Arbitrary move to set wages stark violation of IMF agreement terms: PA

The Planters Association of Ceylon (PA) claimed that the government’s current approach in attempting to coercively set wages for the private sector and interference in the management of the sector from the key government figures represent a stark violation of the terms of the International Monetary Fund (IMF) agreement.

“This decision is very clearly driven by short-term populist politics aimed at securing electoral victories rather than fostering the long-term economic health of the industry and securing the interests of workers,” the PA said.
The IMF’s US $ 3 billion Extended Fund Facility for Sri Lanka is contingent on several stringent conditions aimed at ensuring fiscal consolidation, including reduced intervention in state-owned enterprises (SOEs). Historically, state control over enterprises has led to inefficiencies and financial burdens, as evidenced by the failures of numerous state-run businesses in Sri Lanka.

The PA pointed out that the government has consistently failed to manage the SOEs effectively, leading to steep losses and in many instances, near total collapse.
“By the time of privatisation in 1992, the state-owned plantations made continuous losses that had to be heavily subsidised by the government up to Rs.5 billion per year, which was borne by the Treasury.

A further Rs.8 billion was owed by the JEDB (Janatha Estate Development Board) and SLSPC (Sri Lanka State Plantations Corporation) to Bank of Ceylon and People’s Bank, as a result of a US $ 300 million lending facility, which was extended to the state plantations by the World Bank. While these funds were intended for the improvement of the plantations industry, there were no significant improvements and the plantations did not have the ability to repay the debts and the government was eventually compelled to absorb this debt,” it elaborated. 
Following privatisation, worker wages appreciated sharply and with a significantly larger workforce of 327,123 within the Regional Plantation Companies sector, the industry was able to operate more effectively, investing substantially towards the development of the industry, including all the key certifications and standards that have allowed Pure Ceylon Tea and rubber to maintain a reputation for unmatched quality, relative to the global competitors.  

“These efforts have led to improvements in efficiency and productivity, which are now at risk, due to the proposed wage hike. It is also important to note that all these companies are publicly traded companies listed on the Colombo Stock Exchange. Any attempt at a second and immediate expropriation by the government will therefore contravene the Securities and Exchange Commission (SEC) and SEC rules, Companies Act and other related statutory provisions,” the PA added. 

PA Spokesperson Dr. Roshan Rajadurai highlighted that the current state-managed plantations, which include the JEDB, SLSPC and Elakdauwa Plantations, have been struggling to make even the EPF and gratuity payments to their workers over the past decade. Hence, he questioned as to how these plantations are going to finance the sharp wage hike without further burdening the state coffers.  (NF)