Initiatives to improve business climate in Sri Lanka

Sri Lanka is expecting to make significant progress in the World Bank’s Ease of Doing Business Indicators as showcased at a symposium on initiatives to improve the business climate in Sri Lanka which was held at the Hotel Taj Samudra on 16 March.

The Doing Business rankings is a World Bank initiative that measures and tracks changes in regulations affecting 11 areas in the life cycle of a business across 190 economies around the world and has now become the global benchmark for measuring a country’s capacity to attract investment.

Sri Lanka has identified reform actions under eight of these parameters which are starting a business, dealing with construction permits, registering property, getting credit, protecting minority investors, trading across borders, enforcing contracts and resolving insolvency which are key to assess how conducive the country’s regulatory environment is to the operation of a business. Task forces consisting of key members – from both the public and private sector – with specialised expertise in the subject have been set up for each of these categories.

The symposium which gathered together eminent scholars, stakeholders and the top officials of lead government agencies from the public and private sectors who are actively engaged in improving the Sri Lanka’s Business climate was organised by the Ministry of Development Strategies and International Trade which is tasked with coordinating the initiative through a series of ambitious reforms to make Sri Lanka a highly competitive knowledge-based economic ‘hub’ in the region.

Addressing the opening session of the symposium, the Minister for Development Strategies and International Trade Malik Samarawickrama said that whenever the President or Prime Minister and other ministers travelled overseas or met with international investors they all expressed keenness in investing in Sri Lanka.

“We are very encouraged by the enthusiasm shown by these countries especially Japan, Korea, Singapore, the European Union and the UK. All these countries are not too interested in the fiscal incentives we offer but they are keener on the ease of doing business in Sri Lanka.

The cost of manufacturing or production has increased significantly in these countries and they are looking at emerging countries to set up their businesses and manufacturing plants and the main area they look at is the ease of doing business.

They compare us with our peers and countries like Malaysia, Thailand, and Vietnam and as you know we are currently ranked 111 which is not satisfactory at all. In comparison Singapore which is one of the best is ranked number two in the world, whilst Malaysia is 24, Thailand 26 and Vietnam 70.

Our aim is to get to at least number 70 by the year 2020 which is certainly possible – as you all know some time ago – about 30 years back – Malaysia, Thailand and Vietnam were all far behind us in this area. However, thanks to the commitment of the political leaders of these countries they were able to progress and I see no reason why Sri Lanka cannot do the same. Even India made huge progress last year moving up around 30 places in the rankings.

The Task Forces set up for each indicator have persons of very high calibre and capabilities and are drawn from both the public and private sectors and I am sure they will help us to achieve our goal of rank number 70,” concluded Minister Samarawickrama.

Also addressing the event was Dr. Harsha de Silva, State Minister for the Ministry of National Policies and Economic Affairs who has been tasked to closely track the progress with the Heads of the Task Forces on a monthly basis and provide guidance to them to achieve the targets and clearing any impediments that are affecting progress.

State Minister Harsha de Silva stated that he was greatly encouraged by the efforts of all the Task Forces and expressed confidence that Sri Lanka was set to improve its rankings significantly at the next review conducted by the World Bank. He also noted that some archaic laws needed to be changed in accordance with the technological developments globally. Citing an example, he stated that so far registering a company takes about 14 days because of a requirement that the publication of a newspaper notice giving a period of two weeks for any objections was mandatory. 

“All that was needed was an amendment to the law to do away with this requirement. Now the Registrar of Companies has announced that registration could be done online within 24 hours. Another interesting development was the obtaining of street line permits for any construction in the city. There are three permits to be obtained and the individual has to make three different applications at three different times and go to three different agencies to obtain these permits. This was time consuming and causing unnecessary delays and a lot of frustration. We have now set up a single window at Colombo Municipal Council (CMC) to handle all three applications and this will greatly reduce the number of days taken in the whole process and improve our rankings in this area,” added State Minister de Silva.

During the symposium each Task Force made detailed presentations of the progress of their work and almost all of them reported significant progress which can contribute Sri Lanka rise up the ranking when the World Bank does its annual review later in the year.

Other countries have taken steps making it easier to start a business – streamlining procedures by setting up a one-stop shop, making procedures simpler or faster by introducing technology and reducing or eliminating minimum capital requirements. As per the Registrar of Companies, the Starting a Business Task Force has applied the single window concept and automated the online company registration at the Department of Registrar of Companies. The company registration will be through a web based online application process where the applicant can submit their application online and receive the business registration number electronically within few hours.

Online company registration – Introducing the fully online company registration with the Department of Registrar of Companies by end of March 2018 is committed under the 1st Iteration of the eROC project. Name Reservation, Company Registration and certificate of Incorporation can be obtained within one day. 

