VZCZCXRO7088
PP RUEHLMC
DE RUEHLM #1200/01 2020626
ZNR UUUUU ZZH
P 210626Z JUL 06
FM AMEMBASSY COLOMBO
TO RUEHC/SECSTATE WASHDC PRIORITY 3893
INFO RUCPDOC/USDOC WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHGV/USMISSION GENEVA 1258
RUEHNE/AMEMBASSY NEW DELHI 9811
RUEHKA/AMEMBASSY DHAKA 9326
RUEHIL/AMEMBASSY ISLAMABAD 6222
RUEHKT/AMEMBASSY KATHMANDU 4257
RUEHCG/AMCONSUL CHENNAI 6772
RUEHLMC/MILLENNIUM CHALLENGE CORP
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