Sri Lanka - Construction Industry Project

Document of The World Bank FOR OFFICIAL USE ONLY Report No. 7560 PROJECT COMPLETION REPORT SRI LANKA CONSTRUCTION INDUSTRY TRAINING PROJECT (CREDIT 1130-CE) DECEMBER 30, 1988 This document has a resticted distribution and may be used by recipiens only in the perfonnance of their officil dudes. Its contents may not otherwise be disclosed without World Bank authorization.  ACRONYMS AND ABBREVIATIONS ACCSL - Association of Construction Contractors of Sri Lanka AMP - Accelerated Mahaweli Programme BC - British Council BSM - Basic Skill Module CHPB - Centre for Housing, Planning and Building CITB - Construction Industry Training Board CITP - Construction Industry Training Project DE - District Engineer DOL - Department of Labour GOSL - Government of Sri Lanka ICTAD - Institute for Construction Training and Development IDA - International Development Association IFOAPCA - International Federation of Asia and Pacific Contractors' Association MHE - Ministry of Higher Education MLGHC - Ministry of Local Government, Housing and Construction NAB - National Apprenticeship Board NHDA - National Housing Development Authority NIBM - National Institute of Business Management NSCCI - National Steering Committee for the Construction Industry NTCCI - National Training Committee for the Construction Industry SCCI - Secretaries' Committee for the Construction Industry SD & CC - State Development and Construction Corporation SDR - Special Drawing Rights SEC - State Engineering Corporation UK - United Kingdom USD or US$ - United States Dollars  FOR OFFICIAUL USE OrNLY THE WORLD BANK Washington. D.C. 20433 U.S.A. Oike of Doctrawa' Opmatm tEvwakutwn December 30, 1988 MEMORANDUM TO THE EXECUTIVE DIRECTORS AND THE PRESIDENT SUBJECT: Pass-Through Audit Report on Sri Lanka - Construction Industry Training Project (Credit 1130-CE) Attached, for information, is a copy of a report entitled "Pass-Through Audit Report on Sri Lanka - Construction Industry Project (Credit 1130-CE)" prepared by Resources Development Consultants, Ltd. on behalf of the Government of Sri Lanka, with an overview memorandum prepared by the Asia Regional Office. Further evaluation of this project by the Operations Evaluation Department has not been made. Attachment This document has a trescted distribution and nmay be used by recipbents only in the perfionrmnc of their ofcial duties. Its contents may not otherwise be disclosed without World Bank authorization. _hi _ouethsarsrce itiuinadmy eue yrcpet nyIh efrac  PROJECT COMPLETION REPORT SRI LANKA CONSTRUCTION INDUSTRY TRAINING PROJECT (Credit 1130-CE) TABLE OF CONTENTS Pare No. Preface .................................................... i Data Sheets.......................... ii Highlights ................................................. v I. PROJECT BACKGROUND ........................................ . 1 (a) Socio-Economic Setting ... 1 (b) Sector Setting . . . 5 (c) Trends in Construction Employment ..................... . 7 (d) Social Characteristics Affecting the Construction Industry . . . 10 Ce) Project Description and Objectives ... 12 Objectives ... 13 Project Components ... 14 Expected Benefits ... 14 II. PROJECT IMPLEMENTATION . . . 17 (a) Overview ............................................... 17 (b) Management ................... ........................... 17 *c) Inter-Ministerial Coordination . . 19 (d) Physical Implementation .. 20 Ce) Improvements to Existing Institutions .................. 28 (f) Building of New Facilities . . 29 (g) Procurement of Equipment . . . 30 (h) Technical Assistance ..... . 31 (i) Fulfillment of Covenants . . 32 III. PROJECT COST AND FINANCING . . . 36 (a) Appraisal Estimates. , . . . 36 (b) Final Cost of the Project . . . 36 Cc) Expenditure by Category . . . 36 (d) Technical Assistance Costs . . . 37 (e) Financing and Disbursement . . . 37  Table of Contents (continued) IV. PROJECT OPERATING OUTCOME .. .............................,. 39 (a) Overview Attainment of Project Objectives. 39 (b) Trainee Enrollment and Output. 41 (c) Short-Term In-Service Training Courses. 46 (d) Development of Curricula and Other Training Materials 49 (e) Special Studiest u d i es............. .... 50 Assessment of Training Needs ..50 Impact Assessment Study . . 60 V. BANK GROUP PERPOR4ANCE... 66 VI. LESSONS LEARNED AND RECOMMENDATIONS . . . .67 (a) General ...67 (b) Physical ..................... . .68 Project Formulation. ................. . . .68 Project Implementation ... 69 Supervision ............. . ... . .70 Technical Assistance . . 70 CHARTS ......... o .. .................. 73 TABLES .......................... 