Cablegate: Sri Lanka's Parliament Passes Ground-Breaking

This record is a partial extract of the original cable. The full text of the original cable is not available.




E.O. 12958: N/A

1. Summary: The Sri Lankan Parliament passed three
important bills containing ground-breaking, and
contentious, labor reforms on January 8. The bills contain
new industrial dispute resolution and termination
procedures. The legislation is expected to improve
industrial relations by prompt and equitable settlement of
labor disputes. The government was forced to incorporate
last minute amendments to the bills to accommodate
opposition demands. Nonetheless, the reforms are a big win
for the United National Front (UNF) government in its push
toward further economic liberalization. End Summary.

2. The Sri Lankan parliament on January 8 approved three
bills containing important labor reforms. The bills were:

-- Amendments to the Industrial Disputes Act (hearing and
determination procedure), which contained provisions for
expeditious hearing and determination of industrial
disputes including employment termination cases;

-- Amendments to the Termination of Employment of Workmen
(Amendment) Act (TEWA) containing new provisions for
termination including compensation as an alternate to
reinstatement, provision for a compensation formula by the
government and granting employees the right to be heard by
the Commissioner;

-- Amendments to the Employment of Women, Young Persons and
Children Act to increase fines and prison sentences for
violating labor laws.

3. The first two amendments encountered heavy resistance
from labor unions and opposition political parties. The
amendment to the termination of employment act drew the
heaviest criticism, as the government was relaxing the
termination procedure in the absence of an unemployment
insurance or compensation scheme. During the debate, the
Labor Minister pledged that a comprehensive unemployment
safety net would follow the current legislation. According
to Labor Ministry sources the Minister has also promised to
conduct multi-party discussions regarding the compensation
formula and to present the formula to Parliament for

4. Parliament approved the labor amendments after one and
a half days of debate. The amendments met stiff opposition
both within the Parliament and outside, with JVP-led trade
unions leading protest campaigns on the streets of Colombo.
In fact, after the Labor Minister presented the bills to
parliament, parliamentary sittings were suspended for an
hour when the opposition leader asked for a postponement of
debate pending further discussion with trade unions. The
debate, however, went on. Backstage maneuvering by the
Prime Minister paved way for the passage of the bills, with

5. According to Labor Ministry sources, the amendments did
not contain substantive changes to any of the reforms, only
minor adjustments such as lengthening the proposed
timeframe for dispute resolution. The first two pieces of
legislation were passed with 121 votes for and 68 against.
The third, containing increased fines for violating certain
labor laws, passed without vote.

6. Comment: Sri Lanka, already the most open economy in
South Asia, has just taken a giant leap toward greater
economic liberalization. The passage of this legislation -
which for months had been promised by the pro-business UNF
government and resisted by the unions - was surprisingly
quick. The assurances of the Labor Minister that a social
safety net would be in place for dismissed workers, some
minor concessions, and maneuvering by the Prime Minister
helped to get the job done. These are critical steps for
the government, which is eager to attract new foreign
investment. Sources tell us that the Prime Minister is
preparing to move more quickly and aggressively on further
economic reforms this year. He has the popular support to
make changes, but he will need strong political will to
push the tougher ones through. End comment.


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