EFC Chief calls for urgent labour reforms to unlock investment and drive growth

Warns of low workforce participation, with national LFPR at 47.4% and female LFPR at 31.3%, far below regional peers Points to country's FDI inflow fluctuations, reflecting weak investor confidence Says outdated labour laws, rigid termination rules and fragmented employment regulations hinder competitiveness Proposes reform around three pillars: termination of employment, conditions of employment and industrial relations Urges unified employment code, modern social security system and shift from litigation to mediation in labour disputes Pushes for cross-cutting reforms, including flexible work models, evidence-based minimum wage setting and night work access for women Stresses regulatory simplification, technology adoption and institutional reform are key to global competitiveness

- BY CHARUMINI DE SILVA

THE Employers' Federation of Ceylon (EFC) Director General Vajira Ellepola recently called for bold and comprehensive labour reforms, warning that without decisive changes, Sri Lanka risks remaining stuck in economic stagnation and missing out on critical foreign direct investment (FDI) needed for long-term growth.

He made these remarks during a webinar jointly organised by the Daily FT, Association of Chartered Certified Accountants (ACCA), International Chamber of Commerce Sri Lanka, Women in Management (WIM), SLASSCOM, Sri Lanka Institute of Directors, MBA Alumni Association of the University of Colombo, and the EFC.

Sharing insights against the backdrop of fluctuating investment flows and the regional labour market, Ellepola warned that the country's outdated labour framework, low workforce participation, and fragmented employment laws are severely undermining its competitiveness. Citing data from the latest World Investment Report 2025, he noted that global FDI contracted by 11% last year, while inflows into Asia dipped by 3% from $ 622 billion in 2023 to $ 605 billion in 2024. North America and Africa bucked the trend, registering a sharp increase of 23% and 75%, respectively.

He said Sri Lanka's own FDI performance over the past five years reflects similar fluctuations. According to him, in 2019, FDI stood at $ 743 million, in 2020 it dropped to $ 434 million, in 2021 it was $592 million, in 2022 it was $ 884 million, in 2023 it was $ 713 million, and last year it was $ 761 million.

"These figures point to the urgent need to evaluate regional investment trends and evaluate how Sri Lanka can create a conducive environment to woo and retain investment," Ellepola added.

A key area of concern he said lies in the country's underutilised labour force. "With a population of 22 million and 17 million people of working age, only 8.3 million are officially part of the labour force.