79 ANNEXES Annex 1 - Government Departments and Boards Engaged in Construction Work . ........ . 103 Annex 2 - Composition of Project Cell .. 104 Annex 3 - List of Artisan Training Centres .... 105 Annex 4 - Map of Sri Lanka Showing Locatini of Training Institutes . ............ ..107 Annex 5 - List of Specifications Prepared by the CITP . 108 Annex 6 - Bibliography . ........ 109 Annex 7 - Comments From the Borrower: (a) Ministry of Labour .. 111 (b) Ministry of Local Government Housing and Construction . 112 (c) Institute for Construction Training and Development .. ...........114  - i - PROJECT COMPLETION REPORT SRI LANKA CONSTRUCTION INDUSTRY TRAINING PROJECT (Credit 1130-CE) PREFACE 1. In Marrh 1981, the International Development Association approved a credit for SLtR 10.9 million (US$13.5 million equivalent) to the Democratic Socialist Republic of Sri Lanka, for a project designed to increase the supply of trained manpower to the local construction industry. 2. The Project (US$25 million total project cost) was aimed at providing training in the basic skills, which were in short supply, to artisans in the country's construction trades; in addition, it sought to improve the use and maintenance of plant and equipment training operators and mechanics, increase the effectiveness of work planning and supervision by training middle and upper management in contract procedures, site management and quality control, strengthen the agencies and institutions involved in training for the construction industry, and finally, improve methods and procedures relating to the industry. To achieve these objectives, the project established a unified modular training system designed to give basic trade skills to about 45,000 unskilled workers and upgrade the existing skills of some 9,600 experienced construction workers. The program also included training of about 1,800 mechanical equipment operators, some 900 work supervisors, and another 80 senior works managers. By the end of the project period, more than SDR 10.1 million was disbursed while SDR 0.78 was cancelled an of the last disbursement date of July 21, 1987. 3. The PCR was prepared by a local consulting firm on behalf of the project authorities. In accordance with the revised performance reporting procedures, this report has been read in the Operations Evaluation Department (OED) but the project was not audited by OED staff. 4. The report was sent for comment to various potentially interested Government Agencies. The three responses received from the Ministry of Labor, Local Government.Housing and Construction (NLGHC) and from the successor to the implementing agency ,the Institute for Construction and Development (ICTAD), confirmed the general fairness and appropriateness of the consultant's re ,jrt. Their principal comments clarify the reasons for adjustments to training targets based on decisions taken during project implementation to better reflect the significant changes in economic conditions in Sri Lanka, and in the light of periodic updating of training needs data. These adjustments at the same time emphasized qualitative improvements to training programs overall and a shift in priority from basic job entry skills training to in-service courses. The Borrower's comments are reproduced in Annex 7.  - ii - PROJECT COMPLETION REPORT SRI LANKA CONSTRUCTION INDUSTRY TRAINING PROJECT (Credit 1130-CE) ASIC DATA SHEET KEY PROJECT DATA (amounts in US$ millions) Appraisal Actual as Z of Item Expectation Actual Appraisal Estimate Total Project Cost 25.0 18.8 252 underrun Amount of IDA Credit SDR 10.90 SDR 10.11 72 underrun Completion Date * 6184 12/86 30 months delay Proportion completed 2 1002 100o Operation Outcome Satisfactory Institutional Performance Satisfactory Note: * " Procurement of equipment and furniture only. Project had no civil works. CUMULATIVE ESTIMATED AND ACTUAL DISBURSEMENTS FY82 FY83 FY84 FY85 FY86 FY87 Appraisal Estimate 2.44 6.09 7.48 10.9 - - Actual 2.11 3.29 5.44 7.2 8.16 10.1 Actual as 2 of Appraisal 85 54 73 66 75 93 Date of Final Disbursement (07121187) Total Disbursed in SDR 10.113 million - cancelled: 786,000 PROJECT DATES Original Delays from Plan Revisions Actual Original Plan First Mention in Files - - 03/21/79 - Negotiations - - 02/23/81 - Board Approval - - 04/07/81 - Signing of Credit - - 06/01181 - Effectiveness 06130/81 - 08/19/81 50 days Closing Date 12131/84 12/31/86 12/31/86 24 months  - iii - STAFF INPUTS (staff weeks) FY80 FY81 FY82 FY83 FY84 FY85 FY86 FY87 FY88 Identification /Preparation 8 * Appraisal 60 * Negotiations 2 Supervision 9.1 10.6 10.4 1.7 3.2 10.1 PCR 2 Subtotal 8 62 9.1 10.6 10.4 1.7 3.2 10.1 2 note: data with an asterisk is estimated MISSION DATA Special- Perform- Types