REMITTANCE ECONOMY MIGRATION-UNDERDEVELOPMENT IN SRI LANKA Matt Withers A thesis submitted in fulfilment of requirements for the degree of Doctor of Philosophy. Faculty of Arts and Social Sciences Department of Political Economy The University of Sydney 2017 “Ceylon ate the fruit before growing the tree” - Joan Robinson (Wilson 1977) (Parren as 2005) (Eelens and Speckmann 1992) (Aneez 2016b) (International Monetary Fund (IMF) 1993; International Monetary Fund (IMF) 2009) (Central Bank of Sri Lanka (CBSL) 2004) (United Nations Population Division 2009) Acknowledgements Thanks are due to a great number of people who have offered support and lent guidance throughout the course of my research. I would like to extend my appreciation foremost to my wonderful supervisors, Elizabeth Hill and Stuart Rosewarne, whose encouragement and criticism have been (in equal measure) invaluable in shaping this thesis. I must similarly offer heartfelt thanks to my academic mentors, Nicola Piper and Janaka Biyanwila, both of whom have unfailingly offered their time, interest and wisdom as my work has progressed. Gratitude is also reserved for my colleagues Magdalena Cubas and Rosie Hancock, who have readily guided me through the more challenging stages of thesis writing with insights and lessons from their own research. A special mention must be made for the Centre for Poverty Analysis in Colombo, without whose assistance my research would simply not have been possible. I would like to thank Priyanthi Fernando for her willingness to accommodate me, Mohamed Munas for helping to make fieldwork arrangements, and to Vagisha Gunasekara for her friendship and willingness to answer my incessant questions about Sri Lanka. Special thanks are likewise accorded to Mohamed Shamil, whose interpreting, liaising and motorcycle handling skills were indispensable. Another special mention must be made for the Women’s Centre of Sri Lanka and their numerous field contacts who generously facilitated the initial interviews and ‘got the ball rolling’. Keep fighting the good fight. Lastly, I’m very grateful to the friends and family who have endured the turbulence of the past four years, and particularly to Ezreena Yahya for her patience and understanding during the more testing moments. Acronyms ADB Asian Development Bank ALFEA Association of Licensed Foreign Employment Agencies (Sri Lanka) CBSL Central Bank of Sri Lanka CEPA Centre for Poverty Analysis (Sri Lanka) CMRD Centre for Migration Research and Development (Sri Lanka) DCS Department of Census and Statistics DNP Department of National Planning EMN European Migration Network EPZ Export Processing Zone FDI Foreign Direct Investment GCC Gulf Cooperation Council GDP Gross Domestic Product ILO International Labour Organisation IMF International Monetary Fund IOM International Organisation for Migration IPS Institute for Policy Studies (Sri Lanka) JAAF Joint Apparel Association Forum (Sri Lanka) JBIC Japan Bank for International Cooperation JDI Japan Development Institute KNOMAD Global Knowledge Partnership on Migration and Development LTTE Liberation Tigers of Tamil Eelam MFEPW Ministry for Foreign Employment Promotion and Welfare MFP Ministry of Finance and Planning MMWD Ministry of Megapolis and Western Development NELM New Economics of Labour Migration ODA Official Development Assistance OECD Organisation for Economic Cooperation and Development SDC Swiss Agency for Development and Cooperation (Sri Lanka) SLBFE Sri Lanka Bureau of Foreign Employment SLFP Sri Lanka Freedom Party UNP United National Party WMC Women and Media Collective (Sri Lanka) Table of Contents Abstract 6 Introduction 8 An Elephant in the Room Part One: Contextualising Temporary Labour Migration in Sri Lanka Chapter One 19 The History and Ideology of Migration-Development Chapter Two 40 The Political Economy of Uneven Development and Labour Migration in Sri Lanka Part Two: Empirical Research and Fieldwork Findings Chapter Three 70 Research Aims and Methodology Chapter Four 85 In Search of the ‘Good Life’: Uneven Development and Forced Migration Chapter Five 114 The Cost of Being Exploited: Fees, Debts and the Merchants of Labour Chapter Six 139 Manufacturing Success: Status and the Re-socialisation of Migrant Labour Part Three: Macroeconomic Implications Chapter Seven 169 Remittance Capital: Financing Uneven Development Chapter Eight 199 Remittance Economy: The Unequal ‘Wins’ of Temporary Labour Migration Conclusion 229 Migration-Underdevelopment in Sri Lanka Bibliography 237 Appendix: Fieldwork Survey 252 Abstract Sri Lanka's integration at the lower tiers of a (re)globalising world economy has entailed the mass migration of low-skilled and domestic workers employed as temporary contract labour throughout the oil-economies of West