Wednesday, 30 October 2013 00:00
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THE Ease of Doing Business in Sri Lanka took a hit on Tuesday when the latest report compiled by the World Bank saw the island slip four places to 85 from 81 the previous year. This shows that the Government’s aim of improving the investment climate has not served up the expected dividends and more worryingly that the rest of the world is outpacing local reforms.
While Sri Lanka remains in a healthy position regarding the rest of South Asia, managing to stay just head of Maldives and Nepal, it nonetheless has fallen behind its own lofty goals. When Sri Lanka made inroads on the Ease of Doing Business after the end of a three-decade war, the Government was upbeat it could steer the turning tide.
With that in mind, President Mahinda Rajapaksa gave a target of reaching rank 30 by 2016 – an ambitious goal any standard. However, many officials including Economic Minister Basil Rajapaksa and Central Bank Governor Ajith Nivaard Cabraal were confident this could be met, with the latter telling anyone who would listen that in 2013 Sri Lanka would likely reach the 70th rung.
But more was done than to set challenging objectives. A group was appointed to study how Sri Lanka could run up the rankings and present their findings to policymakers. The push for reforms were not without results, as the World Bank itself has pointed out. During the last year the Government did introduce measures that attempted to strip away red tape and reduce time wastage, but it is unclear whether these met up to internationally required standards.
Sri Lanka made it easier to get construction permits by eliminating the need to obtain tax clearances and by reducing building permit fees. Getting new electrical connections was made easier by improving the utility’s internal workflow and reducing time required to process new applications. Regulators also made it easier for companies to pay taxes by introducing an electronic filing system for social security contributions though usage of it is still low. Finally, trading across borders became more efficient due to a newly-introduced electronic payment system for port services.
Yet one could argue that these reforms did not reach deep enough to address issues of corruption, opaque and complicated bureaucracies as well as adherence to rule of law that are usually highlighted as the core of a good business environment. Moreover, with the global economic environment becoming tougher, the tough have predictably got going, by 18% according to the report. As economies became leaner and faster in the past year Sri Lanka, it would seem, simply could not change fast enough to keep pace with the competition.
Ukraine, Rwanda, the Russian Federation, the Philippines, Kosovo, Djibouti, Côte d’Ivoire, Burundi, the former Yugoslav Republic of Macedonia and Guatemala are among the economies improving the most, which shows that developing economies have realised they have the most to gain from streamlining their business environment.
In fact Sub-Saharan Africa is home to nine of the 20 economies narrowing the gap with the regulatory frontier the most since 2009. Low-income economies narrowed this gap twice as much as high-income economies did, showing that Sri Lanka really needs to step up its game.
Now that the numbers are out, it’s important to plan pragmatically and apolitically to ensure that Sri Lanka does not get left behind in a race that counts.