No.of izations ance of Date Persons Represented Rating Trend Problems Identification /Preparation 06/80 2 2 na na na Appraisal 07/80 6 4 na na na Post-Appraisal 04/81 1 1 na na na Supervision I 06/81 1 1 1 1 Supervision II 10/81 2 2 1 1 Supervision III 07/82 3 3 2 1 TM Supervision IV 04/83 3 3 2 1 T Supervision V 07/83 2 2 2 1 P Supervision VI 09/83 2 2 2 1 P Supervision VII 09/84 1 1 2 1 FT Supervision VIII 12/85 1 1 2 1 M Supervision IX 08/86 3 3 1 1 M Supervision X 03/87 1 1 1 1 TM Completion 01/88 2 2  - ivr - OTHER PROJECT DATA Borrower: Democratic Soicialist Republic of Sri Lanka Executing Agency: Ministry of Local Government Housing and Construction Follow-on Projects Second Vocational Training Project Credit No. 1698-CE Amount: SDR 13.0 million (US$15 m. equival.) Approval Dates July 11, 1986  - v - PROJECT COMPLETION REPORT SRI LANKA CONSTRUCTION INDUSTRY TRAINING PROJECT (Credit 1130-CE) HIGHLIGHTS 1. Sri Lanka has experienced wide swings in economic policies during the past 20 years, which have affected the growth and development of the construction industry. The change in Government in 1977 led to a substantial revision of economic policies: trade restrictions were removed and price controls relaxed. The construction industry was accorded the status of a lead sector in development, with projects in irrigation, power, housing and highways playing a key role in a bid towards an economic "take- off". However, due to previous periods of stagnation, the construction industry was poorly equipped in terms of skilled manpower and technology to handle the surge in construction activity following the revitalization of the economy (para 1.03). 2. The IDA-funded Construction Industry Training Project was appraised in June/July 1980, and became effective in August 1981. It had several objectives, including: to increase the number of trained craftsmen in the building industry and thereby expand the capacity of the construction industry to cope with the expected workload, to upgrade the skills of experienced workers, to train mechanical equipment operators, works managers and supervisors, to develop on-site training centers in many of the existi-ig construction work sites, to develop and institute trade testing mec:,anisms, and to improve methods and procedures related to the construction industry (para. 1.25). 3. The Credit became effective promptly after it was signed. Because of the country's conditions and fewer prospective trainees, the Government requested the closing date to be extended twice. Thus, the overall project completion was delayed by two years, and several adjustments in the targets were made during project execution. The closing date was December 31, 1987. 4. From the outset of the project there were doubts about the training targets for artisans. The reasons for the lower expectations for additional labor demand were: larger-than-expected numbers of Sri Lankans returning from the Middle East, a gearing down of the Mahaweli Program construction activities and the general slowing of the national economic growth. This led to a downward revision of initial targets. In January 1982, the National Training Committee for the Construction Industry decided to cut back training targets for artisans by about 40%. On the other hand, it increased the numbers for mechanical equipment operators, supervisors and works managers following increased demand for these categories. Compared to the original target of 54,600, some 32,800 artisans were trained under the project. In addition, 2,331 men took the mechanical equipment operators and mechanics course vs a target of 1,800; 1,500 graduated from the work supervisors course vs a target of 900, and there were 1,100 graduates for the works managers program vs an expected target of 80 (para. 4.01-03).  - vi - 5. The other objectives originally envisaged, i.e., strengthening the agencies and the institutions involved in on-site training and trade testing and improving the testing methods and procedures related to the construction industry, were met to varying degrees. As revealed by Tracer Studies, inspections carried-out at over 500 work sites found on-site training programs to be operating successfully; mechanisms for trade- testing were put in place but only a small number of artisans have so far been tested. The trade-testing has to be improved and expanded in order to have any impact in the quality control of the graduating tradesmen. Moreover, manuals on methods and procedures were produced, although it is difficult to ascertain how many are used regularly by the respective workers (paras. 4.04-05, 4.36). 