The Simplification of Existing Laws and Regulations in Sri Lanka

FEBRUARY 2021

THE SIMPLIFICATION OF EXISTING LAWS AND REGULATIONS IN SRI LANKA Stefan Claus Beisswenger

Report on the Simplifica�on of Exis�ng Laws and Regula�ons in Sri Lanka February 2021

On January, 7th, 2021 his Excellency the President of the Democra�c Socialist Republic of Sri Lanka established a Commission on the Simplifica�on of Exis�ng Laws and Regula�ons. The main tasks of this commission are to review and assess as to whether the issuance of laws, regula�ons and circular instruc�ons has resulted in over regula�on and deviated from the scope and objec�ves of original legisla�ons and to iden�fy areas where simplifica�ons and ra�onaliza�on could be made in order to make the most effec�ve modern regulatory systems.

For decades, Germany has been a reliable and trusted partner for Sri Lanka. German investments are represented in all key sectors of the Sri Lankan economy. Its FDI por�olio is one of the most diversified in Sri Lanka – from producers of apparel/tex�le, automo�ve parts, industrial gases, construc�on chemicals, solid �res and organic agriculture to sophis�cated service providers in the field of tourism, IT, healthcare, banking, insurance and logis�cs. Therefore, the Friedrich Naumann Founda�on for Freedom and the Delega�on of German Industry and Commerce in Sri Lanka are honored to have the opportunity to contribute with this report1 to the work of the commission.

INTRODUCTION Sri Lanka, unlike the other South Asian na�ons, is located in the center of the Indian Ocean at a strategic posi�on, equipped with the essen�al ingredients for rapid economic development - , a high level of educa�on, an absence of extreme poverty and inequality, a rela�vely well-developed physical infrastructure, and a broad-based administra�ve apparatus. In its VISION 20252, the government envisages making Sri Lanka a rich country and a hub of the Indian Ocean, with a knowledge-based, highly compe��ve, social market economy by 2025.

During the last decades, the country has made significant progress in its socio-economic and human development indicators. Social indicators rank among the highest in South Asia and compare favorably with those in middle-income countries. Economic growth has translated into shared prosperity.

Extreme poverty is rare and concentrated in some geographical areas; however, a rela�vely large share of the popula�on subsists on slightly more than the poverty line. The country was ranked 72th out of 189 in the United Na�ons Human Development Index in 2020.

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This report is based on an extended research among a broad selec�on of scien�fically recognised current studies and sources (see references) concerning the assessment of Sri Lankas current economic, poli�cal and social situa�on, poten�al and regulatory framework and of structured interviews with private sector senior representa�ves of German firms doing business in Sri Lanka and representa�ves of interna�onal development and business organisa�ons in February 2021.

2 Government of Sri Lanka (2015): Vision 2025 – A Country Enriched

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While Sri Lanka was one of the most open Asian economies in the 1970s, restric�ve trade policies and shortcomings in the investment climate over the past decades have limited the growth poten�al of established firms, while crea�ng strong incen�ves for informality - which in turn has stunted private sector growth and poses a drag on compe��veness of the Sri Lankan economy.

At the same �me, Sri Lanka has a�racted a much lower volume of Foreign Direct Investment (FDI) (as a propor�on of GDP) than peer economies, reducing the ability of the country to enhance trade and improve produc�on processes. In turn, the FDI trends stem from a host of factors, including legal and procedural obstacles for foreign investors, lack of predictability in laws and regula�ons, and deficiencies in mechanisms to a�ract, retain and integrate foreign investment.

The Government of Sri Lanka has recognized the need to adopt a policy agenda that strengthens the compe��veness of the country’s private sector in order to achieve inclusive and sustainable growth.

Recent government vision statements have iden�fied the need for a revision of trade and investment policies coupled with reforms that promote innova�on, entrepreneurship and skills forma�on, as needed to propel Sri Lanka to upper-middle-income status. While the economy has grown rapidly in the past, the dominance of non-tradable sectors as drivers of economic growth is unlikely to remain adequate for inclusive and sustainable growth in the coming decade. Authori�es have iden�fied the need to strengthen compe��veness not only in tradi�onal sectors such as apparel, natural resources transforma�on, and tourism but also to establish the necessary condi�ons for a thriving knowledge economy, to realize Sri Lanka’s trade poten�al, to integrate produc�ve local companies in global value chains, and to a�ain higher value addi�on in the manufacturing sector.

In order to iden�fy areas where simplifica�ons and ra�onaliza�on in the field of exis�ng laws and regula�ons in Sri Lanka could be made, this report aims at all legisla�on, regula�ons, quasiregula�ons, and any other aspect of government or regulator behaviour that can influence or compel specific behaviour by business and the community. It also includes the red tape imposed by the Government’s procurement, grants and costrecovery frameworks.

Five widely used business and governance quality indicators describe the current performance of Sri Lanka compared to its comparators: 1.

2.

3.

4.

5.

the World Bank’s Ease of Doing Business 2020 ranking across 190 economies, the Corrup�on Percep�ons Index 2020 of 183 economies by Transparency Interna�onal, the World Bank’s Logis�cs Performance Index 2018 ranking across 160 economies, the Economic Freedom of the World Index 2020 by Fraser Ins�tute across 162 countries, and The United Na�ons Human Development Index 2020 across 189 countries.

Economy

Malaysia Singapore Sri Lanka Thailand

Ease of Doing Business 2020

Corrup�on Percep�ons Index 2020

Logis�cs Performance Index 2018

Economic Freedom Index 2020

Human Development Index 2020

out of 190

out of 183

out of 160

out of 162

out of 189

12 2 99 21

57 3 94 104

35 5 94 24

46 2 83 88

62 11 72 79

Sources: For Ease of Doing Business: World Bank, Doing Business, accessed 23 February 2021; for the Corrup�on Percep�ons Index: Transparency Interna�onal, accessed 23 February 2021; for the Logis�cs Performance Index: World Bank Logis�cs Performance Index Dataset, accessed 23 February 2021; for the Economic Freedom of the World Index: Fraser Ins�tute, Annual Report 2020, accessed 24 February 2021, for the Human Development Index: UNDP, Human Development Report 2020.

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The data, presented in the Table above show:   

 

Sri Lanka’s business climate currently lags behind that of its neighbors. A major implica�on is the need to simplify regulatory and licensing procedures.

Although less distant from Sri Lanka’s comparators, the business community clearly regards corrup�on as a serious problem.

Sri Lanka has adopted a rather restric�ve approach to foreign investment, which has limited its access to interna�onal markets and technology. The country has a�racted much smaller FDI flows than neighboring economies3.

Sri Lanka lags well behind its neighbors in the provision of high-quality, interna�onally oriented transport and logis�cs services.

Regulatory issues created incen�ves for informality and affected firm produc�vity. In Sri Lanka, formal firms surveyed iden�fied informality as the single most important factor constraining their growth.

Source: World Bank Business Environment Enterprise Surveys (www.enterprisesurveys.org).

The latest countrywide survey was conducted in 2011. Recent consulta�ons with private sector confirm that the findings of the survey remain relevant.

While Sri Lanka ranks on posi�on 99 out of 190 countries in Doing Business 2020, a more detailed view shows the different areas where improvements could and should be made in order to create sustainable growth and unleash the various valuable poten�als of the country:

Source: World Bank, Doing Business 2020, Economy Profile of Sri Lanka, accessed 24 February 2021

3

UNCTAD, World Investment Report 2020

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The establishement of the Commission on the Simplifica�on of Exis�ng Laws and Regula�ons by the President für Sri Lanka follows the recogni�on that currently diverse, protracted, regulatory procedures in Sri Lanka create disrup�ons and have a nega�ve impact on the overall development process of the country and crea�ng space for irregular prac�ces and corrup�on, the Government rightly recognizes the need to redesign these complex circulars, laws and regula�ons in order to facilitate community life and take the country towards rapid development.4 De-regula�on is an important task for governments in order to improve the regulatory framework and s�mulate development and growth. Since decades, all over the world, manifold experiences have been made in this field and clear lessons learned could be iden�fied. One important lesson iden�fied is, that in developing new policies and programmes or reviewing exis�ng regula�ons the following ten principles should be considered5:

Following the task of assessing whether the issuance of regula�ons and circular instruc�ons in Sri Lanka has resulted in over regula�on and deviated from the scope and objec�ves of original legisla�ons and to iden�fy areas where simplifica�ons and ra�onaliza�on could be made in order to make the most effec�ve modern regulatory systems, the following regulatory areas and sectors are examined in closer detail: A. General Issues of Regula�on A.1. Trade Policy and Customs A.2. Transport and Logis�cs A.3. Foreign Investment Policy A.4. Public Procurement and State-Owned Enterprises A.5. Labour Market Regula�ons A.6. Fiscal Policy and Taxes B. Sector Specific Issues of Regula�on B.1. Apparel and Tex�le Sector B.2. Healthcare Sector and Pharmaceu�cals B.3. Financial and Insurance Sector B.4. Tourism 4 5

The Gaze�e Extraordinary, No. 2209/47, January, 7th, 2021 Australian Government, Department of Industry (2014): Industry Officers Guide to Regula�on Reform

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A. General Issues of Regula�on A.1. TRADE POLICY AND CUSTOMS Sri Lanka today is less open to trade than it was for most of the last 30 years when reforms aimed to liberalize the foreign trade regime and Sri Lanka was seen as the first country in South Asia to significantly open its borders to trade and foreign direct investment. Today, Sri Lanka Customs suffers from overregula�on. Its regula�ons need to be updated to reflect modern trade prac�ces and use of technology. Progress has been made, and more s�ll needs to be done. The government has promised a renewed policy focus on an outward-oriented development strategy.

Exports and imports are an outcome of cross-cu�ng policies, including tariffs, logis�cs, border clearances, infrastructure and skills among others. A successful trade policy reform needs to be complemented by improved trade facilita�on. Poor trade facilita�on can add significantly to costs of trading. Efficient trade facilita�on, along with low tariffs, is a crucial enabler to plug into global value chains, which have increasingly become the driver of global trade.

Currently, there are significant gaps between trade facilita�on prac�ces in Sri Lanka and benchmark countries in Asia. The comparison of all areas related to trade facilita�on highlights the need for improvements not only in infrastructure, but also on regulatory processes that cause unnecessary delays for traders and erode the compe��veness of local producers rela�ve to exporters in neighboring countries. Elimina�on of regulatory and procedural hurdles would be a cost-effec�ve way to quicken Sri Lankan producers’ access to foreign markets.

Sri Lanka’s trade policy, with high and variable tariffs and para-tariffs, is characterized by a strong an�-export bias, and has been a key contributor to the decline in trade performance. The compe��veness of Sri Lanka’s firms depends on their ability to get products to foreign markets in a �mely and cost-effec�ve way. Improving access to enabling infrastructure and cu�ng costly and burdensome trade-related procedures are essen�al in this regard. Trade barriers also make it difficult for firms to access world-class inputs at compe��ve prices, thus reducing the ability of firms to compete and integrate into Global Value Chains and Regional Value Chains.

In addi�on to the tariff, Sri Lanka applies a number of addi�onal levies and charges. These include the Export Development Board Levy (Cess), Excise Duty, Value Added Tax (VAT), Ports and Airport Development Levy, Na�on Building Tax, port handling charges and the Special Commodity Levy.

Cumula�vely, these significantly increase the cost of impor�ng and, in some cases, can exceed 100% of the c.i.f.6 value. Furthermore, these addi�onal taxes and levies are prone to change, which adds to the unpredictability of the import regime.

The introduc�on of para-tariffs during the last decade has effec�vely doubled the protec�on rates, making the present import regime one of the most complex and protec�onist in the world7.

Addi�onally, the para-tariffs’ dispersion leads to prices that distort produc�on and consump�on pa�erns.

The main legisla�on governing customs procedures in Sri Lanka is the Customs Ordinance; it was amended through the Customs (Amendment) Act No. 2 of 2003. As per the provisions of the legisla�on, importers and exporters must be registered with Customs to be able to trade in Sri Lanka. For registra�on purposes, importers need to obtain a tax iden�fica�on number (TIN) by registering with the Inland Revenue Department.

6 7

(incoterm) Ini�alism of Cost, Insurance, Freight World Bank (2016): Enhancing Compe��veness in Sri Lanka

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In addi�on, importers need to submit a completed customs declara�on (CUSDEC) form to Customs, with all other relevant documents8. Sri Lanka Customs must ensure that the necessary approvals have been obtained from other relevant government authori�es9 prior to releasing a cargo.

Le�ers of credit (LC), documents against payment (DP), documents against acceptance (DA), or advance payment (AP) can be used to pay for import charges. Le�ers of credit are valid for up to a year. AP terms are allowed where the total value of the goods does not exceed US$10,000; goods must be received by the importer within 90 days of payment. Customs charges include seal charges per container and container examina�on charges for the first container and further charges per addi�onal container. The �me needed to complete an import opera�on is 136 hours and the cost to import is US$693 per container10.

In 2020, the Government of Sri Lanka amended a series of Imports and Exports (Control) Regula�ons, to curb imports with the policy goal of conserving gross official reserves and strengthening the Sri Lankan Rupee. In July 2020, the final list of products under temporary suspension and credit basis was published which saw the highest number of temporary suspension of imports in the tex�le sector11 followed by the transport sector and vegetable products. Metals and machinery/electrical imports had the highest number of HS codes at 8 digit restricted by a 90-day credit facility.

Machinery/electrical items rela�ng to air condi�oners, refrigerators and, IT and communica�on equipment had the highest number of HS codes at 8 digit which required a 180-day credit facility followed by products in the transporta�on sector (vehicle parts). In August 2020 further amendments to the Import Control License (ICL) and Banning (B) schedules were made. Chemical and Allied products had the highest number of HS codes at 8 digit for products added under ICL. These addi�ons were a fresh set of HS codes that did not have any restric�ons previously. Transporta�on sector saw the highest number of suspension in the issuance of Import Control License for an indefinite period. Items such as Salt and Saw have been removed from the B listand added to the ICL list with an imposi�on of an ICL fee. Rubber products (tyres) saw the highest number HS codes at 8 digit added to the B List. This was a transfer from the ICL list. In addi�on, an extension in the 180-day credit facility was observed.

The text in red are the items that were added newly to the 180-day credit facility list. These addi�ons were moved from TS to the 180-day credit facility.

8

These documents include: a delivery order; bill of lading; invoice; exchange documents; packing list; cer�ficate of origin; cer�ficate of registra�on (with an English transla�on for used motor vehicles); a load port survey cer�ficate for food items; and, if applicable, an import licence and/or a sanitary and phytosanitary or quaran�ne cer�ficate.

9 e.g. Import and Export Control Department, Sri Lanka Standards Ins�tu�on, and Ministry of Healthcare and Nutri�on, and Na�onal Plant Quaran�ne Service 10 WTO (2016): Trade Policy Review Sri Lanka (as of march 2017 revision) 11

Restricted imports only in HS 61,62 and 63 which also cons�tute Sri Lanka’s key export

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Informa�on and communica�on technology is frequently used to improve the efficiency of border regula�ons, enhance transparency and accountability, and thereby reduce the �me and cost of compliance. Sri Lanka’s ini�a�ves in this field date back to the 1990s. The country also started to automate customs func�ons in the early 1990s. However the results have been mixed. In 2012, Sri Lanka Customs launched an ini�a�ve to introduce the “Single Window,” a facility that enables all par�es involved in trade and transport to lodge all necessary trade-related documents and informa�on to be submi�ed at once at a single entry point to fulfill all trade and regulatory requirements. However, the current Single Window’s opera�ons do not meet the criteria of a single window because   

it has only partly automated the trading process; traders s�ll have to produce hard copies of documents to clear goods; and only a few border agencies are linked to the electronic system, with a majority s�ll being outside it12.

For Sri Lanka to compete with other logis�cs hubs in the region, the Single Window must ul�mately be a central data exchange facility similar to the Republic of Korea’s KTNET and Singapore’s TradeNet. The experience of other countries clearly demonstrates the benefit of such a system in improving the efficiency of logis�cs services and reducing the �me and cost of conduc�ng cross-border trade. Having a paperless trading environment is important to achieve the government’s economic policy objec�ves.

The lack of automa�on of border management systems reduces the efficiency of trade facilita�on. At the present �me, many of the trade-related processes remain manual and paper-based, with significant duplica�on of documenta�on required by different agencies. Systems automa�on and the use of IT in import and export processes can lead to reduc�ons in paperwork and rent seeking opportuni�es.