Asia. Foreign employment of this kind began after neoliberal economic restructuring in 1977 and, by facilitating remittance transfers, has since become a dominant livelihood strategy for households and the largest source of export earnings for the economy. Dominant policy-level assumptions of a mutually- beneficial ‘triple win’ between migrants and their countries of origin and destination posit that temporary labour migration will produce positive economic outcomes for all involved. Yet while labour-receiving economies clearly benefit from exploiting reserve armies of labour and care, the developmental implications of remittance transfers for migrant households and sending economies remain empirically ambiguous and relatively under- theorised. Employing a multiscalar analysis of migration outcomes – spanning individual households, local communities, the macro-economy and global patterns of capital accumulation – this thesis demonstrates how cumulatively causative processes at structural, institutional and agency levels have left Sri Lanka a precariously uneven and remittance-dependent economy. Sri Lanka’s dilemma hinges on a central contradiction: uneven development has forced marginalised populations into foreign employment, only for their remittances to maintain the model of development they themselves are excluded from. The dualistic nature of remittance capital, as both an individual income transfer and an aggregate foreign exchange inflow, is fundamental to this dynamic. Fieldwork findings from over 100 interviews with migrant returnees suggest that a combination of rigid economic geography, exploitative recruitment networks and the social importance of status consumption have resulted in few lasting benefits from foreign employment. Most migrants achieved subsistence rather than ‘success’, while those from more disadvantaged communities often returned indebted. Whilst remittance transfers have generally produced one-off or transient benefits for migrant households, their aggregated inflows have cushioned Sri Lanka’s trade deficit and buoyed the rupee to underwrite international loans that sustain uneven development by financing large infrastructural projects orientated explicitly to capital and the urban economy. Although evoking the pretence of stability, Sri Lanka’s remittance-driven development has complex implications for trade 6 and production, to the effect of undermining domestic industry and limiting local spillovers from remittance consumption. With increasing remittance inflows needed to buffer the current account deficit and maintain macroeconomic stability, Sri Lanka has become entwined in an unsustainable and seemingly intractable path dependence on temporary labour migration as a substitute for substantive economic development. 7 Introduction An Elephant in the Room Background Temporary labour migration has quietly become the cornerstone of Sri Lanka’s economy. Although the South Asian island is more frequently associated with tea, tourism and garment manufacturing, in 2015 the combined net foreign exchange earnings of its three largest industries were eclipsed by workers’ remittances amounting to US$6.9 billion (CBSL 2016). Equivalent to 66 percent of total export earnings and 8.5 percent of gross domestic product (GDP) for the same year (CBSL 2016), the prominence of these remittance inflows is commensurate to the volume of domestic and low-skilled workers leaving Sri Lanka to work abroad, overwhelmingly in the oil-economies of West Asia. The last available data indicates that there were 1,932,245 Sri Lankans in foreign employment as of 2010 (SLBFE 2012), approximately 10 percent of the country’s total population and equivalent to roughly 25 percent of the domestic workforce. Given that annual departures have increased year-on-year since 2010, and large irregular migration flows remain unaccounted for, these figures can be considered conservative estimates of the true extent of Sri Lanka’s migrant workforce. For Sri Lanka’s working poor, this statistical snapshot reflects a more intimate socio- economic reality: the prevalence of temporary labour migration as a dominant livelihood and survival strategy. Since sweeping economic reforms in 1977 liberalised Sri Lanka’s migration policy, foreign employment in West Asia has become an increasingly common means of earning an income in lieu of decent local work and – for the most developmentally marginalised communities – almost a rite of passage. The conditions and commonness of temporary labour migration cuts asymmetrically across Sri Lanka’s gender, ethnic and class divisions. Throughout the first two decades of migration to West Asia, the clear majority of workers were female domestic workers, typically of poor Sinhalese background (Eelens,