6. According to Impact Assessment Studies carried out in 1987, the quality of the trained workers, in general, has been found to be as good as or better than those trained by other agencies. The training thus, has shown to be an important factor on the employability of graduates; however, employment is mainly part-time due to the nature of the industry. In addition, the introduction of the ICTAD(CITP) placement assistance office was very productive (para 6.04). 7. The overall technical assistance provided was satisfactory but it took 9 more staff-years than the originally planned 36 sly, and cost 54% more than appraisal estimates. The reasons for that could be attributed to some degree to additional training programs, the considerable fall in the rupee exchange rate against the US dollar, and the extension of the duration of the project by two years. In total, 31 expatriate consultants were utilized at various lengths of time amounting to 45 s/y (para. 6.08). 8. A follow-up project was prepared by the Ministry of Local Government in 1985 with the following objectives: to create an institutional framework to sustain training and industry development started under the first project, to increase the supply of semi-skilled, skilled, and managerial personnel to the industry, to improve the quality of manpower supplied to the sector, and to institute a system of cost recovery in vocational training for the construction sector. The Second Vocational Training Project was for SDR13.0 million and the Credit was approved in July 1986.  CHAPTER 1 PROJECT BACKGROUND a) SOCI0-ECONOMXC SEfl:NG 1.01 Introduction Sri Lanka has experienced wide swings in economic policies during the past 20 years, which have affected the growth ard development of the construction industry. In general, economic upswings and downturns have a magnified impact on the construction industry and this tendency has been clearly evident in Sri Lanka (see chart 1 and Table 1). 1.02 Early Seveaties During the early part of the seventies (1970-1977) the construction industry was sluggish and recorded growth rates that varied from 7% in 1974 to -9.6% in 1977. The average rate of growth in the Construction Sector during the period 1974 to 1977 was -1.46%*. During this period there was also a shift towards the Public Sector. Furthermore, the construction industry (particularly the Housing Sector) tended to be regarded as a resource absorbing rather than a resource producing sector and therefore less emphasis was placed on infrastructure improvement. Insufficient resources for invest- ment added to this situation although consumption expenditure was maintained at high levels (average of 86% between 1970-1975).4 Consequently, Gross Domestic Capital formation declined to an average rate of 15.5% during the same period . The overall devel- opment strategy was based on import substitution which necessarily entailed severe restrictions on international trade. 1 .3 Construction Boom The change of government in 1977 led to a complete revision of economic policiest trade restrictions were removed and price controls relaxed. * Source: Central Bank Reports (1978 to 1986) + Source: Central Bank - Review of the'Economy 1978.  2 The construction industry was accorded the status of a lead sector in development with infrastructure projects in irrigation, power, housing and highways playing a key role in a bid towards an economic "take-off".. The lead sector role assigned to the construction industry, in the Medium Term Economic Plan (1979-1983), centered round the following Programmes:- i) The Accelerated Mahaweli Programme ii) The Urban Development & Housing Programme A major component of these Programmes was given to foreign contrac- tors, which eased the pressure on domestic construction resources to an extent. The relaxation of controls also stimulated Private Sector investment in buildings, and construction activity in the tourist industry. As a result, the Construction Sector reported real growth rates of 28.2% (1978), 20.9% (1979) and 11% (1980) (see Table 1). 