Comment - Testimonial to Lanka's business climate

The chief guest at the opening ceremony of Virtusa's UK operation centre in Colombo, British High Commissioner Dominik Chilcott said that Virtusa's expansion in Sri Lanka is a testimonial for Sri Lanka's business climate. His argument is globally savvy, no nonsense business like Virtusa would not expand its business here if the conditions were not good.

Virtusa is a leading technology company engaged in knowledge business and it is a real global company that Sri Lanka can be proud of. The company is registered in the US, with its operations based in India and Sri Lanka and caters to the UK and US markets. Its products are high-end software solutions.

The Business climate in the country is a hot topic in business circles as well as political circles and there are various arguments on this. While some companies such as Virtusa are expanding their business in the country some are leaving the country for better investing conditions.

The high risk of terrorism and political volatility are considered as the main obstacles faced by business in the country today. The tourism industry is the most affected industry today and all other businesses are suffering directly or indirectly due to the prevailing conditions.

However, some argue that as terrorism and violence is increasingly becoming a world phenomenon this factor is becoming less important for doing business. We can't be complacent by merely saying so. What we have to do is take terrorism as a given condition and overcome all other issues as much as possible to improve the general business climate in the country.

The Word Bank annual report on doing business 2006 highlights and ranks countries according to their conducive business environment. In this classification it considers business environment under the following ten topics; starting a business, hiring and firing workers, enforcing contracts, getting credit, closing business, registering property and protecting investor, dealing with licences, paying taxes and trading across borders.

Considering these factors, the report has ranked Sri Lanka at 75 on the list of 155 countries (Ease of doing business ranking). It measures each topic under a different heading and compares. For instance to start a business in Sri Lanka it has to follow eight procedures, takes 50 days and it costs 10.4% (of income per capita).

New Zealand is the most convenient place for doing business. To start a business in New Zealand, it has to follow only two procedures, takes 12 days and the cost is 0.2% (of income per capita). In India it has to follow 11 procedures, takes 61 days and the cost is 61.7% (of income per capita).

Sri Lanka's position in the ease of doing business ranking gives a general idea of the competitiveness of the country. We are above all the major fast growing economies in Asia. In this list China stands at 91, Vietnam at 99 and India at 116. However, these countries are becoming top reformers and coming to the top of the list very fast.

Our South Asian competitors Nepal (55), Pakistan (60) and Bangladesh (65) are above us. Similarly East European countries are also fast reformers and are competitors in attracting FDIs, offshoring and outsourcing businesses. However, these conditions alone would not make a conducive business environment in a country and the safety of the people and assets are paramount.

Similarly one or two of these factors would not help to improve the business environment in a country. For instance you need to follow only one procedure to start a business in Afghanistan and it will take only seven days and that country stood at 122 in the ease of doing business index. Whatever the rank, risks in Afghanistan are not a secret. Similarly, any country that makes headline news of war and violence in the international media daily would not be a attractive place for business in this global village.

This report is a promotion of the World Bank's neo liberal policies. But these conditions are the commonly agreed criteria that many countries including socialist giants such as China and Vietnam are following. If one condition is not favourable and all or most of the above conditions are fulfilled, then the investments will flow in and new businesses will be launched boosting the economy.

This is evident in China and Vietnam. Investors are worried about labour laws, conditions of the workers, tax policy, trade policy and property rights that come under the ten topics in these countries and not the political system.

So if we can improve the real conditions demanded by entrepreneurs the terrorist threat will not be a big issue.

In addition to all conditions quality infrastructure plays a greater role in improving the general business environment of a country.

New initiatives, especially budget proposals in this regard would help to address the issue to a great extent. Furthermore, the government is doing everything that is necessary to improve the business environment in the country.

Sri Lanka has become one of the most liberal trade centres in Asia with the FTAs the country entered into during the last few years.

The Government is carrying out trade, tourism and investment promotion campaigns around the world to attract business here. But Virtusa's example is more effective than all in convincing the world that the business environment here is good.

If all diplomats such as Chilcott and investors say "globally savvy, no nonsense business like Virtusa would not expand its business here if the conditions were not good", really it is the best testimonial of the business environment of the country. Therefore, the business community has the greatest responsibility ever with the ability to improve the image of the country.