Have Chinese investments generated employment in Sri Lanka?
The presidential elections of Sri Lanka held in 2019 drew attention to the tiny island country for three reasons.
First, there were a large number of candidates – a total of 35 – contesting for the position. Second, the geostrategic position of the country in the Indian Ocean is important from an economic and trade perspective. Third and most important, China has been building various infrastructure projects across Sri Lanka where China was benefitting the most. Gotabhaya Rajapaksa, the former defence chief, was declared as the President of Sri Lanka. He terminated the 37-year civil war with Tamil separatists while promoting nationalism and is expected to follow the policies which are in national interest. Therefore, we might expect some strong steps aimed at attaining equal benefits predominantly from Chinese investments and also from other countries investing in Sri Lanka.
China and Sri Lanka have jointly undertaken projects such as the Southern Highway, Outer Circular Highway, Matala International Airport, Colombo International Container Terminal, and Hambantota Port in Sri Lanka. China is going to invest US$1 billion in the construction of three 60-story buildings at a megaproject near Sri Lanka’s main port, Colombo. This megaproject is an extension of the Colombo International Financial City development, located next to Sri Lanka’s harbour which is the only deep-sea container port in the region.
The state-owned China Communications Construction Company (CCCC) said that the project is expected to create 83,000 new jobs in the span of 20 years from implementation to completion. The same company has been blacklisted by the World Bank on allegations of corruption. Benefits of these projects to Sri Lanka are still doubtful, but China is aiming to maximise its profits and gain control over the Indian Ocean through its Belt and Road Initiative (BRI). China’s true intention was revealed when Sri Lanka could not pay the loan for the Hambantota port and gave the port on lease to China for 99 years in 2017. China charges an interest rate of 6.3 percent which is the highest among all borrowings of Sri Lanka from international organisations, India and other countries.
The Hambantota port was one of the ambitious projects of the Sri Lankan Government which promised to create over 50,000 direct employment opportunities. However, the project could not create the anticipated outcome of generating jobs and increasing per capita income of the Hambantota district on par with the districts in the Western Province which have been the largest contributors to the GDP, 39.7 percent in 2016. In an article in NYTimes, it was mentioned that the project was economically unviable and was always led by the political motive of former President Mr Mahinda Rajapaksa in addition to the dominant assistance strategy of China.
An interesting fact is that through these projects, China generated employment in Sri Lanka but for its own people and not for the Sinhalese. It was mentioned in the article written by Ilaria Maria Sala for Quartz that some thousand Chinese workers were brought to Sri Lanka to work on infrastructure projects like Colombo Port City. In the same article, Mr Chen, a Chinese migrant worker was interviewed who confirmed that they work for 10 hours [daily or otherwise?] and was quite sure about the control of China on the port for the next few decades. An article in NYTimes mentioned how Chinese labourers migrated to Sri Lanka and were overburdened with the work of the Hambantota port.
However, Sri Lanka is still optimistic about the BRI and feels that a joint venture with the Chinese company will generate jobs, drive their economic growth, and turn out to be a positive-sum game for both parties. If all these projects are aimed at creating employment for the Sinhalese, then why has the unemployment rate been so high over the past few years? The graph below clearly shows that the unemployment rate in the country in the past four years never dropped below four per cent. In July 2019, it peaked at 4.9 percent. This is surely an alarming situation requiring definite and concrete steps by the Government.
Thus, it is necessary to understand what kind of unemployment is prevailing in Sri Lanka and how Chinese investment can be helpful in overcoming this challenge. It should be noted that in Sri Lanka, the working-age population makes up 36.79 percent of the total population. Unfortunately, Sri Lanka hasn’t been able to leverage this demographic dividend and the highest unemployment rate of 21.6 percent was found in the age group of 15-24 years as per Sri Lanka’s First Quarterly Labour Force Survey 2019. Education-wise the highest unemployment rate is reported from the General Certificate Education (Advanced Level) and above group i.e. higher secondary and graduates compared to the unemployment rate from other levels of education which is about 7.9 percent or 1,60,379 people.
Sri Lanka’s labour market is facing the challenge of educated unemployed youth mainly because of a skill mismatch. Jobs available are either unattractive to youngsters due to the precarious nature of employment or because they are not up to their aspirations, perceptions of youth about the occupation, stigma attached to the particular occupation or sector. Important skills demanded by the English language market and information technology are in short supply.
The Chinese investments in Sri Lanka have indeed generated jobs, albeit indirectly. For example, new roads built through these investments have strengthened connectivity between villages, towns and cities and boosted tourism. The tourism sector in return generated about 10 percent or 8,19,500 employment opportunities in Sri Lanka’s economy in 2014. This number is expected to rise to 9,43,000 in the year 2025. Overall, the growth of employment in Sri Lanka’s tourism sector has dramatically increased from -6.32 percent in 2009, to 6.44 percent in 2015.
The way Sri Lanka’s tourism sector benefited from China’s investment and boosted its job creation; other sectors also need to be developed to absorb the educated labour force. To develop other sectors, the labour force needs to be skilled and not just educated. Therefore, skilling and training the youth and locals should be the first reform undertaken by Gotabhaya Rajapaksa’s government so that the Chinese investments can generate employment for them. For creating productive jobs desired by the educated youth, Sri Lanka should explore new sectors; increase R&D for technological advancements with the help of China’s investment rather than sticking only to building physical infrastructure. For the educated unemployed youth, it needs to create more local job opportunities and environments for self-employment through encouraging small and medium enterprises.