1.04 Resource Constraints However, the previous periods of stagnation had meant that the construction industry was poorly equipped to handle this sudden upsurge in demand. In general, the level of technology and capital- ization was low and only a few construction firms had the capacity to handle large projects. The surge in construction activity, followino the revitalisation of the economy, was immediately reflected in construction costs which increased by 50% to 100% between 1977 and 1979.. Resource shortages were met with imports, but the shortage of skilled workers was reflected in their wages which escalated sharply during this time. e.g. In the period 1979- 1980, the wages of a Master Carpenter increased by 34.3%, Master Mason by 32.3% and an unskilled helper (Masonry) by 32.3% (see Chart 2 and Table 2). The migration of construction workers to the Middle East also added to the problem. The IDA-funded Construction Industry Training Programme was launched in order to increase the number of trained craftsmen in the building industry and thereby expand the capacity of the construction industry + Dr. S. Ganesan "Management of Small CozstructLon Fir s - Asian Productivity Organization - 1982  3 to cope with the increase in the expected work load. The original objectives (as given in the Appraisal) were to train 45,000 new recruits, upgrade the skills of 9,600 experienced workers, train 1,800 Mechanical Equipment Operators, 900 Supervisors and 80 Senior Works Managers. However, the changes in the economic environment led to a downward revision of these estimates. The sudden increase in demand and the upsurge in economic activity created problems of resource constraints and overstraining, which were reflected in an escalation of inflation. Although inflation was contained at moderate levels in 1978 and the first half of 1979, it began to escalate sharply since then, over and above "corrective inflation" that occured as a result of liberalization (see Chart 3). 1.05 Investment Revisions The escalation of prices affected the cost estimates of the Lead Sector Programmes which had to be revised upwards. The Lead Sector Projects, estimated to comprise 31% of Public Investment (1979- 1983), had to be revised to 42% mainly on account of inflation. Although the Wholesale Price Index* showed inflation rates of 16% (1978), increasing to 34% (1980), other unpublished data indicated much higher rates of inflation of 44% in the same period. It was feared that escalating inflation would affect Sri Lanka's competitive performance and lead to a balance of payments problem and the result- ing budget deficits would also further aggravate the situation. In 1980 it became evident that short term real interest rates were negative, thereby jeopardising the level of domestic savings which were necessary to finance capital projects in the Private Sector. 1.06 Down-turn Early in 1980, the Government responded to these danger signals and re-affirmed its committment to macro economic stability and fiscal discipline. The GOSL took a series of measures, including the imposition of fresh financial ceilings and the re-phasing of the * Source: Central Bank of Sri Lanka - Annual Report 1982  4 Government's high priority programmes such as the Accelerated Mahaweli Programme. The Government also raised lending and deposit rates in an attempt to restore positive real interest rates. In April 1980, the Central Bank minimum lending rate was raised from 10% to 12% and the National Savings Bank raised its interest rate for one year deposits from 15 to 20%. Commercial banks followed by raising their lending rates. Furthermore, GOSL also enforced a limit on the construction of new public buildings. These cut backs in construction activity resulted in a sharp down- turn in construction activity and the growth rate in the Sector plummeted to -3.0% (1982) (see Chart 1). The CITP made a downward revision of their training targets, based on the 'Assessment of Training Needs' conducted by the NIBM (1983). The revised figures envisaged the demand for construction workers to be in the order of 6,000 per annum. The ethnic disturbances of July 1983 had an adverse impact on econ- omil acttvity and this further reduced the demand for construction in the Private Sector. However, widespread unemployment in the Construction Sector was averted by i) increased migration to the Middle East ii) continuation of Public Sector Investment Programmes (though at a reduced pace) including the Million Houses Programme,which had a beneficial effect in rural areas iii) self-employment which enabled workers to tide over difficult times t.07 Conclusions In general, cyclicality and uncertainty have had a negative effect on the growth and development of the domestic construction industry which (apart from a handful of large firms) is still characterised by non-professionalism, under-capitalization, a low level of techno- logy and a short-term view of profit maximisation*. As demonstrated * Dr S. Ganesan - "The Development of National Contractors" - Part I - MLGHC , ICTAD - Aug. 1986  5 in the above analysis and Chart I, cyclicality is an inherent feature of the construction industry and any attempt to improve the status of the industry should provide for this phenomenon. This would involve the development of systems to cope with cycli- cality and/or the provision of