Sri Lanka’s talent drain: From dreams to departures

Originally appeared on The Morning

By Dhananath Fernando

Every day, news stories emerge about skilled labour from Sri Lanka migrating out of the country. It’s not only doctors, engineers, bankers, and teachers who are leaving, but also individuals with institutional knowledge from small and medium enterprises.

This outflow of talent is undeniably going to adversely affect businesses next year. Many attribute this migration to the economic crisis, and often, the debate revolves around the ethical aspect of people leaving after benefiting from investments in education and healthcare funded by taxpayers.

The crisis we currently face is multidimensional. We are dealing with a Balance of Payments crisis, debt crisis, currency crisis, economic governance crisis, and a humanitarian crisis. Amidst all these crises, the issue of why people are leaving the country is primarily a crisis of an economy unable to accommodate its citizens’ dreams and aspirations.

Unfortunately, the dreams of many Sri Lankans, especially those with high-reaching aspirations, have consistently been at the receiving end of various Government policies over the years, even before the economic crisis truly struck. The economic crisis was merely the final blow that compelled people to make the decision to finally leave.

If you recall, many political campaigns targeted youth and professionals with visuals of young people buying vehicles, enjoying family life, having access to better schools, and other attributes of a middle-income lifestyle. In fact, during the Yahapalana Government, the then Finance Minister Mangala Samaraweera understood the needs of the youth and introduced special loan schemes aimed at them under his flagship project ‘Enterprise Sri Lanka’.

High tariff rates

However, our policies over the years have largely stifled the aspirations of an aspirational society. If you take a stroll in urban areas, it becomes apparent that there are many unfinished houses. Often, you can see rusting steel bars protruding from concrete beams and the primary use of the slabs seems to be for drying clothes.

Many people are unaware that the dream of owning a decent house in Sri Lanka has been hindered by very high tariff rates on steel, tiles, bathware, and practically all construction material. People’s right to access reasonably-priced construction materials has been obstructed, resulting in our construction costs being higher than other countries in the region.

Additionally, people pay interest rates of 14-18% on their housing loans due to the extra 40% cost they incur. Consequently, the funds people could have invested into building their second floor have already been spent on the ground floor. This situation affects masons, carpenters, architects, designers, and the entire supply chain, crushing their dreams as well.

Further, certain products imported to the country incur effective tariff rates of over 100%. Sadly, the Government doesn’t even generate significant revenue from these high tariffs, as they are so exorbitant that importing at an effective tariff of over 100% makes no sense. This form of corruption is hidden, as certain individuals benefit from maintaining high tariffs for personal gain, while consumers suffer. The significant reason for professionals considering migration, despite the hardships, is the crisis of shattered aspirations, which the Aragalaya represented.

This type of corruption is challenging to capture, but in people’s minds, the notion that a few people are stealing their dreams holds true when they understand how tariff rates have diminished their quality of life.

Subpar transport system

Another major factor affecting people’s lives is transportation. Our public transport service is abysmal due to a lack of market openness and market restrictions through a permit system. State-owned train services are not only unprofitable but also fall far below average service levels. Thus, for the middle class, the logical choice is to purchase a personal vehicle.

However, personal vehicles are also subject to tariffs of over 100%. Remarkably, the Sri Lankan Government earns a greater profit margin than the automobile manufacturers themselves by imposing tariffs exceeding 100% of the vehicle’s value. Essentially, this means buyers are paying a value of more than double the price of the vehicle.

The extra cost is often funded by borrowing through vehicle leases, incurring interest rates of over 14% on top of everything else. Further, they pay an additional Rs. 50-70 for every litre of fuel, and the cycle continues with spare parts, revenue licences, etc.

For professionals, their aspirations are once again ignored, making it unsurprising that people consider migrating. The Government’s solution to the vehicle issue over the years has been a vehicle permit system which has exacerbated the problem rather than solving it.

Crisis of unrealised dreams

In summary, the migration of people represents a crisis of unrealised dreams, with the economic crisis serving as a significant trigger.

The solution lies in allowing the private sector to recruit skilled individuals from other markets and establishing a scheme that permits skill migration into Sri Lanka. This approach would help fill vacancies, promote knowledge transfer, and stabilise the business environment.

If Sri Lankans can migrate overseas and compete in Toronto, New York, London, Dubai, and Stockholm, they can undoubtedly compete with anyone else in Sri Lanka. Knowledge transfer would be enhanced and salaries would increase over time, even for local staff.

Given that we have already shattered people’s dreams, we shouldn’t obstruct the remaining dreams of those considering staying in Sri Lanka. The best way to retain them is by ensuring the sustainability of the remaining business ecosystem. But to ensure the ability to realise the dreams of an aspirational society, the cause of the problem must be fixed at the root.