Labour shortages as a result of Sri Lanka’s anticipated transition into a middle-income country status will be the next major challenge for the country’s apparel and manufacturing sectors, according to Central Bank of Sri Lanka (CBSL) Governor, Ajith Nivard Cabraal.

“Within the next 2-3 years, Sri Lanka will reach the US$ 4,000 per capita income and also a US$ 100 billion economy and then things will change. I must warn you that when these changes occur it will not be business as usual.

People will want better salaries; there will be many other fields that are created when we open up the five hubs. New people will be coming into the commercial field and there will have to be some migration of labour from the agricultural sector and there will also be other changes in labour composition.”

Addressing the Annual General Meeting of the Sri Lanka Apparel Exporters’ Association, Cabraal urged the industry to take steps towards improving productivity while reducing reliance on labour.

“How the industry deals with productivity and improves, it is a very vital part of the next few years. Many countries reach the US$ 4,000 per capita income level and get stuck as they find their costs have increased and don’t have the funds to grow.

In Malaysia, they went through this same process without getting stuck in the middle income trap by allowing free migration of labour from agriculture into other sectors, Cabraal observed.

He added that Sri Lanka too would have to emulate the experience of Malaysia in terms of cutting labour requirements in half while doubling productivity.

“The industry has to be ready for these changes in the same way that they prepared themselves to deal with the discontinuation of GSP + and the large scale emergence of low-cost competitors.

“Have we arrived? No. In my view we have just begun the journey, however in comparison to Malaysia in 1993, we have a better growth model, more experienced and qualified people and a higher standard of living. Therefore I am confident Sri Lanka can grow to where Malaysia is today within the next 15 years,” he predicted.

In that context, Cabraal stated that it would be vital for industries capable of reaching and competing in global markets to carefully strategize in order to ensure flexibility and growth over the long-term.