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