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    Remittances and Sri Lanka’s migrant workers

    November 25, 2019

    Remittances are an important contributor to the economy and the most import source of export earnings. In 2018, despite experiencing a decline for the second consecutive year, the country received remittances of over USD 7 billion, accounting for 7.9% of the GDP; well ahead of apparel (USD 5 billion), tourism (USD 4.4 billion) and agricultural exports (USD 2.7bn of which tea was USD 1.5bn).

    A new study by IPS shows that 8.76% of all households (almost one in 12) receive remittances. In some of the poorest districts in the North the dependency increases: 24.87% of households in the Vavuniya district receive remittances, as do 21% in the Batticaloa district, 16.47% in the Jaffna district, 12% in the Ampara district and 9.71% in the Mullaitivu district.

    The study draws the distinction between migrant and remittance receiving households: some households receive remittances although none of the family has migrated for work. The gap could be due to remittances from permanent migration, family and friends permanently settled overseas. Nationally, the gap between migrant and remittance receiving households is 1.69 percentage points but this is much wider in the North East.

    In total, temporary migrants are estimated to number 1.9 million: almost 23% of the labour force.

    From a policy-makers perspective the high dependency on migrants presents many problems. Why do so many people need to migrate in order to improve their lot?

    To put things in context it is worth examining the history of migrant labour.

    Employment opportunities

    The oil boom in the 1970’s resulted in labour shortages in the Middle East. Fortuitously, the Non-Aligned Conference held in Colombo in 1976 opened up employment opportunities for Sri Lankans in the Gulf. By 1976 unemployment in Sri Lanka had reached almost 25% of the labour force, leaving 1.5 million unemployed in a population of 15 million. Migration was a solution to a problem of severe unemployment.

    It is ironic that even today, migrant labour absorbs 23% of the labour force. In the absence of overseas employment Sri Lanka should have an unemployment rate of around 27%, worse than that in 1976.

    Overseas employment is a solution to economic problems faced at home- a high cost of living and a lack of jobs that compensate adequately. From a policy perspective it is a mark of failure: the inability of the economy to create jobs. If there are sufficient well-paying jobs at home there is no need to seek work overseas. The steady increase in total departures testifies that Sri Lankan workers are making a choice, that it is better to risk hardship abroad than suffer poverty at home.

    To be sure, there is no shortage of jobs per se, businesses complain of a lack of people but what is lacking is well-paying jobs. Sri Lanka is trapped in too many industries with low productivity, which does not support higher wages. In the meantime bad government policy, particularly with taxes contributes to raising the cost of living.

    For example, a recent survey by Withers found that 66% of women and 53% of men stated that housing was the reason to seek overseas employment.

    Unfortunately bad government policy raises the cost of construction, which makes housing unaffordable. High taxes are imposed on many imported construction materials to protect domestic industries. These include steel bars and rods (taxed at 89.66%), ceramic tiles (taxed at 107.6%), sanitary wear (taxed at 72.4%) as well as aluminium extrusions, granite, paint, electrical fittings, furniture and many others.

    This results in high construction costs, particularly with in relation to income levels-an architect estimates that construction costs in Sri Lanka are overage 60% higher than in Thailand or Malaysia, countries that are both far richer than Sri Lanka. (Malaysia’s Gross National Income is USD10,460 per person while Thailand’s is USD 6,610 per person. Sri Lanka’s is USD4,060).

    A report by property consultants Jones Lang LaSalle (2014) confirms this:

    “high project development costs coupled with the high borrowing costs for housing loans have breached affordable limits and restricted the home buying prospects for Sri Lanka. Based on our understanding from the affordability assessment, only the top-income-earning resident Sri Lankans can buy homes in Colombo.”

    A report by the UN states that out-migration in Sri Lanka is driven by low per capita income, unemployment and/or underemployment, high inflation, indebtedness and lack of access to resources. A long term solution needs to address these fundamental problems, most crucially the creation of employment.

    The abuse of workers stems from weaknesses in the legal system in host countries. Fear of being overwhelmed by migrant workers may be one reason why host-country legal systems offer scant protection to temporary workers.

