Sri Lanka has a long-standing commitment to social protection and has achieved some important advances. For example, the country has made important strides in life expectancy, reflecting perhaps the provision of free access to health services. Sri Lanka has advanced rapidly through the “demographic transition” towards higher life expectancy and a lower fertility rate. It is noteworthy that this transition has occurred at much earlier in Sri Lanka than in its South Asian neighbours. As a result, however, Sri Lanka must now adapt its social, employment and related policies to a population structure which is rapidly ageing.
While the systems of social protection are relatively strong by comparison with other countries in the region, and include a large-scale programme of social assistance, they have come under considerable pressure in recent years due to public finance constraints and, to some extent, a rather fragmented approach to policy development. A variety of crises have posed further challenges for Sri Lanka, notably the recently-terminated civil conflict, the tsunami of December 2004, which claimed upwards of 30,000 lives, and most recently severe flooding in parts of the island. Despite these challenging circumstances, the latest national figures show a fall in the incidence of poverty in the country.
The programme of social security coverage available to workers in the formal economy (which corresponds closely to the concept of the "organised sector" commonly used in South Asia) includes protection against a range of contingencies:
- Old age: the majority of workers, notably in the private sector, are enrolled in provident funds (essentially defined-contribution savings schemes), managed either by public institutions (Employees' Provident Fund and Employees' Trust Fund) or on a private, occupational basis.
- Health care: this is available to all, in principle, in government-run, tax-financed facilities.
- Maternity and sickness benefits: these are provided to workers, under the terms of the Labour Act, by their employers, financed on the basis of "employers' liability".
- Unemployment: in a limited range of circumstances, protection and compensatory benefits may be available under the terms of the Termination of Employment of Workers' Act ("TEWA"); however, considerable discussion has taken place in recent years as to the need to modernise this coverage.
Most Civil Servants are enrolled in a major scheme, partially contributory, providing defined-benefit pensions and associated benefits. For a number of specific groups of workers (farmers, fishers and broadly-specified self-employed), special arrangements have been put in place in the form of voluntary social insurance pension schemes, which are expected to benefit to some extent from explicit or implicit government subsidies.
Complementing these institutional arrangements, and providing to some degree for those not in formal or "organized" employment (and their families), Sri Lanka has a large-scale system of social assistance, Samurdhi; this is essentially unique in the region.
Sri Lanka has, thus, developed a notable range of social security vehicles, which offer wide scope for extending coverage, but also suggest the scope for simplification of the overall structure with valuable prospects for enhanced effectiveness and efficiency. A brand new, still nascent, proposal has now been put forward that such a structural reorganization could, perhaps, take place around the implementation of a basic social security "floor" (see the News item below).
Micro-insurance providers, together with or within micro-finance institutions, are certainly active in Sri Lanka. In a country in which agriculture remains a vital sector of the economy and the labour market (the largest sub-sector of which, the tea plantations, is to some degree "organized" in character), there is ample scope for not only the more traditional personal insurances but also crop insurances. Two major federations, Yasiru and Sanasa, have evolved steadily by grouping smaller organizations, and now operate across the country.