Cablegate: Sri Lanka: Conflict Contributes to Brain Drain

VZCZCXRO3898
RR RUEHLMC
DE RUEHLM #1352/01 2750531
ZNR UUUUU ZZH
R 020531Z OCT 07
FM AMEMBASSY COLOMBO
TO RUEHC/SECSTATE WASHDC 6901
INFO RUCPDOC/USDOC WASHDC
RUEHNE/AMEMBASSY NEW DELHI 1414
RUEHKA/AMEMBASSY DHAKA 0436
RUEHIL/AMEMBASSY ISLAMABAD 7423
RUEHKT/AMEMBASSY KATHMANDU 5561
RUEHKL/AMEMBASSY KUALA LUMPUR 0331
RUEHLO/AMEMBASSY LONDON 4049
RUEHBY/AMEMBASSY CANBERRA 0972
RUEHWL/AMEMBASSY WELLINGTON 0017
RUEHOT/AMEMBASSY OTTAWA 1205
RUEHRH/AMEMBASSY RIYADH 0281
RUEHKU/AMEMBASSY KUWAIT 0468
RUEHAD/AMEMBASSY ABU DHABI 0443
RUEHKP/AMCONSUL KARACHI 2242
RUEHCG/AMCONSUL CHENNAI 8017
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHLMC/MILLENNIUM CHALLENGE CORPORATION

UNCLAS SECTION 01 OF 03 COLOMBO 001352

SIPDIS

SENSITIVE

SIPDIS

STATE PASS USTR FOR ADINA ADLER
COMMERCE FOR JONATHAN STONE
TREASURY FOR LESLIE HULL
MCC FOR S. GROFF, D. TETER, D. NASSIRY AND E. BURKE

E.O 12958: N/A
TAGS: ECON ETRD ELAB KMCA CE
SUBJECT: SRI LANKA: CONFLICT CONTRIBUTES TO BRAIN DRAIN

REF: A. COLOMBO 625 B. COLOMBO 861

1. (U) SUMMARY: Professionals and business people are steadily
migrating out of Sri Lanka in pursuit of better living conditions
and a more stable business environment. Many are Tamils and Muslims
fleeing the conflict and persistent harassment. The "brain drain"
is depleting a local talent pool already limited by insufficient
university training positions in high-demand fields like software
engineering, finance, and nursing. The loss of human capital will
impede Sri Lanka's economic development goals and erode its regional
and global competitiveness, especially as the country seeks to
become a regional information technology and outsourcing hub. End
Summary.

2. (U) Traditionally, unskilled migrant workers have been one of Sri
Lanka's most valuable exports, as their remittances provide the
country's second largest source of foreign exchange after garment
exports (ref A). In recent years, growing numbers of Sri Lankan
professionals have also been leaving the country seeking better
career prospects, higher pay, greater physical security, improved
prospects for their families. Armed with proficient English,
academic qualifications and information technology (IT) skills,
these well-educated Sri Lankans are competitive in the global market
for talent. Unlike most unskilled laborers, however, many
professionals are permanently settling abroad and do not send
significant remittances back to Sri Lanka. Further, the shrinking
talent pool is a serious impediment to the growth plans of some of
Sri Lanka's most dynamic firms. Though local business leaders do
not believe the current migration trend has become a critical
problem, they are pushing for the government and training
institutions to seriously address the issue now.

PROFESSIONAL MIGRATION IS BIG, BUT HARD TO COUNT
--------------------------------------------- ---

3. (U) Estimates vary on the number of professionals leaving the
country. According to the Sri Lanka Bureau for Foreign Employment
(BFE), there are 1.4 million Sri Lankan citizens, or an eighth of
the country's labor force, legally working abroad. In 2006, the
World Bank estimated that more than one million additional Sri
Lankan professionals were permanently established abroad. The
latter figure is harder to confirm, as professionals, unlike
laborers, do not have to register with the BFE when they move
overseas.

4. (U) The Bureau stated that in 2006, 486 engineers, 483
accountants, and 73 nurses departed Sri Lanka for work abroad -- all
figures slightly higher than in 2005. These statistics, however,
reflect only the number of employment contracts handled by foreign
recruitment agencies registered to the BFE, and therefore
underestimate the actual number of departing professionals. The
primary destination markets for Sri Lankan professionals are the
Gulf and the Middle East -- Saudi Arabia, Kuwait and United Arab
Emirates; and the English-speaking industrialized countries -- the
United States, the United Kingdom, Canada, Australia, and New
Zealand. The extent of Sri Lankan professional migration to these
countries is illustrated in one sector by figures reported by Sri
Lanka's Chartered Institute of Management Accountants (CIMA): In
Sri Lanka, there are 1,800 CIMA members and 11,000 CIMA candidates.
Abroad, there are 3,900 Sri Lankan CIMA members and candidates, of
which 1,465 are in the U.K., 676 in Australia, 277 in Canada, 171 in
the United Arab Emirates and 96 in the United States.

