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SRI LANKA: ‘Job Losses Could Have Been Worse’ – Industry Sources

Feizal Samath

COLOMBO, Jan 12 2010 (IPS) - When the global financial crisis struck in 2008, expectations were high that the Sri Lankan economy would be severely affected. But as it turned out, the number of job losses was not as bad as anticipated.

Some industry reports released in the same year had indicated that the resulting jobs losses would reach as high as 200,000 across the South Asian country.

According to the Ministry of Labour, an estimated 70,000 people lost their jobs from around August 2008 to April 2009 as a result of reduced export demands and export market uncertainties.

Sri Lanka has an estimated workforce of eight million out of a population of about 20 million. Garments are its biggest export.

However, a significant development ensuing from the financial meltdown – sparked by the collapse in 2008 of some of the biggest financial institutions on Wall Street – was that most Sri Lankan companies chose to lay off top management and protect jobs at the lower levels, according to sources in the corporate sector.

“This was seen in a survey we did,” says Ravi Peiris, director-general of the Employers Federation of Ceylon (EFC), which represents employers throughout Sri Lanka. Furthermore, there was a redistribution of employment from sectors that were affected to those that needed jobs.

Some of the major companies like Brandix and MAS Holdings, Sri Lanka’s biggest garment groups, chose to offer costly compensation packages and lay off top personnel rather than the rank and file, which to many trade unions was a positive approach to the crisis.

T.M.R Rasseedin, general-secretary of the National Association for Trade Union Research and Education, confirms that the crisis did not hit Sri Lanka as one would have expected.

“The number of jobs lost was less than the initial figures,” he tells IPS, adding that in cases where the private sector had to cut jobs, it was the top end that was looked at rather than the bottom end.

Peiris of the EFC says their survey undertaken over a period of two to three months in mid-2009 covered 135 member companies to determine how the global crisis had impacted the workplace.

“The survey showed that most employers preferred to retain workers rather than retrench. A majority of employers have opted to use other methods rather than lay off,” Peiris says.

The survey also indicated that 60 percent of the companies decided to freeze new recruitments in 2009 and were not filling new vacancies. Also, 50 to 60 percent of the companies said they would not retrench workers but launch job rotation and job-sharing schemes.

Mahesh Amalean, chairman of MAS Holdings, says his firm laid off 3,000 individuals, of whom 700 belonged to top management. “The layoffs were in the larger interest of the workforce. We were losing money, exports orders (from the West) and we needed to be lean and cost-efficient,” he tells IPS.

MAS Holdings supplies the biggest labels in the world. It has a total of 42,000 workers in the country and in garment manufacturing facilities in other parts of the world like India, Africa, other parts of Asia and the Middle East.

“We are now on a recovery and stabilisation,” says Amalean. Central Bank Governor Ajith Nivard Cabraal says while jobs were lost in the first two quarters of 2009, the second and third quarters last year saw a reversal of these trends.

“Some of the mega power and port projects that came on stream absorbed workers that had lost their jobs in the second half of 2009,” he says. “Happily for us,” initial expectations of large-scale losses from the global fallout did not materialise, he affirms.

A positive side of the crisis came for workers who were looking to move to other jobs or start a small business if there were compensation packages offered.

The EFC survey noted a sharp increase in 2009 in employee shedding through voluntary retirement schemes (VRS), or compensation packages offered to employees opting to retire voluntarily.

Between 2007 and 2008, 329 individuals in the EFC’s 500 member companies availed themselves of the VRS and left their jobs. The numbers leaving through VRS, among the EFC members, almost doubled to 614 between 2008 and 2009. A majority of individuals quitting their jobs through the VRS were at the bottom rung of the employment ladder, although executives and managers also opted for the scheme, the survey found.

Development economist Ramani Gunatilake, in a study titled ‘Impact of the Global Economic Crisis on Employment and Industrial Relations in Sri Lanka” released in August 2009, found that while official government figures showed that the first quarter of 2009 saw 30,000 jobs in manufacturing and trade, and 64,000 jobs in construction being lost, on the flip side, employment in agriculture rose by 200,000, or 32 percent of its current total workforce of eight million.

“Since employment in agriculture and services has grown, the crisis has probably encouraged some redeployment of labour from manufacturing, trade and construction to agriculture and services,” Gunatilake states in her report.

The report, commissioned by the International Labor Organization’s office in Colombo, further shows there was some evidence to suggest that the crisis may have contributed to the marginal increase in informalisation – or the shift from formal to informal sector employment – that had been observed in the labour market. It may have also helped cause a redeployment of labour between industrial sectors, says the report.

Gunatilake says informal employment, which accounted for 59.6 percent of all employed persons in the first quarter of 2008, rose to 61.6 percent in the same quarter of 2009.