Sri Lanka has introduced the Automated System for Customs Data (ASYCUDA) for centralized, electronic implementa�on and control of customs procedures. The authori�es stated that if documents are in order it takes less than 4 hours on average to clear a consignment and over 80% of the consignments are cleared on the same day. In fact, all the various agencies that are involved in import and export processes are not yet connected to the system.

The Government has taken further steps to improve trade facilita�on in line with the WTO Trade Facilita�on Agreement. A Na�onal Trade Facilita�on Commi�ee (NTFC) was established in 2016. In July 2018 Sri Lanka established the Trade Informa�on Portal, a one-stop point for informa�on rela�ng to import into and export from Sri Lanka. Implemented by the Department of Commerce, the portal provides an accessible, logical, helpful gateway for traders to access important regulatory and procedural informa�on needed to export, import and transit. However, not all trade related informa�on is available on the portal.

In order to improve transparency, it should be mandatory for all agencies to publish regula�ons, procedures, applicable fees, �melines and con�nuous upda�ng and the informa�on so published will be final and can be used by the stakeholders for transac�on with border agencies. Although, an advance no�fica�on system has to be put in place in respect of any new regula�on issued by any government agency.

12

The stakeholders linked are the traders, customs brokers, transport operators, port operators (e.g., terminals), some banks, and a few border agencies.

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In order to improve the efficiency of trade facilita�on, especially in the field of Customs Ordinance and its amendments, it is necessary   





to provide facili�es for paperless transac�ons on all import and export documenta�on for BOI and other stakeholders. for Customs to accept all import and export documenta�on submi�ed by stakeholders duly signed with digital signatures. for Customs to process and approve all import and export documenta�on digitally with respec�ve interphases to all necessary government ins�tu�ons to avoid delays and duplica�ons (BOI, Inland Revenue, Import Export Controller) to update all informa�on on du�es and taxes levied by Customs real �me on the customs web portal which will offer accurate real �me data and informa�on. This should be con�nuously updated without fail which will provide legally binding responsibility. to implement proper guidelines for the Electronic Transac�on Act including facilita�on of B2C transac�ons, e-payments, e-signature, e-documents and tracking.

A.2. TRANSPORT AND LOGISTICS Sri Lanka’s loca�on on a major trade route and its proximity to some of the largest manufacturers and markets (China, India, and Pakistan) in the world offer a unique opportunity for the country to take part in trade logis�cs and manufacturing ac�vi�es in the region. The loca�on advantage could help posi�on Sri Lanka as a key logis�cs hub for the region.

Building on the country’s loca�onal advantage, policy documents of successive governments have emphasized the strategy of crea�ng a globally integrated and compe��ve service hub. Moreover, the government’s main policy document—Mahinda Chintana 2010—envisaged posi�oning Sri Lanka as a “naval, avia�on, commercial, energy and knowledge hub, serving as a key link between the East and West”13.

Transport and Logis�cs is a sector where reform is vital to increase Sri Lanka’s growth rate and improve its interna�onal compe��veness. The services rendered by logis�cs providers extend beyond the point of consump�on. These services, some�mes referred to as “reverse logis�cs,” include a�er-sale services provided to customers (e.g. repair), waste management, recycling, and transfer to other par�es or to the original manufacturer for reuse, remanufacturing, or resale. Logis�cs services therefore embrace a wide range of interrelated services and providers, across and within borders.

Regula�ons and administra�ve procedures governing logis�cs ac�vi�es have a significant impact on the performance of the logis�cs subsector as the table below shows.

13

Mahinda Chintana (2010): Vision for the Future, Presiden�al Campaign 2010

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Logis�cs Performance, Subindexes, Selected Countries‘ Rank, 2018 Index

India

Malaysia

Oman

Pakistan

Singapore

Sri Lanka

UAE

Customs Infrastructure Interna�onal Shipments Logis�cs Quality Competence Tracking and Tracing Timeliness

40 52 44

43 40 32

44 39 36

139 121 97

6 6 15

79 85 112

15 10 5

42

36

49

89

3

109

13

38

47

66

136

8

78

13

52

53

29

136

6

122

4

UAE = United Arab Emirates; Source: World Bank Logis�cs Performance Index 2018, accessed 23. February 2021

Overly complex administra�ve procedures and red tape are o�en obstacles to developing logis�cs centers. Ad hoc and frequent changes to the import tax regime during the last decade also impact logis�cs performance. The revisions have resulted in the introduc�on of mul�ple para tariffs including, for example the Import Cess, the Port and Airport Development Levy, and the Special Commodi�es Levy, which have increased the level of protec�on and reduced the transparency and predictability of the import tax regime.

Some of the key challenges facing the sector include uncoordinated development of transport infrastructure, lack of synergy between city and port development, bureaucra�c red tape, failure to a�ract global third party logis�cs firms, and a lack of a unified and holis�c policy approach.

Developing a master plan and establishing a na�onal commi�ee on logis�cs is important to address issues arising from weaker coordina�on and communica�on, and greater use of informa�on and communica�on technology will help cut red tape. In addi�on, reforms that aim to introduce be�er regula�on, encourage greater private-sector par�cipa�on, and enhance compe��on will help the country improve the performance of its logis�cs sector and unlock ist loca�on poten�al.

A key proposal to facilitate modern trade and logis�cs prac�ces is to amend the Sri Lanka Customs Ordinance which has been already amended several �mes in the past, but stakeholders note that the current law s�ll fails to address a number of areas. Sri Lanka introduced Commercial Hub Regula�on No. 1 of 2013 to facilitate and encourage value-added logis�cs ac�vi�es and to reduce red tape.

According to the regula�on, companies engaging in entrepot trade, off-shore businesses, front-end services to clients abroad, opera�ons of headquarters, and value-added logis�cs services are exempted from exchange control, customs, and import and export control regula�ons.

However, the companies have to secure 65% of their funding from foreign sources and obtain minimum investments ranging from $3 million for companies engaging in value-added logis�cs services to $5 million for companies engaging in entrepot trade14.

Addi�onally, the ac�vi�es have to be carried out in areas designated by the regula�on as free ports and bonded areas. Imported goods may be stored in a bonded warehouse exempt from customs du�es for up to two years. If goods are taken out of the warehouse for domes�c consump�on, they are subject to the du�es.

14

Asian Development Bank (ADB) (2017): The Sri Lankan Economy – Char�ng a New Course

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Private sector respondents surveyed complained about the inefficient administra�on of regula�ons, fees, and levies imposed and the lack of transparency and accountability. For example, although Sri Lanka generally has the poten�al to develop entrepot trade with the broader South Asian region and beyond, to do so requires minimal red tape. Cargo that is brought in for entrepot trade and is for reexport should be processed fast with minimum interven�on by Customs and should not be subject to du�es or levies. However, interviewees noted that the current government procedures and resul�ng red tape hinder development of the entrepot trade.

Compounding these problems on the freight side is the absence of central collec�on or distribu�on centers for access by rail. The result is double handling of cargo, with cargo being trucked from different loca�ons to the train sta�on at the point of origin and again trucked from the train sta�on to a port or vessel at the point of departure, thereby increasing the cost of transpor�ng cargo via rail.

Another significant drawback is the lack of rail linkages to new port terminals in the Port of Colombo.

Further, because trucks do not pay road user charges, trucking by road is effec�vely subsidized. This also makes rail freight a less a�rac�ve alterna�ve at present. Stakeholder interviews revealed that the u�liza�on of expressways for trucking remains low; one reason is that truckers consider that the highway toll is too high. Powerful trucking interests are also holding back the transi�on from road to rail.

Another regulatory barrier highlighted as preven�ng growth in the logis�cs subsector and greater par�cipa�on by global firms is the restric�on of foreign ownership in ship agency and freight forwarding services. Per the Gaze�e No�fica�on issued in 2002 under the Exchange Control Act No. 24 of 1953, foreign ownership of shipping agencies and freight forwarding is restricted to 40%. The commercial hub regula�ons introduced in 2013, however, remove foreign ownership restric�ons on investments in logis�cs services (such as freight forwarding) provided the firms meet the condi�ons outlined (such as minimum capital requirements) and operate within designated free ports and bonded areas. The associa�ons represen�ng freight forwarding companies have resisted uncondi�onal liberaliza�on of the sector. Ship agency services are s�ll limited to 40% foreign ownership and the industry is opposing further liberaliza�on of the sector.