CONFLICT FUELING MIGRATION OF TAMIL PROFESSIONALS
AND BUSINESS PEOPLE
--------------------------------------------- ----

COLOMBO 00001352 002 OF 003

5. (U) Veteran business leaders in Sri Lanka say that the brain
drain is not a new phenomenon, as migration waves have historically
correlated with Sri Lanka's separatist conflict, starting in 1983
and picking up most recently since 2005. For Tamil and Muslim
professionals especially, the conflict has made daily life difficult
and has signaled to many that educational and career prospects for
themselves and their families are unreliable. The President of
local software company hSenid told Econoff that, of the ten percent
of workers who have left the company in the past year, approximately
75 to 80 percent were Tamils.

6. (U) Similarly, the conflict has indirectly caused many Tamil and
Muslim traders and other entrepreneurs to depart. Numerous Tamil
business owners in the north and the east have fled to India to
escape fighting, local persecution, and general insecurity. This
trend has spread to Colombo as well. Embassy has heard in recent
months from Colombo-based Tamil and Muslim owners of trading,
wholesale, and retail businesses that many of their peers are moving
to India, Singapore, and Malaysia, in search of greater security and
stability. First Tamil, and later, Muslim business people have been
the target of criminal abduction-for-ransom rings (ref B). Some
Tamil business owners report experiencing official harassment, such
as by customs officials who impose extortionate fines in response to
minor mistakes in customs paperwork. Malaysia in particular has
become an attractive destination for Tamil business relocations,
because it offers long term (though not permanent) legal residence
status for people who can deposit 300,000 ringgit (about $88,000).

MID-CAREER PROFESSIONALS: SOME SEEK IMPROVED
OPPORTUNITIES, OTHERS SECURITY
--------------------------------------------

7. (U) For large Sri Lankan businesses the brain drain is a problem
at both the mid-career and entry level. In a recent local newspaper
poll, 60 percent of senior human resources managers interviewed were
worried about company-wide talent shortages; 75 percent of the same
managers said that attracting and retaining key talent was one of
their top three priorities. Company leaders interviewed in local
business journal Lanka Monthly Digest stated that "uncertainty" was
a major factor causing their mid-level professionals to seek work
abroad. They also cited lack of security, lack of educational
prospects for children, and overall political instability as drivers
of the brain drain. They added that higher pay and greater upward
mobility abroad also act as a draw to those worried about security.

UNIVERSITY GRADS: MISMATCHED DEGREE FIELDS
AND HIRING NEEDS ADD TO BRAIN DRAIN
------------------------------------------

8. (U) The state university system is also a major contributor to
the brain drain. The universities' poor academic quality in many
fields and insufficient spaces in hot fields like information
technology are inducing prospective students to study abroad. This
means that local firms in growing fields like software design and
business process have more job slots available than qualified
graduates to hire. According to the Sri Lanka Information and
Communication Technology Association (SLICTA), the local IT industry
has an annual demand for over 7,000 workers, but has only been able
to hire 2,000 plus this year. This shortage will impede Sri Lanka
from reaching its potential as an IT industry and
business-processing outsourcing hub.

9. (U) Outside hot sectors like IT, the problem is reversed: the
universities are producing graduates in fields that are not hiring.
A local newspaper study reported that Sri Lankan universities

COLOMBO 00001352 003 OF 003

annually produce over 3,000 science and technology related
graduates, but that only 7 percent of these find substantive work in
their specialties in Sri Lanka. As a result, many emigrate. The
departure of such university grads represents not only a depletion
of human capital, but also a loss of state investment, as the
country loses the opportunity to gain from its educational
investment.

RESPONSES TO THE BRAIN DRAIN
----------------------------

10. (U) Reinforcing the evidence that the brain drain is not solely
a financial issue, businesses are finding that a higher salary alone
is not enough of an incentive to keep professionals in place. The
Sri Lanka Information and Communication Technology Association
(SLICTA) reported that current retention rates of IT employees are
generally between two to three years. HSenid, trying to avoid
losing employees entirely, encourages their movement to hSenid
offices in other countries. Similarly, HSBC bank's Sri Lanka CEO
told Econoff that he finds himself helping his employees transfer to
other HSBC offices abroad in the slim hope that they will eventually
return to work for HSBC in Sri Lanka.

11. (U) The private sector is also encouraging the government to
create incentives to attract educated Sri Lankans overseas back to
Sri Lanka. They have urged the government to emulate India's "brain
gain" strategy, which includes tax and other financial incentives
for those who return. Businesses realize that attracting talent
back to Sri Lanka has a great upside in terms of knowledge transfer
from returning migrants.

12. (U) COMMENT: Sri Lanka's brain drain is another damaging
economic and social consequence of its long ethnic conflict. With
skilled professionals and talented students departing, Sri Lanka is
losing the human capital it most needs to compete in a globalized,
information intensive economy. Simply riding the wake of India's
growth in information technology and business process outsourcing
could provide enormous growth potential for Sri Lanka, but the brain
drain is a serious impediment to that prospect.
The government has in recent years worked hard to promote outward
migration of unskilled labor and has recently begun to talk of
promoting migration of skilled labor as well. While these measures
may appear attractive in the short run because of the remittances
they yield, the government fails to take account that professional
Sri Lankans overseas are contributing to other countries' GDPs, and
that only a fraction of their earnings comes back as remittances.
For these reasons, the government should start to develop longer
term plans for retaining and attracting back educated Sri Lankans
who are essential to the country's long term competitiveness.
BLAKE

© Scoop Media