Single Window for Business Registration – Introduction of Single application for the Company Registration, TIN Registration and EPF Registration under the Single Window concept; The eROC system will capture the additional information required for TIN Registration and EPF Registration, at the point of company registration and transfer the necessary data to the Department of Inland Revenue and Department of Labour for its registration through the System.

Speaking at the symposium, P.M.P. Udayakantha Surveyor General who is the Head of the Registering Property Task Force said, the registering property process takes 51 days and 9 processes at present and by 31 March it will reduce to 25 days and 5 processes and by 30 September this year, it will reduce to 16 days and 3 processes. Land records of the Colombo Municipal Area are online through the Registrar General’s Department and a Single counter to issue non-vesting certificates, street and building lines certificates and ownership certificates is started at the Colombo Municipal Council. Further, the deed registration is made fully digital in Colombo and Delkanda areas by June, 2018. Following are the planned reforms set by the Task Force on Registering Property to achieve by 2018:

nJune 2018 – Deed Registration is made fully digital Colombo/ Delkanda

nSeptember 2018 

- Registration Data will be made available on line Western Province

- Updating mechanism for Parcel Fabric/Through Licensed Surveyors plans coming for approval for sub divisions /New Assessment number Registrations 

nDecember 2018 – Parcel Fabric is completed in Digital Form and linked to  CMC Attributes/Land Registry Information/Valuation Department Allowing online submissions/payments 

Countries around the world have worked on consolidating construction permitting requirements in the efforts to ensure building safety while keeping compliance costs reasonable.  Head of the Task Force on Dealing with Construction Permits and the Director General of the Urban Development Authority, Eng. S.S.P. Rathnayake said, UDA has already started an online application receiving system and it will be further developed during this year. Issuing construction permits has been segregated among UDA and CMC. 

An application receiving counter and helping desk at UDA for manual submission of application and a single application receiving desk is established at CMC as well for ownership certificate, street line certificate and non-vesting certificate. The application processing system has been expedited including site inspection at UDA and a smart communication system via email and SMS has been commenced regarding the applications at UDA while amendments are being made to the existing building construction regulations. 

Planned Reforms by May 2018 to deal better with construction permits

There are reforms to be implemented by the Task Force on Resolving Insolvency which assesses the time, cost and outcome of insolvency proceedings involving domestic legal entities. Among the reforms, appointment of a full time salaried Official Receiver under Section 281 of the Companies Act will be implemented giving effect to create an Insolvency Regulator who is the default liquidator in all windings up, bring down cost and create greater transparency and confidence in the system. Also the Winding Up Rules of 1939 will be brought up to date and new Rules in Sinhala, Tamil and English will be Gazetted.

Of the 10 sub-indices which make up the overall Ease of Doing Business Index, it is in the Protecting Minority Investors Index that Sri Lanka performs best in terms of country ranking. It shows the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse. In 2018, Sri Lanka was ranked 43in the world in relation to protecting the rights of minority investors. The Protecting Minority Investors Taskforce is expediting the adoption of a policy framework which will bar Chief Executive Officers of public listed companies from serving as Chairmen of such companies. 

National Trade Facilitation Committee is the Task Force to implement the reforms on Trading Across Borders. The two major initiatives are the establishment of National Single Window and the Trade Information Portal.

nA Blueprint for implementation and operation of National Single Window will be completed by July 2018 to provide web applications for Traders for completing regulatory requirements (including single submission of documents and data) to enable electronic data interchange between Government Agencies(GAs) and enable electronic data interchange among traders, GA’s and port operators for better coordination of their activities.

nA Trade Information Portal (TIP) to be completed by July 2018. TIP is a website populated with Legal Documents and Data, Procedure Maps/Descriptions and Information Pages and Commodity Search for traders with services to help launch and sustain the service.

The Task Force on Enforcing Contracts is the body to implement reforms towards making an effective commercial dispute resolution as it reflects the rules of the market and protect economic rights through an efficient and transparent courts system to encourage new business relationships. As Task Force elaborated, so far the pretrial conferences were introduced in Civil Procedure amendments in 2017 and needs full implementation, email to attorneys was also authorised and Electronic Transaction (Amendment) Act of 2017 has permitted automation to be introduced by courts without additional legislation and it facilitates electronic filings of all documents with courts.

Participants at the symposium were hopeful that the new reforms will revolutionise the business environment in Sri Lanka and attract much needed investment into the country which would benefit all Sri Lankans. It was also noted that the changes made in the processes were not just cosmetic ones to tweak the World Bank rankings but genuine changes that would improve the quality of life for all Sri Lankans.