The current Sri Lankan logis�cs regulatory arrangements lack harmoniza�on. For example, transport policy and infrastructure development plans for airport, road, and rail connec�vity are largely focused on facilita�ng passenger movement and provide li�le recogni�on of the needs of freight movement. Further, because transport infrastructure related to road, rail, sea, and air is developed with li�le or no communica�on and coordina�on between their agencies, the networks fail to facilitate the flow of cargo and passengers. Another example is that trade facilita�on ini�a�ves are not recognized as a vital component of be�er logis�cs services.

Interministerial and interagency coopera�on and coordina�on need strengthening. Four ministries are working separately and in parallel in planning the development of transport infrastructure:    

15

for the Road Master Plan—the Ministry of Transport and Civil Avia�on; for the Western Region Megapolis Master Plan—the Ministry of Megapolis and Western Region Development; for the Port Master Plan—the Ministry of Ports and Shipping; and for the Northern Expressway—the Ministry of Higher Educa�on and Highways15.

Since end of 2019 Ministry of Higher Educa�on, Technology and Innova�on

10

Sri Lanka has currently established minimum values on certain products for customs purposes.

Ar�cle 10 of Schedule "E" of the Customs (Amendment) Act No. 2 of 2003 grants the Minister (of Finance) – with the approval of the Cabinet of Ministers and in the interest of the na�onal economy or for any other reason – the authority to apply minimum values for any goods and for a period to be specified in the Order implemen�ng the measure. As such, Minimum values are used for motor vehicles under HS headings 87.02, 87.03, 87.04 and 87.11. The valua�on method used is the transac�on value method based on an invoice issued by the manufacturer. Vehicles older than three years cannot be imported. As of 27 May 2016, automobile imports are only subject to an excise tax, which ranges from 70% to 290% depending on engine type and size. This results in a decline of vehicle imports of – 99,4%16 in November 2020 compared to the previous year.

A.3. FOREIGN INVESTMENT POLICY Foreign Direct investment (FDI) can be an important driver of the country’s economic growth and diversifica�on by bringing in new capital and new technologies, by crea�ng new jobs and shi�ing the work force from lower into higher value added jobs; and by impar�ng skills and knowledge spillovers to the workforce and local firms. FDI is also an important vehicle for connec�ng the domes�c economy with the interna�onal private sector by fostering a wide range of opportuni�es for local companies to integrate into global produc�on value chains.

Sri Lanka’s performance in a�rac�ng FDI was impressive during the post-reform period un�l about the mid-1990s, but has since deteriorated slightly. The Sri Lankan experience highlights the complementary role of investment liberaliza�on for exploi�ng the poten�al gains from trade liberaliza�on: trade liberaliza�on increased the poten�al returns to investment by capitalizing on the country’s compara�ve advantage, while liberaliza�on of foreign investments permi�ed interna�onal firms to take advantage of such profit opportuni�es.

Despite its loca�on and access to major markets, FDI into Sri Lanka has been lower than in peer countries. The ability of Sri Lanka to become a des�na�on of choice for efficiency-enhancing FDI will require much more than investment in infrastructure and incen�ves for investors.

The interviews with privat sector have shown three main challenges affec�ng the establishment and entry of investors into the country:    16

cumbersome and slow entry procedures; access to land and ownership ceilings to foreign investors in many sectors.

Delega�on of German Industry and Commerce in Sri Lanka (2021): Sri Lanka Newsle�er January-February 2021

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Even when companies decide to invest in Sri Lanka, the process for entering and establishing their opera�ons in Sri Lanka is complex and can be very �me consuming. First, the investment approval process is a key impediment. Investors inves�ng under the normal laws of the country need to obtain an approval under Sec�on 16 of the Board of Investment (BOI) Act and those seeking certain support measures need to obtain an approval under Sec�on 17 of the BOI Act. While Sec�on 16 investment approval entails a rela�vely short process, Sec�on 17 process is longer and more �me consuming - at �mes las�ng several months.

Second, difficul�es in gaining access to land have been a cri�cal constraint for further expansion by investors. Under the Land (Restric�on on Aliena�on) Act17, a foreigner, foreign company or a company with 50% or more foreign shareholder is prohibited from owning land in Sri Lanka.

Investors also reported that the process of leasing land in Sri Lanka is cumbersome since it involves mul�ple government agencies, is �me consuming (can take even up to a year or more) and requires payment of upfront 15% tax for the period of the en�re lease.

Third, there are substan�ve restric�ons on foreign investment which act as a deterrent to investors looking to invest larger volume of capital. For example under the Board of Investment (BOI) Act, foreign ownership in sectors such as educa�on, freight forwarding, travel agency, shipping agency and mass communica�on is restricted to 40% and can be increased only upon approval by BOI. The ra�onale for these barriers should be revisited in light of the vision of the government for economic transforma�on.

Ac�ons such as the na�onaliza�on of private property in 201118 and the passage of a Land Act forbidding the purchase of land by foreign firms and individuals with retroac�ve applica�on unnecessarily undermine investors’ confidence in the country as an investment des�na�on. Going forward, close consulta�on with the private sector will be necessary in order to minimize the nega�ve impact and uncertainty from policy changes.

Developments in the last decade have, begun to send mixed signals to foreign investors. In 2008 the parliament passed the Strategic Development Projects Act, empowering the minister in charge of the Board of Investment (BOI) to grant exemp�ons to “strategic development projects” from all taxes for a period of up to 25 years. In the Act, a strategic development project means “a project which is in the na�onal interest and likely to bring economic and social benefits to the country and which is also likely to change the landscape of the country, primarily through provision of goods and services which will be of benefit to the public, substan�al inflow of foreign exchange, substan�al employment, and technology transfer”. This defini�on leaves a great deal of room for the minister’s discre�on in the investment approval process, thus undermining the BOI’s role.

BOI is a large ins�tu�on with a wider range of func�ons than peer organiza�ons in Asia. The size of its staff stems from the fact that BOI undertakes a wide range of func�ons including investment promo�on; regulatory func�ons; management of economic zones and trade facilita�on services. In turn, this mul�plicity of roles appears to have undermined the BOI’s focus on investment promo�on – to which less than 1 percent of BOI’s staff is dedicated.

17

Land (Restric�ons on Aliena�on) Act effec�ve from 1st of January 2013 prohibited the acquisi�on of land by foreign individuals and companies with 50% or more foreign ownership. The Act created significant uncertainty to companies through two provisions: a) The Act s�pulates that companies with less than 50% foreign ownership can acquire land, but must retain the shareholding mix by at least 20 years (within which term foreign ownership above 50% would make the land acquisi�on null). B) the Act has a retroac�ve effect for the 22 months before enactment, thereby affec�ng investments already undertaken.

18 Through the Underperforming Enterprises and Underu�lized Assets Act No. 43 passed in November 2011 the Government na�onalized 37 enterprises many of which had foreign investment. The wording of the law provides for a ‘competent authority’ to administer ‘underperforming’ assets, although the criteria for defini�on of underperformance was considered vague.

12

Restoring the BOI’s role to its original status as the apex ins�tute for FDI promo�on is vital for linking the economy to rapidly evolving global produc�on networks. This requires repealing, or superseding by new legisla�on, the Revival of Underperforming Enterprise and Underu�lized Assets Act and the Strategic Development Project Act, and a firm commitment at the highest poli�cal level to promote FDI. De-linking the investment entry approval process from the gran�ng of incen�ves can help streamline and simplify the entry process. At present, approval by BOI is required both for projects that benefit from support measures and for those that do not. However, 80% of countries have eliminated entry approval process referred to as “screening” (except for certain na�onal security related ac�vi�es) and only a simple registra�on process exists. In Sri Lanka, elimina�ng investment approvals when support measures by BOI are not sought by investors, can help free up BOI’s resources, reduce lead �mes for investment establishment and reduce transac�on costs for both the government and investors. Where support measures are being sought by investors, Sri Lanka may consider further streamlining procedures to ensure that they are transparent and non-discre�onary.

In May 2016 the government of Sri Lanka established a One Stop Shop (OSS) to facilitate the establishment of foreign investment in the country. The OSS is expected to reduce lead �mes for investment approval by facilita�ng the interac�on between investors and the regulatory agencies 19 involved in approval of new investments. This is a posi�ve ini�a�ve given the fact that at present, foreign investors seeking to establish opera�ons in Sri Lanka face high transac�on costs and lead �mes to obtain all necessary approvals from mul�ple regulatory agencies when establishing opera�ons in Sri Lanka.

