If the global financial crisis slams the brakes on worker remittances from the Middle East, Sri Lanka’s top foreign exchange earner, it could severely exacerbate this country’s economic woes, analysts say.
Shrinking oil incomes in the Middle East have already affected the construction industry and the real estate business in which tens of thousands of Sri Lankans are employed.
‘’ There are at least 25,000 to 30,000 Sri Lankans in construction work in Dubai alone. They could lose their jobs, their salaries could get delayed or not be paid at all,’’ said Suraj Dandeniya, former president of the Association of Licensed Foreign Employment Agencies (ALFEA) of Sri Lanka.
Dandeniya told IPS that there has already been a 15-20 percent drop in demand for female domestic workers. Chamali Wickremasinghe, who runs an employment agency servicing the Middle East, says she is facing hard times.
‘’We are very worried. Job orders are shrinking and we see a drop of at least 50 percent in the coming months. I have four employees and its tough surviving,'' she said. Another former president of the ALFEA, Anver Ulumudeen, believes that while the bigger agencies may survive, the smaller ones are sure to wind down.
More than a million Sri Lankans work in the Middle East 60 percent of whom are poor, rural women who repatriate all their earnings to support their families back home.
Remittances this year are expected to reach three billion US dollars -- up from 2.5 billion dollars in 2007-- taking care of 70 percent of the country’s trade deficit.
Any fall in remittances are sure to have a ripple effect on the economy since almost a quarter of Sri Lanka’s 20 million people depend directly or indirectly on this income, economists say.
Although Sri Lanka’s garments export industry also brings in three million dollars annually, nearly half of the earnings are reinvested in the import of fabrics and accessories. With prices for Sri Lankan commodities such as rubber and tea crashing, remittances remain the mainstay.
When he raised the issue in parliament, in November, opposition legislator Anura Kumara Disanayaka called for the state to be prepared to intervene if the rate at which Sri Lankans are losing jobs in the Middle East worsens.
The problem is one faced not by Sri Lankans alone. According to the World Bank, anything between 350 to 650 billion dollars are sent back home by some 150 million international migrants and predicts that these remittances could drop by one percent in 2009.
Kingsley Ranawaka, chairman of the Sri Lanka Bureau of Foreign Employment (SLBFE), was quoted by the ‘Nation’ newspaper earlier this month as saying that architects and quantity surveyors in the Middle East have lost their jobs due to the prevailing global financial crisis where many companies are expected to prune staff.
However SLBFE additional general manager S. Ruhunuge told IPS that the issue is still not very clear as to whether there is a crisis or not. 'We have asked Sri Lankan embassies and missions for a report on the job situation in the Middle East and by end January a clearer picture will emerge for follow up action,' he said.
In a weekly column in the local ‘Sunday Times’ newspaper, its unnamed economist laughed off claims by the Central Bank that inflation is falling and the country’s economy is doing better this year despite the global crisis.
'In a world where country after country is feeling the global meltdown in their backyard, it appears that the Sri Lankan economy is unscathed in spite of the turmoil in global financial markets,' he said. 'Can Sri Lanka be an island of economic growth in a sea of global recession and financial crises?’’
‘’Public debt has reached huge proportions, the trade deficit is likely be massive, the fiscal deficit likely to exceed the estimated figure and Sri Lanka’s economy is expected to record an economic growth of six percent according to the Central Bank,’’ the columnist wrote.
According to Richard Vokes, director of the Asian Development Bank, the world economic crisis could last between 12 to 18 months and the Bank is making an assessment of the impact on member countries.
'A number of countries have approached us for support and all this is under consideration,' he said, indicating a possible drop in migrant remittances for countries like Sri Lanka, the Philippines and Nepal. 'We expect stresses and strains in Asian economies due to the crisis.'
International Labour Organisation officials in Colombo said the crisis will result in the informal sector growing because during times of recession employers prefer loose working arrangements rather than formal contracts. This means workers have less bargaining power and less social security, one official said.
Apart from the uncertain labour markets, Sri Lanka is facing a dilemma in commodities. Main export crops like tea and rubber are facing a sharp fall in world prices, eating into earnings and raising concerns among the workforce.
Exporters are putting pressure on the government to depreciate the local currency -- artificially held high traditionally to cushion the cost of imports -- to make Sri Lankan products competitive since China and India have also depreciated their currencies to make their exports cheaper.
Garment exporters won a brief respite after the European Union said a probe on whether Sri Lanka has conformed to U.N. human and labour rights covenants to qualify for special tariffs (GSP+) for the three-year period to 2011 would take at least nine months. During this time, the exporters will continue to enjoy these concessions.
'This has come as a breather for exporters,' said Ajith Dias, head of the Joint Apparel Association Forum.
There are other worries for the government of President Mahinda Rajapakse.
On Dec. 17, the Supreme Court, responding to a fundamental rights case seeking a revision of oil prices following a drop in global fuel prices, ordered a reduction in local petrol prices with immediate effect. But the government refused to implement the decision, with the cabinet saying the written court order had not been received.
Even when the written order was received, the cabinet decided to seek legal opinion on the implementation of the new pricing formula and put off a decision till Jan. 7. The crisis triggered a run in supplies at fuel stations and public anger, vent through the media, demanded that the government enforce the order.
In recent times, Rajapakse has expressed frustration over a series of Supreme Court decisions ranging from cancellation of controversial oil hedging contracts to the resignation of the treasury secretary over the disputed sale of a government company.
About the only relief on the horizon, for the government, is the possibility that the fall in oil prices could reduce the cost of prosecuting the civil war against Tamil rebels seeking to carve out a separate state in the north and east of the island.
© Inter Press Service (2009) — All Rights ReservedOriginal source: Inter Press Service
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