    According to the Middle East Institute, a think tank, foreigners make up an estimated 37-43% of the population of the Gulf Cooperation Council (GCC) countries and constitute 70% of the workforce, with workforce numbers rising significantly higher in the UAE (90%), Kuwait (82%), and Qatar (90%).

    The high percentage of guest workers worries government officials in host countries. Accordingly, governments have legislated to minimise the perceived threat. Restrictions on length of stay, strict regulations about changing jobs, hurdles imposed by the sponsorship system, difficult-to-meet criteria for bringing in family members, the inability to own land and businesses, the near-impossibility of obtaining citizenship, and the absence of legal rights all work to keep guest workers’ stays short, temporary, or informal.

    Unfortunately, this is what enables the abuse. According to Human Rights Watch, workers typically have their passports confiscated and are forced to work under the highly exploitative kafala system of sponsorship-based employment, which prevents them from leaving employers. Migrants often have limited information about their rights and channels to seek help, and face discrimination and obstacles to redress. Domestic workers are worst off because labour laws in the Gulf exclude domestic workers from even the limited protections guaranteed other workers such as a weekly rest day, limits to hours of work, and compensation in case of work-related injury. Restrictive immigration rules make it difficult for domestic workers to escape from abusive employers.

    Domestic workers

    Worker remittances have become a mainstay both for the national economy and for the households which receive them. Domestic workers, the category most vulnerable to abuse, are generally unskilled and drawn from the poorest sections of society. Many are below the poverty line or just above it, working overseas represents an opportunity to escape from poverty.

    Therefore what the Government needs to do is to work with GCC countries to improving the system so that abuses are minimised.

    Some work is being done, eleven Asian countries set up the Colombo Process in 2003, a regional consultative process to address the needs of contractual migrant workers employed overseas. In 2012, participating governments, including South Asian countries and all six GCC countries, adopted a Framework of Regional Collaboration committing to prevent abuse and foster greater benefits from migration. These include reducing recruitment costs, developing standard employment contracts, and making recruiting agencies responsible for the activities of local-level labour brokers. It also recommends pre-departure and post-arrival information seminars for migrant workers and government action to enforce labour laws.

    Charities such as Helvitas are implementing projects to educate workers, provide guidance, support and access to legal advice. The Helvitas Labour Migration project works along 4 main threads:

    l Access to Information: Migrants and their families are empowered to take an informed decision, based on safe migration knowledge. This includes the ability to follow the legal process or to detect fraudulent practices of sub-agents.

    At the same time, local government officials are supported to increasingly provide safe migration messages to the community and guide a decision-making process.

    l Access to psycho-social support: By raising awareness on migrants’ psycho-social issues with counsellors, midwives, and other relevant officers, the migrants are increasingly able to access services to mitigate their psycho-social hardships. Individual counselling and psycho-education sessions are provided for caregivers, migrants’ children and returnees.

    l Access to justice: Together with The Centre for Human Rights and Development (CHRD) Sri Lanka, migrants are provided free legal assistance and access to legal redress mechanisms provided by the Sri Lankan Bureau of Foreign Employment.

    l Remittances management: Migration can only be successful when remittances are managed sustainably. Financial literacy and knowledge about productive investments is key for migrants and their families. Therefore, they are sensitised on access to loans, budgeting, savings, formal banking and remittances transfer systems in order to maximise the financial benefits of migration.

    The Government should partner with such organisations to ensure wide dissemination of these programmes.

    Not all abuse takes place overseas, some local recruitment agencies have been known to be guilty of poor practices including failure to observe blacklists of employers/overseas recruitment firms compiled by the Sri Lanka Bureau of Foreign Employment (SLBFE), excessive fees, double-charging migrants for fees already paid by the employer and misrepresentation of pay or working conditions. More seriously some employment agencies have been accused of theft of wages and refusal to assist in mediation and repatriation. The SLBFE monitoring and enforcement functions also need to be strengthened to limit any local malpractices.

    Banning overseas employment is not a solution, although Nepal did experiment with one, temporarily banning women under the age of 30 from working in Gulf countries. The danger with a ban is that it may push workers into irregular migration channels with heightened risk of exploitation and trafficking. Instead, the Government needs to work in partnership with international agencies and other countries to strengthen the system so abuse is minimised.


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