Crea�ng an effec�ve investment climate in Sri Lanka needs to be a con�nuous process responds to the priori�es iden�fied by entrepreneurs. As the Government of Sri Lanka embarks in strategies aimed at facilita�ng the economic transforma�on of the country, it will be essen�al to develop Public-Private Dialogue to involve the ac�ve par�cipa�on of the private sector in iden�fica�on of the most significant obstacles to their opera�ons as a way to priori�ze reforms.

19

Ministry of Provincial Councils and Local Government, Inland Revenue Department, Sri Lanka Customs Department, Colombo Municipal Council, Department of Immigra�on and Emigra�on, Central environmental Authority, Forest Conserva�on Department, Urban Development Authority, Na�onal Water Supply and Drainage Board, Ceylon Electricity Board, Sri Lanka Land Reclama�on & Development Corpora�on, Import & Export Control Department, Land Commissioner General’s Department, Department of Registrar of Companies.

13

A.4. PUBLIC PROCUREMENT AND STATE-OWNED ENTERPRISES (SOEs) Inefficient procurement regula�on leads to substan�al losses of public funds. Government procurement of most goods and services in Sri Lanka is primarily undertaken through a public tender process. Some tenders are open only to registered suppliers. Procurement has also occurred outside the normal compe��ve tender process. There are widespread concerns about the lack of transparency and accountability in the tender process. Tender specifica�ons are o�en developed to suit a par�cular company. Even on occasions when a company wins a tender, the contract can be canceled on a technicality, o�en at the urging of a compe�tor. The prac�ce of accep�ng unsolicited proposals without compe�ng bids con�nues and there is a lack of clarity in the government procurement process which leads to reports of large-scale corrup�on.

Sri Lanka is not a signatory to the Agreement on Government Procurement (GPA)20 and only had observer status for years. As a result, western companies are very reluctant to par�cipate in tendering processes. Furthermore, the uncertainty is increased by ad-hoc regula�ons in public procurement, e.g. in the construc�on sector, foreign companies are no longer allowed to par�cipate in tenders of up to LKR 600 million.

SOEs are likely to remain a crucial part of a country’s socioeconomic and poli�cal landscape. The pivotal role SOEs play in a country’s development trajectory emphasizes the need to ensure that they deliver effec�vely on a range of outcomes—efficiency, fiscal, and distribu�onal.

As an example reported during the interviews, the electricity sector is mainly controlled by a state en�ty, the Ceylon Electricity Board (CEB), which is responsible for genera�ng, transmi�ng, distribu�ng, and marke�ng electrical energy in Sri Lanka. It is the only licensee for electricity transmission and also generates most of the power in the country. It was established pursuant to the Ceylon Electricity Board (CEB) Act No. 17 of 1969. In 1983, the Lanka Electricity Company (Private) Limited (LECO) was created under the CEB and Ministry of Power and Renewable Energy in order to acquire the assets of local authori�es to create a comprehensive electricity distribu�on network 21.

The sector is regulated by the Public U�li�es Commission of Sri Lanka (PUCSL), which operates pursuant to the Public U�li�es Commission of Sri Lanka Act No. 35 of 2002, and the Sri Lanka Electricity Act No. 20 of 2009 and its amendments. Its main role is performing licensing, regulatory and inspec�on func�ons for the sector, including regula�ng tariffs and media�ng disputes. All these bodies operate under the State. The private sector is involved in the opera�on of some thermal (oil) power plants and the renewable sector.

The electricity sector is guided by the 2009 General Policy Guidelines on the Electricity Industry for the Public U�li�es Commission of Sri Lanka. The guidelines give high priority to: improving access to electricity by households in rural areas; fuel diversity and security; electricity tariffs that are supplied to all categories of consumers at reasonable prices; ensuring adequate and effec�ve genera�on, transmission, and distribu�on systems; and energy conserva�on and safety issues.

Developments during the review period mainly involved establishing new power genera�on facili�es pursuant to the CEB's Long-Term Genera�on Expansion Plan (2013–32). Compe��ve bidding was also introduced for the state enterprises in the sector.

20

The Agreement on Government Procurement (GPA) is a plurilateral agreement under the auspices of the World Trade Organiza�on (WTO) which regulates the procurement of goods and services by the public authori�es of the par�es to the agreement, based on the principles of openness, transparency and non-discrimina�on.

21 Central Bank of Sri Lanka (2020): Annual report

14

In recent years, electricity tariffs, as set by the PUCSL, were o�en not sufficient to cover the cost of electricity produc�on. However, this was influenced by the price of oil, and fluctuates accordingly. In 2014, there was an Rs 5 billion loss, whereas in 2015 there was a similar gain.

SOE reforms implemented across countries vary significantly—there is no onesize-fits-all approach.

An SOE reform program should commence with a comprehensive performance review by a government commission or agency to list the SOE’s resources and assets, determine the financial standing of the SOE, and evaluate its past performance in terms of mee�ng its financial and development objec�ves.

The results should be used as inputs in designing an effec�ve strategy for reform, which in turn should spell out a clear vision of the SOE’s role in na�onal development, mission, objec�ves, and performance targets.

As successful de-regula�on reform strategies for state-owned enterprises (SOEs) in other countries have shown, three key elements are essen�al22: 





22

Transform the role of the state from an operator to investor. The role is being transformed to allow for greater private sector par�cipa�on in SOEs. This entails allowing for a spectrum of ownership structures, including cross-share holdings, public lis�ng, etc.).

Classify SOEs into broad categories with specific ownership structures, reform plans, and assessment criteria. The categories iden�fied include (1) commercial strategic SOEs, such as telecommunica�on and energy, where the state will remain the major shareholder and the SOE will be tasked to support the country’s na�onal strategies such as “going global” and “crea�ng champions”; (2) commercial nonstrategic SOEs that will compete directly with the market; and (3) SOEs with social obliga�ons to improve the provision of public services.

Restructure or expedite the closure of nonviable SOEs, including their subsidiaries and local SOEs, to cut aggregate losses.

Asian Development Bank (ADB) (2017): The Sri Lankan Economy – Char�ng a new course

15

A.5. LABOUR MARKET REGULATIONS Employment laws and labour regula�ons are vital to worker well-being. At the same �me, firms should also be free to conduct their business in the most efficient way possible. When labor regula�on is too cumbersome for the private sector, economies experience higher unemployment most pronounced among youth and female workers. With fewer formal job opportuni�es, workers turn to the informal sector. Flexible labor regula�on provides workers with the opportunity to choose their jobs and working hours more freely, which in turn increases labor force par�cipa�on.

Governments face the challenge of striking a balance between worker protec�on and labor market flexibility.

Although the Sri Lankan labor force is the most educated in South Asia, with the highest literacy rates and the highest pre-ter�ary enrollment and comple�on rates, the job-specific skills supply is trailing. Few workers have the technical skills a modern compe��ve economy requires, such as computer knowledge and English. Moreover, the educa�on and training system does not do much to shape so� skills, which are also in high demand for a wide range of occupa�ons 23.

In fact, Sri Lanka has the second-highest redundancy cost in the world24. Gratuity payments, contribu�ons to the Employees’ Provident Fund, Sri Lanka’s social security scheme, and the Employees’ Trust Fund, and generous paid leave and holidays add to the labor cost borne by the employer.

Mul�ple and overlapping types of coverage for workers owing to different regula�ons create a complex opera�ng environment for firms, making compliance costly. As a result, compliance tends to be incomplete, even for larger firms. Enforcement is generally weak due to manpower shortages in enforcing agencies, and the many lines of enforcement render the exis�ng ins�tu�ons inefficient and ineffec�ve, while the labor dispute se�lement system can lead to lengthy and costly processes.

Businesses need flexibility in hiring. Using a fixed-term contract, an employer can hire a worker for a specific period of �me. These contracts afford employers the flexibility to respond quickly to changes during the course of their opera�ons, temporarily subs�tute workers on leave, and reduce the risk of new business ventures. Fixed-term contracts can be cri�cal to boos�ng youth employment by ac�ng as a channel for youth to gain work experience.

There is a clear need for reforms to achieve labor market flexibility by repealing restric�ons set by the Industrial Dispute Act and the Termina�on of Employment of Workers Act (TEWA), which regulates dismissal condi�ons and compensa�on. TEWA has been long cri�cized for making it difficult and expensive to dismiss employees.

