Sri Lanka firms struggle with rising labour costs: reports

June 06, 2010 (LBO) – A coir factory in a coconut growing northeastern district in Sri Lanka is facing labour problems and a yet another state enterprises is facing financial difficulties, media reports said. The Sunday Times newspaper said a four year old export oriented coir factory with Indian and Israeli collaboration has run into labor problems when its managers tried to improve labour productivity by outsourcing.

The report said a local politician had jumped into the fray “and taken away the keys to the factory”.

Sri Lanka has had problems with the rule of law since two constitutions in 1972 and 1978 undermined the independence of the public service by scrapping permanent secretaries of ministries and a public service commission.

The politician was quoted as saying that workers had complained of “threats to their jobs after management had decided to contract some of the work instead of having permanent employees.”

From 2004 to 2008 Sri Lanka resorted to extensive money printing to finance budget deficit as state spending rocketed with unrestrained expansion of state workers and inflation touched 30 percent a year.

Rising inflation pushes up the cost of local inputs such