Sri Lanka’s Ease of Doing Business ranking fell by one notch to 110 for 2017 despite key improvements, according to the flagship report on the subject by the World Bank.
“While Sri Lanka has taken positive steps in reforms, much needs to be done to enable the private sector to grow and to provide equal opportunities for all,” World Bank Country Director for Sri Lanka and the Maldives Idah Pswarayi-Riddihough said.
The report noted that Sri Lanka had made progress under two reform indicators that are covered by the report. The starting a business indicator improved to 74th in the world due to the government removing stamp duty on newly issued shares. The protecting minority investors indicator edged up to rank 42nd due to related party transactions being required to have board and, in some cases, shareholder approval, and internal reviews.
According to the World Bank, though the reforms were crucial, Sri Lanka slipping from its 109th position in 2016 shows that other peer economies had undertaken a larger number of reforms during the same period.
The present government had come into power promising a wide array of reforms, most of which are yet to be fully implemented, and the government is citing the length of the democratic process it is attempting to follow as an explanation for the delays.
Sri Lanka ranked worst (163rd) in the enforcing contracts area while ranking 158th in paying taxes, 155th in registering property and 118th in getting credit. This is despite credit growing at almost uncontrollable levels.
Trading across borders was ranked 90th, which the government has to improve if it is to follow through with its policy of trading the country out of its debt. Dealing with construction permits came at 88th, getting electricity at 86th, and resolving insolvency was ranked 75th. The World Bank noted that 11 reforms were implemented by 5 of the 8 economies in South Asia in the past year, compared to an annual average of 9 reforms undertaken over the past 5 years.
“Pakistan is among the top 10 global improvers. Over the past 12 months, it implemented a total of three reforms and saw its ranking progress from 148 to 144,” the World Bank said.
India, which had also implemented multiple reforms, came up 1 rank to 130.
“In the past five years, Sri Lanka has implemented the highest number of Doing Business reforms in the region, with 12 reforms in total, followed by India with 10,” the World Bank added.
New Zealand came up first in the rankings for 2017, followed by Singapore and Denmark.
The Ease of Doing Business rankings reflect the situation as at June 1 of the previous year, and includes data gathered from one or two cities in a country, which in the case of Sri Lanka, was Colombo.
Look at key factors to improve ranking, private sector urges
Despite Sri Lanka’s keenness in uplifting its trading platform, the government and policy makers have been unsuccessful in looking at the key factors to improve the country’s Ease of Doing Business ranking, a prominent private sector representative pointed out.
Speaking on the importance of Sri Lanka transforming into a complete paperless trading economy, as it claims it already has, Ceylon Chamber of Commerce (CCC) Import Section Chairman Dinesh de Silva opined this area has not been thought through by the relevant authorities.
“The government and the policy makers have really not gone into certain areas that are of paramount importance to get these indices right. One area is to have a paperless system. This is vital for those engaged in international trade, but is not treated that way unfortunately,” said de Silva.
After two decades of work and little success, it was highlighted that paperless documentation and transactions are exercised, but by a few groups/departments in isolation. According to de Silva, this is no good.
“Working in isolation is not going to help the trade. Across all levels there has to be the same level of understanding, commitment and usage. For that the government has to come in a much bigger scale and announce the infrastructure in place. There are many lose ends to tie,” he stressed.
It was noted that in an era where local traders are struggling to remain competitive and relevant in the global market, cumbersome processes add significant amounts of transaction costs that further lower traders’ ability to compete against low cost, high quality offerings from regional and global competitors. Sri Lanka, which was traditionally regarded as a provider of high quality, low cost goods and services, continues to lose ground due to delayed and complicated trading procedures.
According to a breakdown of the World Bank’s Ease of Doing Business index 2016, Sri Lanka takes an average of 76 hours to comply with documents requirements for trade, whereas Singapore, a country Sri Lanka aspires to become, takes no more than four hours. Sri Lanka also falls behind its neighboring peers India and Pakistan, which take an average of 61 and 62 hours. (SAA)