The amount of the TEWA-regulated compensa�on payable upon separa�on presents a heavy financial burden to employers. The compensa�on is mainly a func�on of the worker’s tenure. The basis for the current formula, which dates from 2005 a�er several a�empts at reform, reduces the arbitrariness of the compensa�on level. Under this system, a worker with two years of service would be en�tled to a separa�on payment equivalent to five months of salary, while a worker with 25 years of service would be en�tled to 43.5 months of salary. How does this compare with other countries?

The World Bank’s (2017) Doing Business report, which presents interna�onally comparable measures of redundancy costs, shows that Sri Lanka ranks second from the top, a�er Sierra Leone, making it one of the costliest and most restric�ve countries in the world to dismiss a worker.

23 24

World Bank (2014): Building the Skills for Economic Growth and Compe��veness in Sri Lanka World Bank (2020): Informality, Job Quality, and Welfare in Sri Lanka

16

The difficul�es and costs associated with dismissals under TEWA discourage formal employment.

The biggest impediment imposed by TEWA is that an employer is unable to dismiss an employee, except for serious disciplinary infrac�ons, without prior wri�en consent by the employee or prior wri�en approval by the Labour Commissioner. In prac�ce, this provision makes it very difficult a nd very expensive to restructure a firm’s workforce in response to changes in market condi�ons. This provision has been cri�cized for a long �me for discouraging private sector investments. The Investment Policy Review of Sri Lanka, prepared by the United Na�ons Conference on Trade and Development, called this provision “an inappropriate imposi�on on private investors to make their staff retrenchment decisions dependent on government approval”25. Following this review, the TEWA was subsequently amended to remove the Labour Commissioner’s discre�on to decide compensa�on on a case-by-case basis; but other provisions remain in place, including the requirement to seek approval for the nondisciplinary termina�on of even one employee.

Another very relevant issue adressed by private sector companies in the interviews is formalising the administra�ve relaxa�on to permit the working of a 5 day work week - a ma�er that has been pending for more than a decade. For example, a large number of the companies involved in the apparel manufacturing trade have been prac�cing a 5-day week for over 15 years. To do this however, an “administra�ve relaxa�on” needs to be obtained from the Commissioner General of Labour. Prac�cally this is a lengthy process with ad hoc condi�ons being included and the approval period varying from three to twelve months.

The objec�ve and the benefits of opera�ng a 5-day week are:   



The 5 and ½ hours that are usually worked on Saturday are spread over Monday to Friday – i.e., 9-hour working day (an employee works ½ hour less per week).

Employees are benefited by not having to work on Saturday and thus a be�er work-life balance.

Even in case if a company wants its employees to work on a Saturday, it will be only for the employees who are willing to work on Saturday and they are paid over�me at a rate of 1.5 �mes.

Employers too benefit due to the reduced overhead expenses.

Therefore, a formal mechanism should be established for this approval, covering employees under both the Factories Ordinance and the Shop & Office through a legal mechanism going beyond the administra�ve arrangement.

To make formaliza�on more a�rac�ve, the following components are suggested in line with recommenda�ons from the interna�onal literature. They respond to the diverse characteris�cs and causes of informality, as well as to interrelated issues such as inferior job quality, lack of social protec�on, and low produc�vity (all of which require investment in human capital and access to credit and technology): 



25

Increase flexibility in labor markets and quality of jobs by reducing labor taxes and simplifying compliance. Labor costs, especially those associated with dismissal, are high, effec�vely reducing the demand for formal labor. TEWA was introduced during a �me when the economic and social environment was dras�cally different from today, and it needs to be reconsidered so firms can adjust their workforce in response to worker produc�vity and changing market condi�ons.

Build an adequate and effec�ve social protec�on system. The ETF contribu�ons could be converted into an unemployment insurance fund to serve the ETF’s original intended purpose.

UNCTAD (United Na�ons Conference on Trade and Development). 2004. Investment Policy Review of Sri Lanka.

17



Increased flexibility for workers, firms, and markets to adjust to changes in broader economic condi�ons, combined with an effec�ve social protec�on system, will lead to greater economic growth.

Streamline regula�ons while strengthening monitoring. Strengthening monitoring alone could lead to more informality (as firms might more ac�vely try to conceal unlawful employment); it could also drive higher unemployment and even smaller firms. At the same �me, leveling the playing field is important — e.g. enforcement ac�vi�es should extend to both formal and informal firms. (The la�er are currently not covered by such ac�vi�es.) These reforms can be achieved in the short run.

A.6. FISCAL POLICY AND TAXES At the beginning of 2020, as domes�c economic ac�vity started to show early responses to the policy measures taken to revive the economy and improving business sen�ments a�er the Easter Sunday a�acks, the outbreak of the COVID-19 pandemic, the containment measures adopted by all countries including Sri Lanka, and the resultant projected contrac�on in the global economy, triggered further uncertain�es regarding the country’s economic performance. In the near term, the economy is likely to be impacted severely in terms of its growth, fiscal, external, and financial sector performance, while causing hardships to all stakeholders of the economy.

Despite the temporary setback posed by the pandemic, appropriate growth suppor�ve reforms to address longstanding structural issues and enhance domes�c produc�on, improve export orienta�on, a�ract foreign direct investment (FDI), facilitate innova�on, improve factor produc�vity and efficiency, and improve policy buffers, if implemented without delay, would enable Sri Lanka to realise the desired outcome of achieving sustained and equitable economic growth and becoming a prosperous na�on in the period ahead26.

To achieve this goal, it is important to remove certain exis�ng distor�ons in the Inland Revenue Law that are substan�ally hindering business expansions: 

26

Dividends declared out of profit derived from Exports: In terms of the provisions of the Income Tax Act No. 24 of 2017, the dividends declared out of profit derived from exports are presently taxed at 14% in the hands of the recipient resident corporate shareholders and at 18% in the hands of the resident individual shareholders while dividends declared in favor of nonresident shareholders both corporate and individuals are exempted. This is a clear anomaly which need to be corrected for resident shareholders.

Central Bank of Sri Lanka (2020): Annual report

18











Enhanced Capital Allowances (Second and Sixth Schedules): In terms of the provisions of the Income Tax Act No. 24 of 2017, the Enhanced Capital Allowances, i.e. 100%, 150% and 200% are presently permi�ed only for New Businesses and not for expansion of exis�ng businesses; we cannot comprehend the ra�onale of this provision. It is suggested to extend the Enhanced Capital Allowances to the business expansions of exis�ng businesses as well.

Off-Shore Business: Income and profit arising out of Off-Shore business where goods are procured from one country or manufactured in one country and shipped to another country without bringing the same into Sri Lanka, is subject to 14% income tax. It is necessary to emphasize the fact that there is no necessity for companies to undertake, record or to bring in the total proceeds to this country and but can easily loaded them in tax advantageous des�na�ons such as Singapore, Dubai Hong Kong, etc. Thus, in order to encourage carrying on of these transac�ons in Sri Lanka and suppor�ng the full transfer of the export proceeds so generated out of offshore businesses to Sri Lanka, gains and income arising out of such ac�vi�es should be exempted from income tax if such proceeds are transferred through the domes�c banking system.

Supply of Goods to Indirect Exporters: Manufacturing and supplying of fabric and accessories to indirect apparel manufacturers who supply finished garments to direct exporters are liable to income tax at 24%, at present. Sri Lanka is aspiring to be a country engage in industrial development where compe��ve import subs�tu�on is taking the pride of place. However if such company is supplying its products to a yet another supplier of goods to another exporter such sale will attract 24% income tax on profit. To improve this, the concessionary rate of income tax at 14% given for direct and indirect exporters needs to be extended to the exportoriented raw material/intermediate goods manufacturers in the third layer of the export supply chain in view of the foreign currency earnings/savings.

Mergers / Amalgama�ons / Acquisi�ons / Sale / Transfer / Disposal of Business Assets: The growth poten�al of businesses in Sri Lanka, by way of capital forma�ons has permanently been crippled due to the excessive tax burden at 24% computed on the capital gain on business assets, based on its historical cost. A concept introduced very recently, whereas the capital gain on investment assets is calculated at 10% based on its value as at 30.09.2017. This tax burden has virtually suspended the restructuring that is required for survival, expansion or right sizing etc. Hence, it is recommended to extend the similar treatments by defining the market value of the business assets as at 30.09.2017 as the cost for the purpose of calcula�on of business gain and the 10% concessionary income tax rates for such business gains.

