Sri Lanka battles labor shortage amid massive building boom, Pakistan could be next

Irshad Salim (BE2C2 Report) — Sri Lankan contractors and builders are desperate for workers as the island nation experiences an unprecedented construction boom last year — after negative growth in 2015.

Annual investment in new homes, roads, bridges and ports — which has hovered at around US$4 billion in recent years — is expected to almost triple to almost US$12 billion in 2017.

Lanka’s economy is projected to grow 4.7 pct in 2017, says a World Bank report.

But Sri Lanka needs 400,000 new workers — a two-thirds jump from the existing levels — to keep up with this surge, said Nissanka Wijeratne, the head of the Chamber of Construction Industry. “We can’t get that many overnight and we will have to import. We are now facing a serious labor crisis,” he said quoted AFP.

The labor shortage has seen builders and contractors offer lavish incentives ranging from cash to vehicles to keep workers from heading overseas, and in some cases, illegally employ foreign tradesmen to man projects.

Private contractors are going to extreme lengths to stop the flow of tradesmen heading to the Gulf for construction jobs, offering bonuses like motorcycles and cars to laborers who choose to work on projects  back home.

The government has sought to put curbs on migration by raising the minimum wage requirements for workers heading overseas.

Under their proposal, Sri Lankans will be barred from going abroad for work unless they can show evidence of future earnings amounting to more than US $ 400 per month.

“We want to discourage those who go abroad for low pay. Some of these workers can get more money if they stay back in Sri Lanka,” Finance Minister Ravi Karunanayake told AFP.

But it is a risky strategy. Roughly one in 10 Sri Lankans work abroad and their remittances are the number-one foreign exchange earner for the island of 21 million.

Sri Lankans on the average remit the highest amount per capita among South Asians, a BE2C2 analysis reveals.

Foreign Employment Minister Thalatha Athukorala last month “thanked the migrant workers who worked hard and as their remittances strengthen the country’s economy and assured that she will work towards their welfare and take all steps to protect their families,” according to a report in the Colombopage.

The pool of money flowing home has been growing. Sri Lankans sent US$7.24 billion last year compared with US$6.98 billion in 2015 — almost 4 percent increase, while other South Asian countries saw a dip in their remittance receipts.

The dearth has spurred some desperate contractors and builders to look offshore for workers. The government estimates roughly 200,000 foreigners are employed illegally in the construction sector.

“Foreigners are illegally employed like this because we have a shortage of workers,” Urban Development Minister Champika Ranawaka said recently.

“I am proposing that the government come up with a policy on foreign workers to regularize this sector.”

One company, which declined to be identified, said it was employing foreign workers illegally but noted that many others were doing the same.

Chinese firms, unable to source local labor, have moved armies of construction workers to Sri Lanka to man their mega building projects which also include Hambantota port and special economic zone surrounding the port to boost business.

Along one of Colombo’s main promenades, hundreds of Chinese workers wait every day for transport home after finishing a shift building towers for a new Shangri-La Hotel. Across the street, their countrymen toil on a vast US $ 1.4 billion real estate development.

Despite unemployment hovering at 4.5 percent at the end of 2016, the crippling labor shortage shows no signs of easing, raising fears that it will put the brakes on economic growth.

A large-scale Sri Lankan contractor said he had stopped accepting contracts to build condos because he couldn’t find tradesmen to finish the job.

The crisis is stretching beyond the construction sector. Sewage and water works projects are struggling to find laborers and are turning to neighboring India for workers.

Sri Lanka’s lucrative garment industry is also facing a shortage of 50,000 machine operators and many companies have relocated to Bangladesh in search of cheap labor, according to  industry officials.

A somewhat similar scenario if not more shortage of skilled workers could be expected in Pakistan in the next few years with the huge $56 billion China Economic Corridor, special economic zones, etc. having taken off on a fast-track mode, several analysts told BE2C2.

Pakistan would require anywhere from 700,000 to almost a million skilled and white-collar human resources to supplement and add-value to the corridor’s business, trade, shipping, transport, peripheral growth, etc. which according to Chinese President Xi could value in excess of US$550 billion.

BE2C2 is a business unit of Irshad Salim Associates  which produces reports, infographics, analytics and analyses based on data and information from sources readily available on the web and in the public domain.

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