cushioning measures to protect the industry against the debilitating effects of short term variations in demand. Since the Government is the largest client of the construction industry, stabilisation measures introduced in the Government Sector will have a significant influence in promoting the devel- opment of long term strategies for planning and improvement in the construction industry as a whole. b) SECTOR SETTING 1.08 Composition The sectoral composition and the importance of the construction industry in the economy have reflected the policy objectives of successive governments. The shift in economic policies that took place with the liberalisation of trade and controls in 1V77 led to a revitalisation of the economy in general, and the con- struction industry in particular (see Chart 1, Table 1 and para No.1.03 ). While construction activity remained at approximately 3% of GNP during the early 70s, the boom in construction and the lead sector role assigned to it led to its contribution to GNP being increased to 8.9% in 1977*. With the slowing down of the construction boom, and the cut backs in Government-Programmes (see para 1.06), the sectoral position declined to 7.9% (1984) and 7.5% (1985)* 1.09 Demand On the demand side, there are three main determinants of construc- tion demand. They are: 1) Public Sector demand 2) Private Sector housing 4emand 3) Private Sector non-housing demand * source: Central Bank Reports - 1978 to 1986.  6 1.10 Public Sector Demand A consistent feature in Sri Lanka has been that the Public Sector is the single most important determinant of construction demand. The bulk of construction related activity today is generated through the Public Sector which accounts for over 50% of total construction activity. The lead sector projects, namely, the Accelerated Mahaweli Programme (AMP), the Urban & Housing Develop- ment Programme, and construction in the Investment Promotion Zone alone accounted for 42% of Public Sector investment in 1983*. 1.11 Private Sector Housing Demand Private Sector housing demand, which reached a peak in the period 1978-1980, declined thereafter due to the escalation in building costs (in 1978-1979 alone this increased by 50 - 100% 1, the increas- ing price of land and the high interest rates. 1.12 Private Sector Non-Housing Demand Private Sector non-housing demand, which increased with the tourist boom in the period 1978-1980, also declined. The ethnic disturbances of 1983, which affected the Private Sector in general and the tourist Industry in particular, resulted in a virtual standstill in cons- truction activities, in the latter. 1.13 Supply With regard to Supply, the importance of the Private Sector has shown a significant increase in the last decade. Prior to 1977, a number of Government departments and boards were created (or existed) to undertake Public Sector Construction Programmes (as listed in Annex 1). In 1978, these Public Sector Construction Agencies accounted for approximately 1/3rd of the total construction expenditure * Source: Central Bank Reports - 1978 to 1986. + Ganesan - "Management of Small Construction Firms" - Asian Productivity OrganizatLon - 1982 * Review of Construction industry - March 1979 World Bank Report.  7 The current policies being pursued towards these agencies have resulted in a move away from actual construction work to a designing, consultancy and supervisory role with Private Sector construction firms being employed for actual construction work., The overall Government strategy has been to shift construction work towards the Private Sector. 1.14 Foreign Contractors There has also been a significant shift towards the employment of foreign contractors for certain projects, where local firms have not had the technology and the capacity to handle such large con- tracts, e.g. A significar.t segment of construction activity pertain- ing to the AMP has been assigned to fereign contractors. This has helped to relieve the domestic resource constraints pertaining to manpower and other construction resources. The work sharing prog- rammes (though to a limited scale) have enabled the -local construc- tion industry to work side by side with foreign firms and gain experience in handling projects of this nature'and the use of modern technology. The infrastructure development programmes and construction activity in general have spanned across most sectors of the economy, both rural and urban, agricultural and manufacturing. In particular, the AMP and the Million Houses Programme have brought direct benefits to the Rural Sector and helped to reduce the sectoral imbalances that have plagued many other developing countries. c) TRENDS IN CONSTRUCTION