Elimina�on of WHT Deduc�ons on Outward Remi�ances of Off-Shore Business Expenses.

Off-Shore Businesses are not defined or recognized at present in the respec�ve WHT Tax Provisions in Sri Lanka. The Outward Remi�ances of Off-Shore Business Expenses are facilitated by the Banks only on the Tax Direc�ons of the Department of Inland Revenue. It is recommended to relieve the below listed Outward Remi�ances of Off-Shore Business Expenses from the WHT burden in Sri Lanka: o Payments from Sri Lanka for sourcing of RM from overseas suppliers to the overseas manufacturing territories Ex. Sourcing of RM from China to India, etc. o Payments from Sri Lanka for Purchase of Finished Goods from one country for expor�ng to another Country without bringing such goods into Sri Lanka. o The Outward Remi�ances of Sub-Contract Manufacturing Charges [CM Charges] to Overseas manufacturers.

Due to lack of understanding of these new offshore subcontrac�ng businesses, serious difficul�es in gaining direc�on to exempt occurs. Hence the above request is made. This mode is in fact the new mode of knowledge-based exports industry is currently developing.

19



Eliminate 18% Income Tax Risk on VRS Payments: It is recommended to exempt the 18% income tax burden on the compensa�ons received on loss of the employments, by the Employees, placing the VRS Compensa�ons at par with EPF. It is really astonishing that a 18% tax is imposed on somebody who is losing his job.

Furthermore, the following issues and distor�ons of VAT Law should be removed: 





Deferred VAT on imports in respect of apparel exporters: VAT on importa�on of capital items, consumables etc., which is presently deferred by Director General of Customs (DGC), to be considered as “Excluded VAT” at par with fabric imports under the first Proviso to Sub Sec�on 3 of Sec�on 2 of the Value Added Tax Act No. 14 of 2002, as amended.

Deferred VAT – Deferred VAT is defined under the Second Proviso to the Sub Sec�on 3 of the Sec�on 2 of the VAT Act. It is a facility offered mainly to exporters under which VAT liabili�es on importa�on of ar�cles are deferred by the DGC for 60 days. Accordingly VAT on importa�on of machinery, spare parts, accessories and raw materials (other than fabric) is deferred by the DGC for 60 Days, in case of an exporter. As per the present VAT prac�ces, this liability is nullified only on submission of IMPORT CREDIT VOUCHERS issued by the Department of Inland Revenue in this regard. Also the DGC could demand this liability at any �me a�er 60 days, if such liabili�es are not cleared through DIR Import Credit Vouchers.

VAT Risk on Exporters: the success of this system totally depends on the Import Credit Voucher System of the DIR. At present, the Exporters are experiencing major delays in obtaining Credit Vouchers from the DIR. Moreover, Credit Vouchers from the year 2015 are s�ll at pending stage. The risk is that this liability ini�ally appears as a NOTIONAL LIABILITY at the �me of importa�on thus it is not recognized in the books of accounts of exporters. Due to the delays on issuing Credit Vouchers this Liability to the Government is ge�ng accumulated and ac�vated off the books and it is unno�ced to the Directors and the Management.

Exporters at present are recording substan�al VAT liabili�es to the DGC on their imports.

It is proposed to offer “Excluded VAT or NO VAT” status for importa�on of Machinery, Spare Parts, Accessories and Raw Materials in respect of Exporters. This would not impact the revenue posi�on of the Government, as the exporters are relieved from the burden of VAT, fully. On the other hand, this may be a revenue favorable proposal in the event when such exporters records Output which is subject to VAT. The VAT and SVAT systems are administered at present in Electronic form through RAMIS by the Department of Inland Revenue. All VAT and SVAT Returns and schedules are submi�ed online. To further enhance the effec�veness of the System, by capitalizing the advance Tax Administra�on features of RAMIS, it is suggested to permit Taxpayers to maintain all VAT and SVAT records/ documents in electronic form as item 18 of the record keeping regula�ons (Extraordinary Gaze�e No�fica�on No. 2042/21, dated 26.10.2017) permits keeping records on so� form.

Instead of improving doing business in Sri Lanka and inspite of the challenges, privat sector companies currently are struggling with during the COVID-pandemic, the government imposes new regula�ons which further paralyzes doing business: 

27

On January, 25th, 2021, Central Bank of Sri Lanka issued a direc�on27 to all commercial banks to refrain from entering into forward contracts of foreign exchange for a period of three months with immediate effect. The temporary suspension of hedging instruments – like forward contrac�ng and swaps – un�l April, 25th, 2021, has a massive nega�ve impact for private companies and banks in doing business in Sri Lanka. As an effect, all client oreign

Central Bank of Sri Lanka, Banking Act Direc�on No. 2 of 2021

20





exchange exposures that were unhedged as of close of business 25th Jan were vulnerable to market fluctua�on un�l maturity. Moreover, there is no clear ruling on how to treat extension of maturing forward contracts.

On February, 18th, 2021, the Central Bank of Sri Lanka issued the „Repatria�on of Export Proceeds into Sri Lanka Rules No. 1 of 202128“ which obliges every exporter of goods, immediately upon the reciept of export proceeds into Sri Lanka, to convert twenty five per centum (25%) from and out of the total of the exports proceeds received in Sri Lanka into Sri Lanka Rupees, through a Licensed bank. The requirement shall con�nue, un�l any other percentage as may be determined by the Monetary Board, from �me to �me.

As part of the enforcement of the import restric�ons, payment obliga�ons from confirmed irrevocable le�ers of credit were not fulfilled despite the "compliant presenta�on of documents" confirmed by Sri Lankan banks with reference to the import restric�ons. This is a clear viola�on of the ICC's UCP-60029

B. Sector-Specific Issues of Regula�on B.1. APPAREL AND TEXTILE SECTOR A�er the Mul� Fiber Arrangement (MFA) in 2004 expired, the Sri Lankan apparel industry has se�led into a smaller core of firms, which are presumably well prepared to take advantage of changing future demand. A number of Sri Lankan apparel firms are now global players with produc�on bases in several countries, and Colombo is now considered South Asia’s apparel technology hub. The remarkable resilience of Sri Lankan apparel exports to the MFA aboli�on under these constraints has been underpinned by a clear pa�ern of composi�onal shi� in the exports, from “basic apparel” to “fashion-basic apparel”.

Sri Lanka‘s apparel sector represents 47% of Sri Lanka’s exports. The Covid-19 pandemic currently has taken a heavy toll on the Sri Lankan economy and the major issues faced by the sector were: cash shortages, worker absenteeism, mobility issues, scarcity of raw material, increased cost of produc�on, and loss in demand. The second wave worsened an already difficult situa�on.

28 29

The Gaze�e Extraordinary, No. 2215/39, February, 18th, 2021

The Uniform Customs & Prac�ce for Documentary Credits (UCP 600) is a set of rules agreed by the Interna�onal Chamber of Commerce, which apply to finance ins�tu�ons which issue Le�ers of Credit – financial instruments helping companies finance trade. Many banks and lenders are subject to this regula�on, which aims to standardise interna�onal trade, reduce the risks of trading goods and services, and govern trade.

21

Dispite the current COVID-crisis, very recently Customs has commenced inves�ga�ng apparel companies on the basis of disparity in the export performance using the concept of mismatching weight of imported fabric with that of the weight of the exported garments. In most of the cases, they are now focusing on the wastage and various interpreta�ons are given. While there of course is no objec�on for Customs to inves�gate any company that is engaging in fraudulent ac�vi�es, it is very disturbing that under wrong assump�ons the companies are being taken to task. Threatening to use provisions under 127 of the Customs Ordinance is a common phenomenon in order to obtain informa�on from the staff of the factories. The staff is being frightened on that basis and kept for hours and hours under the guise of interroga�on.

Therefore, this mechanism should be revisited on the following basis: 





Customs is having on real �me basis export values and import values of any company. If the value of goods exported in fact at least represents 120% of the value of the raw materials imported, there shall be no grounds for an inves�ga�on to take place.

Addi�onally, under the Import Control Act, companies are now being asked to submit the receipt of export proceeds on a quarterly basis which also can be had by the Customs through the BOI in rela�on to BOI companies. Given the availability of this data collected and given by the companies, a clear picture can be obtained as to whether companies are misusing their duty free imports.

