Sri Lanka’s rank in ‘Doing Business Index 2012’ improves greatly

According to the ‘Doing Business 2012’ report published by the World Bank, Sri Lanka’s overall ranking in the ‘Doing Business Index had risen by nine places from a ranking of 98 in 2011 to a ranking of 89th in 2012 from a universe of 183 economies said Vidya Nathaniel and Janeen Fernando of Verité‚ Research.

According to the report strengthening investor protection rank improved by 28 points, by jumping from the 74 position last year to 46th in 2012.

In measuring this rank three dimensions of investor protection have been considered; transparency of transactions (Extent of Disclosure Index), liability for self-dealing (Extent of Director Liability Index), shareholders ability to sue officers and directors for misconduct (Ease of Shareholder Suits Index) and Strength of Investor Protection Index. Higher values indicate greater disclosure, greater liability of directors, greater powers of shareholders to challenge the transaction, and better investor protection.

The improvement in Sri Lanka has resulted from requiring greater corporate disclosure on transactions between interested parties.

‘The Resolving Insolvency rank’ has improved by two points from 44th position in 2011 to 42 in 2012.

This measures the time and cost required to resolve bankruptcies. Identifies the weaknesses of the existing bankruptcy law and the main procedural and administrative difficulties in the bankruptcy process.

The recovery rate, expressed in terms of how many cents on the dollar claimants recover from the insolvent firm, is also shown.

‘The Getting Electricity rank’, improved by 2 points, from 97th position in 2011 to 95 in 2012. However, in some areas the rank has fallen compared to last year. For instance the Paying Taxes rank fell by 2 points, from 171 in 2011 rank to 173 in 2012.

The reasons for these negative trends are the tax that a medium-size company must pay or withhold in a given year, and the administrative burden in paying taxes. It should be noted that this fall in rank occurred despite the reduction on taxes on business.

The payment of taxes was made less costly for businesses by abolishing the turnover tax and social security contribution and by reducing corporate income tax, value added tax and the nation building tax.

‘The Starting a Business rank’ also fell by 3 points, from 35th position in 2011 to 38th position in 2012.

This is a measure of the number of steps entrepreneurs must take to launch a business, the time it takes on average and the cost and minimum capital required as a percentage of the Gross National Income (GNI) per capita.

Dealing with Construction Permits rank fell by 1 point, from 110th position in 2011 to 111 in 2012.

This rank measures the procedures, time, and costs to build a warehouse, including obtaining necessary licences and permits, completing required notifications and inspections, and obtaining utility connections.

‘The Registering Property rank’ fell by 3 points, from 158th position in 2011 to 161 in 2012.

It measures the ease with which businesses can secure rights to property. This includes the number of steps, time, and cost involved in registering property.

Getting Credit fell by 3 points, from 75th position in 2011 to 78 in 2012.

This rank measures of the scope, access and quality of credit information available through public registries or private bureaus. A higher value indicates that more credit information is available from a public registry or private bureau.

There was no change in ‘The Trading across Borders’ rank and remained at 53rd position. This rank measures the costs and procedures involved in importing and exporting a standardised shipment of goods.

This is carried out by counting documents associated with every official procedure, starting from the final contractual agreement between the two parties, and ending with the delivery of the goods.

‘The Enforcing Contracts’ rank also did not change and remained at 136th position.