RemittancesGateway.org

Sri Lanka's migrant labour keeps economy afloat

Tuesday, 31 January 2012 10:48

Source: Bankok Post

'The old order changeth yielding place to new," said the 19th century poet Alfred Lord Tennyson in his poem on the death of King Arthur. The context might be entirely different but the words seem apposite to describe the metamorphosis in Sri Lanka's economy in the 64 years since independence.

When Ceylon (now Sri Lanka) gained independence from the British in February 1948 _ a year after India and Pakistan and one month after Burma _ it inherited a colonial economy.

Independent Ceylon began with a plantation export sector that contributed 30% of gross domestic product. Tea, rubber and coconuts, the three major export crops, provided 90% of the country's total foreign earnings. That was how dependent Ceylon was on plantation agriculture that was dominated by tea, then largely owned by British companies and reputedly the world's best tea.

Now almost 65 years later, the economy has undergone a dramatic shift that has stood the old economics on its head.

The old order has indeed changed. If plantation crops were the mainstay of the economy then, a fairly recent export has replaced the old staples. Instead of tea, rubber and coconuts, Sri Lanka now exports people.

Migrant labour, both skilled and unskilled, has now become the biggest foreign exchange earner as remittances from Sri Lankans working abroad have replaced earnings from ready-made garments and tourism at the top of the list.

Global and domestic compulsions necessitated the changes in the export economy. The British introduced tea to their colony in the 1870s after blight destroyed the previous coffee plantations. Ceylon tea, as it came to be known, dominated the world market.

But as some of the African countries still under colonial rule gained independence, they too opened up tea plantations and their produce entered the market.

The abundance of exportable teas began to glut the market. The resulting drop in world market prices and the increasing competition from Indian and African teas made Sri Lanka realise that dependence on primary commodities was not a sustainable proposition and it would need to diversify its economy.

Tourism offered an alternative as Sri Lanka provided a diversity of attractions in a relatively compact area, something rarely found elsewhere. But the hospitality industry was still in its infancy and at the time lacked the essential infrastructure to succeed as a prime foreign exchanger earner.

Moreover, the three decade-old war against terrorism blunted the nascent industry as foreign visitors kept away because of fear of being caught up in terrorist bombings.

Since the government crushed the Liberation Tigers of Tamil Eeelam nearly three years ago, tourism is now booming with arrivals the highest ever last year and international media naming Sri Lanka one of the destinations to watch.

When the tourism industry found itself virtually crippled by the terrorist threat, Sri Lanka turned to manufacturing garments, inviting foreign investment that came largely from South Korea, Japan, Hong Kong and Taiwan.

But within years a new export was beginning to make an impact on the Sri Lankan economy. More and more Sri Lankans began to seek employment abroad.

They were different from the high-value professionals such as doctors, engineers, lawyers, accountants, architects, academics and technically qualified persons who migrated abroad in search of a new life, often taking their families with them.

The current crop of migrant workers are low or middle-tier job seekers including female domestic aides and blue- and white-collar workers who were either jobless or were in search economic and social mobility. They are usually contract workers.

Dilan Perera, the Minister of Foreign Employment Promotion and Welfare, has estimated that more than 1.7 million Sri Lankans work outside the country. In 2010 they remitted US$4.1 billion. Last year inward remittances reached some US$5.2 billion, the highest on record.

"The contribution made by the Sri Lankan migrant labour force has exceeded the income received from traditional export income-generating sectors such as tea, coconut, rubber, gems and garments," he says.

To encourage returning migrant workers to invest their savings wisely in new businesses, President Mahinda Rajapaksa held out a raft of incentives to them in his budget for 2012. He exempted for five years all taxes on income derived from such ventures.

He also waived customs duties on all machinery and equipment required for such enterprises, and proposed a credit assurance scheme to enable such people to obtain easy credit at low interest.

Dr Sarath Amunugama, senior minister of international monetary cooperation, has said that the shortest route for the country to reduce poverty, increase foreign-exchange earnings and upgrade itself to the upper tier of middle-income economies is to double the number of migrant workers.

Nearly 7.5% of Sri Lanka's 21 million people work mostly in blue-collar jobs in Gulf states such as Saudi Arabia, Oman, Qatar, Dubai, Lebanon and Syria, says Dr Amunugama, who is also the current chairman of the UN Economic and Social Commission for Asia and the Pacific.

He says that with zero population growth in many European countries and with economic development in Southeast Asia there will be a huge demand for migrant workers. He believes that Sri Lanka should cash in on this situation.

Neville de Silva is a veteran Sri Lankan journalist currently on a diplomatic assignment in Bangkok.