IFC clarifies Daily FT Opinion piece, ‘Improving Sri Lanka’s Business Climate’

With reference to Pathfinder Foundation article titled ‘Improving Sri Lanka’s Business Climate’ published on 21 December, the International Finance Corporation (IFC)Country Manager – Sri Lanka and Maldives Adam Sack has sent the following response:

I write with reference to the article above in yesterday’s Daily FT by the Pathfinder Foundation – in which there are several errors in the references to the latest Doing Business Report released annually by the IFC and the World Bank.

According to Pathfinder’s analysis, “Sri Lanka was ranked 102nd of 183 countries included in this index in the latest report, the same rank as last year according to the IFC-WB DB report.” However, in “Doing Business 2012: Doing Business in a More Transparent World”, Sri Lanka is ranked 89th – nine places higher than last year – which reflects the improvements in Sri Lanka’s business environment.

The article refers to a list of 10 functional areas which do not capture several changes that were made to this IFC-WB Doing Business Index:

Getting Electricity indicator has been added

Closing a business is re-named as ‘Resolving insolvency’ to more accurately reflect the content of the indicator

Employing workers indicator is not included in the calculation for the DB ranking. Data points are however available for each country

This article also has an incorrect understanding of the IFC-WB Doing Business Report Methodology. In the recommendation for Starting a Business recommendations, the article says:

“It is also noted that Sri Lanka is marked down on the DBI because the Ministry of Labour takes a long time to formalise EPF and ETF numbers.

In practice, EPF and ETF numbers are provided on the date of application and are immediately in force. Doing Business should regard this procedure as complete de facto in one day, not one month as reported in the Doing Business report.”

As per the Doing Business methodology, a procedure is not considered completed until the company has received the final document, such as the company registration certificate or tax number.

Since in Sri Lanka, it takes approximately one month for the ETF and EPF numbers to be issued, the whole duration is counted. This methodology is consistently applied to all economies.

Due to these errors, we would like this clarification to be published prominently to correct readers’ understanding of the IFC-WB Doing Business Report and the methodology adopted. For your further reference, the latest Doing Business Report (2012) can be accessed at this website: www.doingbusiness.org.