PORT SLOWDOWN MAY FORCE GOVERNMENT TO RESIST UNION DEMANDS

UNCLAS SECTION 01 OF 02 COLOMBO 001200 SIPDIS MCC FOR D NASSIRY AND E BURKE SIPDIS SENSITIVE E.O 12958: N/A TAGS: ECON ETRD ELAB EWWT EFIN CE SUBJECT: PORT SLOWDOWN MAY FORCE GOVERNMENT TO RESIST UNION DEMANDS OR LOSE ITS STATUS AS A TRANSSHIPMENT HUB ¶1. (U) Summary: Work at the Port of Colombo has been disrupted due to a work slowdown as unions demand a salary hike. The partial strike has significantly slowed work at the government-run section of the Port of Colombo. Port officials say that the strike is politically instigated, making it difficult for the government to resolve the crisis. A court ruling requesting unions not to sabotage work failed to break the strike action. End Summary. ¶2. (U) Workers in the state-run section of the Port of Colombo, the main port in Sri Lanka, began a work slowdown on July 13 significantly slowing port activity. Since then, productivity in the port has fallen 75 percent. This has disrupted transshipment activities and import and export trade. The government's initial response to the strike was weak as both the Minister in charge of Ports, Mangala Samaraweera (also Foreign Minister),and the Chairman of the Sri Lanka Ports Authority (SLPA) which manages the port, were away from the country. A week after the strike began, the SLPA went to court requesting an interim order preventing workers from disrupting work. On June 20, the court ordered that unions not disrupt port activities. However, the court ruling failed to improve the port situation. Following the court order, the Minister of Ports came out strongly advising the workers to quit if they chose not to work. Subsequent discussions between the SLPA and unions also failed to resolve the crisis, despite the SLPA offering to give about half the increase demanded by the unions. ¶3. (SBU) The trade unions are asking for a Rs 3,000 (USD 30) monthly salary increase for about 13,000 manual workers in the port. This would be the third increase granted within a year. In addition to a Rs 750 (USD 7.50) monthly salary increase recently granted by the SLPA, the SLPA workers were also given a salary increase of Rp 2500 (USD 25) along with all other public servants in ¶2005. Unions claim that executive salaries have been increased sharply whereas the manual workers have been given only a small increase, resulting in wide disparities in the salary structure. Palitha Atukorale, Chief Organizer of the Jathika Sevaka Sangamaya, the trade union affiliated to the main opposition United National Party (UNP),told the Econ FSN the unions expect the SLPA to give in to their demands. He reasoned that the port has been doing well over the past year and the salaries have remained unchanged for three years except for government-mandated public sector wide salary hikes.(Note: In making this claim, Atukorale seems to ignore the recent Rs 750 SLPA-specific salary increase. End Note.) ¶4. (U) According to SLPA officials, this is a politically instigated strike. The situation has been exacerbated by the fact that unions belonging to all major political parties including government coalition parties Sri Lanka Freedom Party (SLFP) and Janatha Vimukthi Peramuna (JVP) as well as unions affiliated with the opposition UNP party are taking part. ¶5. (SBU) According to Winston Tan, CEO of American President Lines office in Sri Lanka and the head of the Sri Lanka Association of Vessel Operators (SLAVO),there has been no improvement in the port despite the court ruling. According to him, as of July 20, about eight ships had bypassed Colombo since the go-slow began. Shipping line officials say the slowdown has compelled them to either re-route or wait for days to enter the port. According to Tan, there are about 20 vessels currently waiting to be berthed at the port. Meanwhile, activities in the privately run South Asia Gateway Terminal (SAGT) at the Port of Colombo have also slowed, due in large part to significant inter-terminal transshipment traffic between the SAGT and SLPA. Shipping line operators are supposedly considering imposing surcharges from shippers in a bid to recover their losses. ¶6. (SBU) Comment: In the recent past, Sri Lanka's politically-affiliated unions have been quite successful in preventing privatization and reorganization of failing government-owned enterprises. The GSL has generally given in to union demands in recent strikes (or threats of strikes) in the energy and transportation sectors. This time, the unions are focusing on the GSL's golden enterprise. While GSL officials are objecting more loudly to union demands this time, the GSL probably will again appease the unions. The Port of Colombo is viewed by many in the GSL and private enterprise as the lifeline for exports and the economy in general. Indeed, the port is a major transshipment hub in South Asia, and Sri Lanka wants it to remain competitive particularly when other countries in the region improve COLOMBO 00001200 002 OF 002 their ports for transshipment business. ¶7. (U) EconOff will report next week on further developments following a meeting with several union leaders. Entwistle