Doing business gets worse in Sri Lanka

Thursday, 30 October 2014 00:25 - - {{hitsCtrl.values.hits}}

Sri Lanka drops 14 notches to be ranked 99th out of 189 countries in WB-IFC Ease of Doing Business Index; Still South Asia’s best
Fall was despite 16 regulatory reforms taken by Sri Lanka, second best in South Asia behind India’s 20 steps

Limitations to freedom of contract and the lengthy times taken to resolve standardised disputes through the courts have made doing business harder in Sri Lanka next year, according to a global survey by the International Finance Corpo-ration (IFC) and World Bank comparing 189 countries. Sri Lanka dropped 14 notches from its 85th place in 2014 and ranked at 99th out of 189 countries in the “2015 Doing Business Report: Going Beyond Efficiency” released Wednesday.

The report said it takes almost four years to resolve a standardised dispute through the courts in Sri Lanka and the slow contract resolution process frustrates freedom of contract. “In Sri Lanka there are equally few limitations to freedom of contract, but resolving the standardised dispute through the courts takes 1,318 days – almost four years. Parties might be able to include a wide array of covenants in their agreements, but long enforcement times can nullify the utility of those covenants,” the report noted. In Singapore, the best country to do business, the process takes only 21 days and Sri Lanka is the worst. Sri Lanka also has made paying taxes more costly for companies by increasing the reduced corporate income tax rate for qualifying small and medium-size enterprises. Sri Lanka’s distance to frontier (DTF) score, which indicates how far each economy is from the best performance achieved by any economy on the resolving insolvency indicators, declined marginally from 61.83% in 2014 to 61.36% for next year. A score of 100 represents the frontier. World Bank Group report found that four of eight economies in South Asia implemented at least one regulatory reform making it easier for local entrepreneurs to do business in 2013/14. Three countries—Bangladesh, Nepal, and Pakistan—focused their efforts on adopting modern electronic systems to facilitate business activity.

All economies in the region have taken steps to improve the business environment in areas measured by the report. India implemented the region’s largest number of regulatory reforms in that period, with 20, followed by Sri Lanka with 16. In the South Asian region Nepal ranked at 108th place, Maldives 116th, Pakistan at 128th, India at 142nd, and Bangladesh at 173rd place. Doing Business measures regulations affecting 11 areas of the life of a business. Ten of these areas are included in this year’s ranking on the ease of doing business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Economies are ranked on their ease of doing business, from 1-189. A high ease of doing business ranking means the regulatory environment is more conducive to the starting and operation of a local firm. Singapore ranked the easiest to do business in 2015 while New Zealand, Hong Kong, Denmark and South Korea rounded up the top five in that order. The United States ranked 7th.