EMPLOYMENT 1.15 Employment Levels Employment in the construction industry accounts for approximately 7% of total employment in Sri Lanka, while employment in agricul- ture and manufacturing account for 68% and 17.8% respectively*. However, the actual numbers employed have fluctuated with changes in demand in the Construction Sector which have followed cyclical variations in the 1970s and 80s (see Chart 1). The period 1978 to 1980 saw an unprecedented increase in construction activity with * Source: Central Bank - Socio-Economic Survey 1981  8 the growth rates in construction going upto 28% (1978) and 21% (1979)*. During this period the level of employment expanded from 100,000 (1977) to 116,000 (1978) showing growth rates in employment of 16% (1978)* and 20% (1979). This period of full employment in the industry and the continuing demand resulted in a sudden escalation of construction sector wages (see Chart 2). The period 1978 to 1983 saw average wages in construction for both skilled and unskilled workers increase to 289% of its -1978 value#. 1.16 Migration The domestic boom in construction coincided with the massive oil financed demand for expatriate labour for development activity in the Gulf States of the Middle East. This resulted in a large exodus of skilled workers from Sri Lanka to the Middle East, approximately 60% of whom were construction workers (see Table 3). In 1981, an estimated total of approximately 50,000 workers migrated overseas - a flow large enough to make a significant impact on the local labour market". During this period, there was serious concern that labour shortages in the Construction Sector would jeopardise the successful implementation of develop- ment programmes of the Government (Medium Term DevelopmEnt Plan 1979-83). The CITP was a response to this situation which demanded an effective and speedy prograkme of skill development and training in the Construction Sector. On the domestic front, the boom period-ended in 1982 as a result of cut backs andre^phasing of Public Sector Investment Programmes (see para 1.06). The effect of this was compounded by the down- turn in Private Sector investment and construction in the tourist industry which followed the ethnic disturbances of 1983. with regard to employment levels, however, Middle East migration which continued unabated acted as a relief valve to alleviate * Source: Central Bank Reports 1978 to 1986. + Appraisal Report # Source: Central Bank - Economic & Social Statistics of Sri Lanka - Price & Wage Statistics - 1983. I Smpact of Out & Return Migration on Domestic Employment in Sri Lanka: A Preliminary Analysis". The Asian Employment Programme (ILO/ARETP) 1985  9 domestic unemployment. Estimates made in 1981 placed the absorp- tion co-efficient at approximately 1/3rd the annual increment in the labour force. 1.17 Migrant Returnees In recent times, with the fall in oil prices, there has been a levelling off and a deceleration of construction activity in the Middle East and a reduction in demand for construction workers. On account of investment lags and the 2nd Phase involving the operation and maintenance component of projects, the demand for expatriate labour will continue although of a different mix. The impact of fiigrant returnees on local employment has not been assessed as no comprehensive studies have yet been undertaken. Two case studies conducted in Ja-Ela and Minuwangoda in 1984* found that of the migrant returnees in these two areas, only 8-to 9% had been absorbed into paid employment whlXe 25% t%ad gone into self-employment. A substantial number was reported to be living on savings while the bulk of migrants, upon returning to Sri Lanka, had not gone back to their pre-migration labour market pursuits, and a high percentage did not engage in direct economic activity upon return. However, it is not possible to draw general macro conclusions from these two micru studies. The continuation of Public Sector Investment Programmes in Sri Lanka has helped to sustain the level of employment in coistruc- tion activity. In the period 1979 to 1983, employment increased by a further 89,000 from 140,000 (1979)+ to 229,100 (1983)#, thereby showing an average annual increase in employment of 12.7%. 1.18 New Entrants With regard to new entrants to the construction industry, the Tracer Surveys pertaining to CITP Trainees give an insight into + Source: Atukorale & Balasuriya (1984) from "Impact of Out 8 Return Migration on Domestic Employment in Sri Lanka: A Preliminary Analysis" (ILO/ARTEP) 1985. * Appraisal Report - Sri Lanka Construction Industry Training Project - 1981 # 1983 figure as reported in Basic Data - Preparation Report for 2nd CITP