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