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| Sunday, 3 October 2004 |
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Business |  |
| News Business Features Editorial
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World Bank rates Sri Lanka business environment The latest ratings of the World Bank (WB) statistics shows that Sri Lanka has to do more to improve the business environment in the country although in many cases the country is in a better position compared with the Asian and OECD region. The WB ratings show that the country's business environment is far behind the average OECD (Organisation for Economic Cooperation Development) countries level. According to the latest WB benchmarking business regulation indices, starting a business in Sri Lanka is comparatively easier than in the regional average conditions. To start a business in Sri Lanka a person has to go through eight steps. The regional average is nine while the OECD average is six. It takes 50 days at a cost equal of 10.7% of gross national income (GNI) per capita to launch a business in Sri Lanka. The regional average is 46 days and the OECD average is 25 days. Rigidity of the labour market is another key factor in measuring the business environment . Hiring workers, regulations on working hours, difficulties of dismissing a redundant worker are the factors that are considered in this regard. In the case of Sri Lanka the overall labour market rigidity index is 40 showing slightly relaxed labour regulations compared with the region where the regional average is 42.3. But the OECD average is 34.4. The overall rigidity index is the average of availability of part-time and fixed- term contracts, working time requirements, minimum wages laws and minimum condition of employment. Each index is assigned values between 0 and 100, with higher values representing more rigid regulations. According to the report, hiring labour in Sri Lanka is not difficult and the index is at 0 while the regional and OECD averages are at 37 and 26.2 respectively. But the firing cost of labour is very high in Sri Lanka compared with the region. The difficulty of firing index is 80 and the regional average is 53.3 while the OECD average is 26.8. Firing cost of labour is also very high in Sri Lanka and it equals to 108 weeks of wages. The regional average cost and OECD average cost are 84.7 and 40.4 weeks of wages respectively. Time and cost of registering property is another dimension by which the business environment is assessed. Number of procedures necessary to transfer a property title from seller to buyer, time and cost of the property as a percentage of the property value are the factors considered under this. In Sri Lanka it has to follow eight steps ( the regional average is five and the OECD average is four) and takes 63 days ( 55 days regional average and 34 days OECD average). Credit is another measure of the business environment. It considers coverage, scope, quality and accessibility of credit information available through private and public registries. The index ranges 0-6 the higher value indicates that more credit information is available. Sri Lanka Credit information index stands at two indicates the availability of credit information is not satisfactory. The legal right index, the second set measures how well collateral and bankruptcy laws facilitate lending. It ranges between 0 - 10 with higher scores indicating that those laws are better designed to expand access to credit. The legal rights index of Sri Lanka is at three is also not very satisfactory, being below the regional average of 3.8. Sri Lanka has protected investors from disclosure requirements than the OECD countries but compared with the region disclosure requirement is higher in Sri Lanka. The disclosure index varies between 0-7 and higher values indicate more disclosure. Sri Lanka has a score of four compared with 3.2 regional average and 5.6 OECD average. In terms of numbers of procedures and the cost, enforcing a commercial contract in Sri Lanka is easier than in the region. But in terms of the time required it takes longer. According to the WB ratings in Sri Lanka it has to follow 17 procedures compared with 29 regional averages and 19 OECD average. Time required in Sri Lanka is 440 days while regional average stands at 375 days and OECD average is at 229 days. The cost of enforcing a commercial contract (as a percentage of debt) in Sri Lanka is 21.3%, while regional average is 39.6% and OECD average is 10.8%. To close a business in Sri Lanka it takes 2.2 years shorter compared with the region while the regional average is 5.2 years. The cost incurred in the closing of a business including Court costs, fees of insolvency practitioners, lawyers and accountants, is very high in Sri Lanka compared with the region. It takes 18% of the cost of assets and the regional average and the OECD averages are at 8.3% and 6.8% respectively. |
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