This has been the week of IT and ITES (or queries related to them). A local weekly asked me about the Economist Intelligence Unit’s Worldwide Cost of Living survey, where Colombo had come in the lowest 20, but above Indian cities and Dhaka.
According to EIU, the survey is for ‘human resources line managers and expatriate executives to compare the cost of living in 140 cities in 93 countries and calculate fair compensation policies for relocating employees.’ Companies can then apply this index to an executive’s spendable income to reach a fair cost of living allowance. The purpose of a cost of living allowance is to reimburse employees for excess living costs resulting from a foreign assignment.
In other words, according to Chairman and CEO of LIRNEasia, Rohan Samarajiva, the purpose is for mobile professionals and companies operating in multiple locations to base an anchor and figure out what to pay its employees.
So what does this really mean?
According to Samarajiva, this has an influence on companies placing in Sri Lanka. He also said this means that the Government should take this number seriously as Mumbai, Delhi and Dhaka are cheaper than Colombo.
“While we are cheaper than Singapore, we are expensive compared to India and Dhaka,” he said, adding that even though Singapore is more expensive, the value for money in Singapore is higher, as well as the facilities such as reliable transport and electricity.
“This suggests that we don’t even have a cost advantage,” he said. Samarajiva added that if Colombo had a cost advantage, companies would invest despite the facilities, if the living cost is low. But in this case, Dhaka has the advantage as potential competitor despite the transport issues, as it has a lower cost of living. India being cheaper that Colombo, he says, is surprising and a matter of concern.