Sri Lanka’s government is being called upon to modernise and diversify the country’s apparel and textile industry and ensure its survival amid the economic damage caused by the pandemic.
A report prepared by the Department of Labour, ‘Covid-19 & Beyond – The impact on the Labour Market of Sri Lanka’, e-surveyed 2,764 private sector businesses. It outlines short-term and medium term recommendations, including the establishment of a comprehensive social security system.
“[The] labour market of Sri Lanka has suffered a similar fate to that of other countries fighting to contain the spread of Covid 19,” it states.
“The existing legislation does not address the current pandemic situation, depriving both employees and employers alike of relief measures to be adopted in this situation. Hence, protecting employment whilst protecting businesses and ensuring sustainability has become a challenging task.”
For the apparel and textile industry, in particular, which contributes 6% to Gross Domestic Product (GDP), with a share of almost 40% of the total exports, the report suggests it is essential to take steps to sustain the manufacturing industry of the country.
“The significantly high level of employment in the manufacturing industry reaffirms this need further.”
Of the 2,764 establishments in the formal private sector that responded to the survey, 58.59% belonged to the Colombo District. All 21 types of industries included in the International Standard Industrial Classification of All Economic Activities (ISIC) were captured, with the manufacturing sector taking the lead with a cohort of 28.65% of the total.
Around 53% had their businesses closed during the survey period of April and May, with only 3% of the establishments capable of functioning fully.
Around 1,084 establishments indicated they would be unable to pay salaries to their employees, while the results indicate the commencement of lay-off/ termination strategies of establishments hinting at the rising unemployment figures of the country.
Only 2% of the responded establishments have been successful in securing the working capital loans offered by financial institutions, with 48.11% of establishments awaiting the outcome of the applications.
“The uncertain manner in which ‘Covid 19’ is evolving does not make room to prepare concrete plans for revival of industries in the country,” the report states. “Yet, it is essential that immediate steps are taken to minimise the threat to the labour market, which is essential in the revival process of the country.”
The report issues two-fold recommendations for both short and medium term:
Short term recommendations
1. Retaining of employment, with deducted salaries for those who have been made to stay at home due to non-availability of work/short-term lay off strategies which ensure return to work to full-time positions within a six-month period with the payment of certain percentage of wage instead of terminating them. Both the EPF and ETF contributions to be continued during this time – guaranteeing continued social security.
2. Establishments to be allowed to prorate payments according to the number of hours worked by each employee, if losses of business/ social distancing requirements have resulted in lower hours of work per employee.
3. Continue the granting of loans to provide working capital to the businesses at lower interest rates.
4. Allow for the employers to recover a portion of ‘lost paid hours without work’ in future having consent with trade unions or relevant parties.
Medium term recommendations
1. Establishment of a comprehensive integrated social security scheme including unemployment benefit scheme linked to reskilling, re-employment, and up-skilling.
2. The pandemic has provided an opportunity to create Sri Lanka Health and Education hubs catering not only for the local demand but also for the rest of the world. This will create significant additional employment opportunities which could mitigate the increased unemployment due to pandemic and positive impact on the external sector of the country.
3. Strengthen social dialogue mechanism at enterprise and sectoral level to mitigate the negative impact of the labour market leading to industrial peace.
4. Exploring and adopting strategies to modernise and diversifying agriculture (including fisheries), apparel and textile industries, and tourism sectors.