallen by 17 % in the first half of the year. I wouldn't
be surprised if this is repeated in the second half of 2001 and indeed
for the whole of 2002.
Bleak as this situation may seem, it does afford the opportunity to
explore new avenues for tapping foreign exchange for the country to tide
us over the coming lean period.
Since 1977, there has barely been any attempt to make it easier for
Sri Lankan residents to hold foreign currency within the country. Our archaic
exchange control laws, drafted during World War II, have not been substantially
revised to reflect the vast improvements in communications of the last
An excuse that has been regularly trotted out in defence of the current
labyrinth of restrictions on FX transactions within the country is the
currency volatility which affected East Asia after the 1997 crisis. It
is contended that if the exchange controls prevalent in Sri Lanka are lifted,
capital will flow out of the country at an alarming rate and bankrupt the
In my opinion, these arguments have been proferred by some exchange
control freaks in the bureaucracy to their gullible political masters/mistress.
The reality is much more prosaic. Today there are a number of currency
traders in Fort and Pettah who will arrange for transfers of tens of millions
of rupees out of the country to any global destination at the flick of
a computer key.
The flourishing hawala networks of the subcontinent have their tentacles
in all corners of the globe and transfer more money on a daily basis than
all our banks do through official channels. Thus, a migrant worker in Toronto
or Jeddah simply turns up at a local moneychanger and pays for a remittance
to his/her relatives in Jaffna or Quetta. The relatives receive the money
within 24 hours, usually delivered to their doorstep, accurate to the last
These money transfer networks flourish precisely because of the ridiculous
controls these countries place on the movement of foreign exchange through
their economies and the restrictions on banks opening ATMs throughout the
The net result is that Sri Lankan residents cannot simply go into a
bank and open a foreign currency account in the manner which they could
open a rupee account. Instead, it has to be either an RFCA or NRFC or SIERA
(more jargon!) account which entails additional paperwork and much less
flexibility in writing cheques or sending a Christmas donation to a charity
I think it is high time our bureaucrats face up to reality and abolish
all these archaic controls.