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Cablegate: Sri Lanka Remittances Up Again in 2007

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R 211150Z MAY 08
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RUEHNE/AMEMBASSY NEW DELHI 2042
RUEHKA/AMEMBASSY DHAKA 0901
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RUEHKT/AMEMBASSY KATHMANDU 6069
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RUEHKL/AMEMBASSY KUALA LUMPUR 0350
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RUEHAD/AMEMBASSY ABU DHABI 0461
RUEHKU/AMEMBASSY KUWAIT 0482
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RUEHDO/AMEMBASSY DOHA 0243
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RUEHCG/AMCONSUL CHENNAI 8500
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RUEHC/DEPT OF LABOR WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHLMC/MILLENNIUM CHALLENGE CORP WASHINGTON DC

UNCLAS SECTION 01 OF 03 COLOMBO 000491

SENSITIVE

SIPDIS

DOL/ILAB FOR TINA MCCARTER
STATE FOR SCA/INS SCA/RA, DRL/ILCSR, AND G/TIP

E.O 12958: N/A
TAGS: ELAB EFIN KWMN KCRM PGOV PHUM SOCI SMIG CE
SUBJECT: SRI LANKA REMITTANCES UP AGAIN IN 2007


1. (SBU) Summary: Sri Lankan migrant worker remittances rose 15%
to $2.5 billion in 2007. Remittances are the second largest source
of foreign exchange earnings to the country, after garment exports.
Each year, over 200,000 Sri Lankans -- about one percent of the
population -- leave to work abroad. Women accounted for 53% of the
2007 migrant labor flow, with housemaids the largest occupational
category. The government seeks to send more skilled male workers
instead of female domestic workers, as stories of abuse of
housemaids offend national pride. But it will have a hard time
meeting the president's goal of discontinuing sending housemaids
abroad, both because of the country's dependence on remittances to
shore up its balance of payments, and because of the basic supply
and demand composition of the Sri Lankan and Middle Eastern labor
markets. End Summary.

---------------------------
Strong Remittances Continue
---------------------------

2. (SBU) According to the Central Bank, Sri Lanka's official
remittances increased by 15%, from $2.3 to $2.5 billion, in 2007,
continuing a strong growth trend since 2004. The actual value of
remittances is likely 30-50% greater than the amount through formal
channels that is recorded in the balance of payments records,
according to informed observers. Formal channel remittances are the
second largest source of foreign income to Sri Lanka, after
garments, which generated $3.3 billion in 2007; and ahead of tea,
which drew in $1.0 billion. Remittances thus play a significant
role in offsetting Sri Lanka's chronic trade deficit.

3. (U) According to Central Bank data, an estimated 1.6 million Sri
Lankan nationals -- equal to about 8% of the population -- are
working abroad. The number of both skilled and unskilled workers
leaving for overseas employment has increased. Total new placements
were 217,000 in 2007 compared with 202,000 in 2006. Women still
outnumber men, but their share is decreasing. In 2007, women
constituted 53% of workers heading abroad for employment, down from
67% in 2000. Housemaids constitute about 47% of annual placements.
However, housemaid recruitment has slowed in recent years.
According to the Central Bank, a key reason was the availability of
employment opportunities in Sri Lanka and inadequate wages in Saudi
Arabia and Oman. Placements in 2007, by share of labor category,
were as follows:

Housemaids - 47%
Unskilled labor - 24%
Skilled labor - 23%
Others - 6%

-----------------------------------
Middle East Remains Top Destination
-----------------------------------

4. (U) The Middle East continues to provide about 90% of employment
opportunities for Sri Lankan migrant workers, with Saudi Arabia,
Kuwait, the UAE, and Qatar attracting the majority of workers. Sri
Lankan officials frequently talk of increased and better paying job
opportunities in countries such as South Korea, Malaysia, Singapore
and Japan, but those countries still absorb relatively few Sri
Lankan workers.

5. (U) On April 1, the government instituted -- via the Bureau of
Foreign Employment (SLBFE), which is responsible for promoting
foreign employment -- minimum wages for unskilled laborers bound for
the Middle East. The minimum wages are based on the per capita
income of the labor-receiving country. Monthly wages range between
$150 (Egypt and Maldives) to $250 (Qatar). Cyprus is an exception,
with the minimum set at $375 per month.

