Sri Lanka's construction sector struggles with securing enough local talent

Since the end of the three-decade-long armed conflict in 2009, the construction industry has benefitted from rapid economic development. Despite unprecedented development in high-end residential and commercial space, as well as hotel and resort construction, the sector continues to be hampered by worker migration, with many construction professionals and unskilled workers seeking employment in Middle Eastern countries. As a result, the majority of large-scale construction projects depend on foreign workers, which leads to higher construction costs.

“There is limited vocational training and a severe lack of skilled labour. The knee-jerk reaction is to bring in foreign workers,” Suresh Rajendra, president of John Keells Property Group, told OBG. “Productivity levels are hindered by a limited labour force. Developers struggle to meet the “one foreigner to two locals” ratio required on construction sites.”

By most accounts, labour shortage is the biggest hindrance to construction growth. In a sector survey conducted by Research Intelligence Unit, a property consultancy group with a regional office in Colombo, 56% of respondents said a shortage in skilled construction workers was the number one issue currently faced by the industry. “Brain drain is common, with the country’s top engineers going to the Gulf for better opportunities,” Paul Callebaut, country manager for BESIX Sanotec, told OBG. “Skilled labour in general is tough to find, which is why Chinese state-owned companies in Sri Lanka hire Chinese workers.”

Moonlighting

Given the shortage of skilled labour, some foreign workers have engaged in other projects in contravention of their work visas. Brought to Sri Lanka exclusively for certain construction projects, a growing number of expat workers are engaging in multiple projects. According to data from the Department of Immigration and Emigration (DIE) there were approximately 100 foreign employees who had officially been given work permits to engage in construction projects by the fourth quarter of 2018, although estimates suggest that as many as three times that number are irregularly engaged in construction activity.

In an effort to better regulate the importation of expat workers, the DIE has established an investigation branch to handle complaints regarding foreign workers breaching their visas. The DIE has also been working on upgrading the existing foreign employment law.

Demographic Transition

As of the fourth quarter of 2018, an estimated 1.8m Sri Lankans were working abroad. While the unemployment rate has declined to 4.1% as of the third quarter of 2018, Sri Lanka’s ageing workforce poses a number of socio-economic challenges. The elderly population is expected to rise to about 3.6m, or 16.7% of the total population, by 2021. With a quarter of the population expected to be over 60 by 2041, there are valid concerns about the shortage of young talent in the national labour force, which comprised 8.39m people in the third quarter of 2018.

Labour laws provide employees with a range of protection, which makes it difficult for companies to reduce their workforce during market downturns. While there is no unemployment insurance or other social safety net for laid-off workers, the cost of dismissing an employee in Sri Lanka is one of the highest in the world, as an employer must calculate compensation based upon an average of 54 salary weeks.

Incentives

According to market estimates by the Chamber of Construction Industry, Sri Lanka needs an additional 400,000 workers to deliver on existing construction targets and projects in the pipeline. In an effort to persuade labourers to stay in country, some private developers have offered reportedly offered significant incentives, such as vehicles and cash bonuses.

Alongside these efforts, the Sri Lanka Bureau of Foreign Employment has raised the minimum wage requirement for unskilled Sri Lankan workers to go abroad from $350 per month to $400, which is expected to slow the pace of migration to some extent.