"The Sri Lankan system places undue discretionary powers in the hands of the Labour Commissioner, who has traditionally been prone to base severance payments on the ability of the employer to pay – thus effectively penalizing multinationals with deep pockets, the very firms the country is trying to attract with an outsourcing strategy," the report says.
Sri Lanka's Commissioner of Labour has the final word on termination of employment, and to date has never consented to non-voluntary dismissal of employees.
Difficulties in laying off staff such as during restructuring, ups costs significantly the Bank says, though Sri Lanka boasts some of the cheapest labour in the region.
Sri Lanka's labour costs per hour is less than 0.50 dollars and the average monthly salary for a mid level manager is less than 500 dollars, compared to key competitors like India, China, Indonesia, Thailand and even Mexico.
The average monthly salary for a mid level manager in New Delhi is about 1000 dollars, while labour costs an hour in India is close to one dollar.
Worker compensation makes up a large portion of the variable costs borne by off-shoring firms, the Bank says, and is a key decider of an off-shoring location’s attractiveness.
The World Bank also suggests Sri Lanka capitalise on a successful export processing zone regime to tackle the Information and Communication Technology market.
Currently, office rents are cheap in Colombo compared to other major Asian cities, but among hindrances for companies is the long process to register property and enforce contracts in the country.
The average monthly cost per square metre is only 11.60 dollars in Colombo, over costs in New Delhi which ranges between 15.45 dollars and 26.15 dollars.
The cost of office space in Shanghai is also three times that in Colombo.
But 'a cumbersome law for property registration (in Sri Lanka) requires eight procedures, which ultimately costs 63 days in processing time and 5.1 percent of the property's value,' the report shows.
Costly Call
The island also suffers from high telephone charges, with Sri Lanka not having any distinct advantages as far as telecommunication goes.
The cost of a three minute fixed line phone call is almost double the cost of India, which specializes in call centre services. Mobile costs though higher than India, are thought to be competitive.
Winning Formula
Sri Lanka's winner is that it has skilled labour, making it attractive for more value-added off-shore operations instead of just back-end office functions.
"A successful out-sourcing strategy for Sri Lanka would focus on niche markets rather than trying to compete directly with generic services offered in India and elsewhere."
Trying to tap into customer contact segments through call centres however, may not quite work yet for Sri Lanka, due to its lack of manpower and high telecom costs.
"With regard to the customer contact segment of the market, Sri Lanka does not have a vast pool of human resources and so cannot offer the economies of scale those countries like India and the Philippines can."
Developing a niche in customer contact would need a high degree of investment and the country still lacks the ability for high end research and development.
Sri Lanka's potential, the Bank says, is in accounting, finance and IT services, with one of the largest pools of qualified accountants.
These shared corporate functions can also be marketed across industries.
For example John Keells had terminations executed for Ceylon Cold Stores, JKCS ( twice or more ) and KBSL ( twice ) without any issue.
I only see a downside for knowledge workers who's salaries are Rs. 100,000 or more.
If some one has worked for over 15 years he should get a compensation of 32 months according to the act, but due to the limitation of Rs. 1.25m in the act, which the employers federation are not talking about, a person who would have got Rs. 3.2 m gets only Rs.1.25m .
We need to probe whether these caps ( Rs. 1.25m ) are in affect in other Asian countries including India, if not I propose to do away with the Rs 1.25m cap.
As knowledge workers are not part of labour unions there is no representation for them and they are ignored in these discussions.
I hope the Labour Minister and the COmmissioner intervene for these knowledge workers who are without unions.
There are also many cases of CEOs, Managers getting rid of competent personal for grudges and internal politics and these knowledge workers opting not to take thier cases to labour courts.
All this is done under the cover of the termination law.
I propose that sound reasons should be given for any termination in case of restructuring, or else the mangement will tailor the restructuring to get rid of political oponents, specially in public companies where major shareholders are not in the board of directors.
So, we get good facilities on various subjects such as telecom / polished work force etc,.
Hope I am at the point?
MBA (mbakbar@hotmail.com)
Lease lines in LK are apperently expensive, and unreliable (remember one ship cut us out for two-three days??) if you compare with those of India. and for BPO's, conectivity is an important issue..as is English.... (French, if it a French company.. German if it is a.....)
It is unfortnuate that Colombo is currently in one of the vulnerable locations compared to other cities like Manila or Bangalore.
Sri lanka also has one of the highest electricity cost in the world.
With the 24 hr operations in the BPO this cost becomes a concern in a price competitive environment.
I think the mobile call rate is a good and clear indictor of the diffrence in cost of telecoms within the Asian BPO market.
We ourselves have just recently decided to set up another BPO operation in another country in asia on behalf of a client due to the high cost of leased lines in to colombo.
What BPO's need is complete package that c an draw them in, not just a BOI concession on some things and not others!
BPOs use leased lines. The author of this report seems to think that they dial out on local lines?!
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