COLOMBO 00000491 002 OF 003

6. (SBU) Suraj Dandeniya, President of the Association of Licensed
Foreign Employment Agencies (ALFEA), told EconFSN the minimum wages
are difficult to implement. Although the employment contracts
specify the minimum wage, in practice many employers do not pay the
agreed wage. Currently, prevailing wages for housemaids in most
countries average only $125 per month. Dandeniya faulted the
government for setting minimum wages without consulting the
governments and employment agencies in labor-receiving countries.
Mrs. KMKP Herath, also of the SLBFE, acknowledging these concerns,
said the government is now taking measures to ensure the
enforceability of the minimum wage rates by signing bilateral
agreements with labor receiving countries. In January 2008, the
governments of Sri Lanka and Saudi Arabia agreed to a minimum
monthly wage of $173 for Sri Lankan housemaids working in the
kingdom.

-------------------------------------
Government Looking to Skilled Workers
-------------------------------------

7. (U) President Rajapaska earlier this year called for Sri Lanka
to cease sending unskilled domestic workers overseas by the end of
2008. According to many, the policy change is a reaction to
frequent reports of mistreatment of Sri Lankan housemaids abroad.
There are also concerns regarding the neglect of children and
families due to wives and mothers leaving home. The government now
actively encourages the migration of males and skilled workers, and
discourages the migration of primarily female domestic workers.
Mrs. Nanayakkara, Secretary to the Ministry of Foreign Employment
Promotion and Welfare, told EconFSN that the Ministry has a two year
plan to implement the decision. The ban, when in operation, will
only affect new employment contracts; current contracts will not be
cancelled.

8. (SBU) Kumudini Samuel, an NGO representative working with local
migrant workers, considers the policy to curb housemaid recruitment
short-sighted. She notes that these jobs opportunities are utilized
by women from low income families who have limited skills and
education. Their options for employment within Sri Lanka are also
limited. ALFEA chief Dandeniya agreed, noting that Sri Lanka does
not have a large skilled work force to replace the unskilled migrant
workers. ALFEA is trying to do its part to correct weaknesses in
the system. In mid-April, for the first time, a thirty-member
delegation traveled to Kuwait to meet with the Sri Lanka Manpower
Agents Association of Kuwait to discuss employment opportunities and
working conditions.

9. (U) The Foreign Employment Promotion and Welfare Ministry plans
to increase the migration of skilled workers by offering training
programs which will enable female workers to be employed as nannies,
housekeepers, caregivers and nurses, instead of simply as
housemaids. In addition, the government has launched training
programs in the hospitality sector and an apprenticeship program in
the construction sector leading to an internationally accepted
certification. Since these workers -- male and female -- will be
skilled and trained, the government hopes that there will be a drop
in exploitation, as well as an increase in overall remittances.

------------------------------------------
Hundreds of Nurses to the U.S.? Not Quite
------------------------------------------

10. (SBU) Local media are uncritically reporting government
promises to secure higher paying jobs for skilled workers. For
example, the Minister of Health has repeatedly stated that the
government plans to send 500 nurses annually to the United States.
When embassy officials met with Ministry of Health officials, they

COLOMBO 00000491 003 OF 003


conceded that the minister's statements bore no relation to actual
plans. They told Econ and ConOffs that in fact they had only six
nurses currently being trained to work abroad, possibly in the
United States. Post has since coordinated with the ministry and
with two private health care recruitment and training firms to
ensure they are aware of U.S. visa requirements for nurses.
Exaggerated press reports aside, the government is implementing new
programs and facilitating language and technical training that will
ultimately make nurses more qualified for work abroad.

--------------------------------------------- ----
Comment: Hard to Change Dependence on Remittances
--------------------------------------------- ----

11. (SBU) The government's plan to train and send out more skilled
workers makes sense in the near term. Due to the limited capacity
of its university system, Sri Lanka has a large pool of educated
youth who could be trained for skilled employment abroad. (Each
year, of about 120,000 students who qualify for university
education, only about 18,000 are admitted.) Until it has more
training programs in place, however, the government will have to
balance its desire to reduce the number of women it sends abroad as
housemaids against the country's dependence on remittances to shore
up its balance of payments. (The USD $2.5 billion received in 2007,
combined with government borrowing, more than offset Sri Lanka's
$3.5 billion trade deficit.)

12. (SBU) Under these circumstances, the President's call to cease
sending housemaids abroad, which was not supported by national
legislation, is unlikely to overcome the basic supply and demand
facts of the Sri Lankan and Middle East labor markets. Over the
longer term, Sri Lanka could change this equation by pursuing more
private sector growth, which would create more domestic job
opportunities for both skilled and unskilled workers. The country
would benefit more from having its people contribute directly to
growth and development than it does now from their remittances,
which constitute only a fraction of the salaries they earn and the
growth they generate abroad.
BLAKE

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