In the event any customs officer feels that the performance of any company is below the s�pulated value, the concerned officer shall obtain approval of the Addi�onal Director General or Director General of Customs before proceeding to raid a company.

Currently the weekly holiday under the Wages Board for the Garment Manufacturing Trade is fixed as Sunday. In order to allow the industry to be flexible and to facilitate 24 x 7 shi� opera�ons, it is proposed that the Wages Board decision is amended to allow the weekly holiday to be taken on any one day in the week, as mutually agreed by the employer and employee, as provided for in other Wages Boards.

Currently the Na�onal Minimum Wage, and the Minimum Wages payable under the Wages Board Acts are based on employees working a maximum of 45.5 hours over a 5.5 day working week. Whilst there is nothing preven�ng a company offering an employee work on the basis of less than the minimum 45.5 hours per week, the payment of salary has to be according to the minimums specified in the Na�onal Minimum Wage / Wages Board Acts. There are however a number of instances where employees would prefer to offer their services, and similarly employers would want to obtain services on a part �me basis where employees work less than 45.5 hours a week, and less than 5.5 days a week.

The inability to do this results in sub op�mal situa�ons where people are employed through manpower agencies and/or on contract basis. It is therefore proposed that the relevant acts be amended to permit part �me employment, and wages be paid accordingly on a pro rata basis, and that this arrangement be permissible under the Wages Board and Shop and Office Employees Acts.

In the case of termina�on of employment on non-disciplinary grounds (eg retrenchment), even where companies are willing to pay as a minimum, the amount of compensa�on required under the Termina�on of Employment of Workmen (Special Provisions Act), it is required that approval be obtained from the Commissioner General of Labour. As the company is paying at least the amount specified under the Act, this should be permissible without the requirement for approval of the CGL. The current process for the submission and receipt of claims under both EPF and ETF are lengthy and unnecessarily complex. Therefore the op�on should be available for these claims to be submi�ed electronically to allow for quicker processing and release of funds to employees.

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B.2. HEALTHCARE SECTOR AND PHARMACEUTICALS Sri Lanka’s Pharmaceu�cal Market is divided into two groups, i.e. Regulated and Semi Regulated markets. Regulated market includes US, EU, Japan, Canada, Australia etc. Sri Lanka is classified under semi regulated market with other emerging markets. Emerging market consists of mainly the countries from Asia pacific, La�n America, Africa and Gulf countries. These countries are differing in their region and in many other aspects as regula�on of Pharmaceu�cals, using different guidelines for registra�on, registra�on fees, requirements to maintain registra�on, dura�on of registra�on patent regula�on and legisla�on for the drug.

In Sri Lanka though there is rising demand for pharmaceu�cals and medical devices especially of chronic nature, however due to slow progress of Government health care programs and local currency’s devalua�on, imports of Pharma products are slightly behind the demand supply ra�o.

Despite ongoing government efforts to boost local pharmaceu�cal manufacturing capacity, its assumed Sri Lanka will con�nue to rely on imports to meet its domes�c demand for medicines.

Approximately 90% of its pharmaceu�cal and medical device needs are met from imported products.

In fact, the local drug industry remains underdeveloped and pharmaceu�cal foreign investment in the country may remain subdued in the near term. Thus, Sri Lanka is likely to observe an increase in drug imports over the next five years, especially to meet the demand for more advanced treatments.

Registering of new drugs manufactured in and imported to Sri Lanka need registra�on with the Na�onal Medicinal Regulatory Authority (NMRA) for manufacturing, importa�on, distribu�on, storage, adver�sing and sale in the country. The Cosme�cs, Devices & Drugs (CDD) Act 1980 is the legisla�ve framework which provides the legal authority to regulate Cosme�cs, Devices & Drugs in Sri Lanka. According to the act Cosme�cs, Devices and Drug Regulatory Authority was formed and the registra�on authority was named as Medical Technology and Supplies Department. This act was revised in 2015 and therea�er, NMRA was established, incorpora�ng Na�onal Medicinal Quality Assurance Laboratory to Medical Technology and Supplies Department30. It is the authority responsible for Drugs, Devices and Borderline products in the country. According to new act, NMRA has the authority even to control the price and availability.

NMRA currently is in the process of prepara�on of robust regulatory and control efforts to approve only the drugs with the highest quality, safety and efficacy for registra�on. However, underdeveloped guidelines, lack of transparency, non-interference of foreign pharmaceu�cal firms for policy making, shortage of staff, inadequate capacity of the NMQAL, deficiencies of analysis of manufacturing process and quality of drugs, unavailability of research to make evidence-based decisions have hindered the effec�veness of new drug registra�on process in NMRA. Therefore, responsible authori�es need to pay more a�en�on on and a�end to find solu�ons for the ident ified issues to adopt best regulatory prac�ces in the country.

Concerning NRMA, the following key issues are currently impeding doing business in this sector in Sri Lanka from the perspec�v of private sector companies:

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There are several divisions in NMRA; Drug Regulatory Division; Medical Devices Regulatory Division; Borderline products Regulatory Division; Law Enforcement Division; Clinical Trial Regulatory Division; Pharmacovigilance Regulatory Division and Adver�sement Division.

All these sectors work in coordina�on to fulfil their du�es including Drug registra�on.

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B.2.1. Uncertainty and Ambigui�es in Regula�ons and Policies 

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Generic products registra�ons: Sri Lanka's regulatory environment is likely to remain unfavourable for foreign pharmaceu�cal firms. While the affordability of medicines was a key focus of the country's Na�onal Medicinal Drug, Devices and Cosme�c Authority bill (passed in March 2015), it also has provisions that disadvantage companies impor�ng products into the country. Sec�on 116 (2) of the na�onal medicine policy states that the Manufacturing Regional Division can advise the authori�es to restrict the import of products which are sufficiently supplied by local manufacturers. There are instances where second generic product applica�on for one molecule has been rejected. In another similar example, 4th application of generic product registra�on is rejected ci�ng reason that market does not require any addi�onal generic product. There is no consistent policy and these examples lead to so much uncertainty in product registra�on.

Transparency and Stakeholder Consulta�on: While any new regula�on is introduced in Sri Lanka, there is no or very limited stakeholder consulta�on. Even if it happens for any challenges, it happens post implementa�on of these revised regula�on/guidelines.

NMRA responsibili�es: This has observed in many situa�ons, NMRA is responsible for many ac�vi�es which should not be ideally covered in country drug/medical/food regulatory authority. Ma�ers related to company registra�on etc. should be handled by appropriate department in govt organiza�on and not through NMRA. Regula�ons are s�ll not formulated and implemented according to the revised act of 2015 of CDD which has limited its implementa�on.

Limited number of Pharmacist (only less than 25 regulatory pharmacists currently working for NMRA): Considering the amount of work, there are only few pharmacists working in NMRA and this number is not enough for the workload resul�ng in substandard quality of evalua�ons.

When NMRA increased the regulatory fees (they are charging in US-$) by exorbitant rate, Heads of NMRA assured private sector to invest this money to recruit adequate staff and to improve the systems – which currently did not take place.

Lack of formal pre-submission mee�ngs or scien�fic advice.

Samples are not checked for quality in the NMQAL in Sri Lanka due to lack of reagent and staff inadequacy and instead NMRA relies on the report issued by a laboratory in the country of manufacturing firm.

Lack of harmoniza�on in regulatory requirements

B.2.2. Opera�onal Challenges 

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As per earlier provision, every Wednesday 2 pharmacists had been allocated to discuss the rou�ne problems. This has been abruptly stopped and even there is no formal mechanism to discuss regulatory challenges with NMRA staff or CEO. There are many files allocated to the pharmacists who have been transferred and these files are not reallocated and not available for private sector to follow.

New files are not being evaluated by NMRA. Some dossiers were filed in 2017 and as a result of that, pa�ents will not receive the products designed with latest technology/sciences.

It’s very o�en submi�ed le�er and regulatory dossier to the NMRA have been misplaced .

This led to loss of trust for MNC companies as dossier has lot of trade secret informa�on. No one is aware where these dossiers are kept in NMRA office.

It is not possible to meet officers physically nor to contact them by phones as well.

There are pending approvals for varia�ons submi�ed either with renewal or submi�ed for varia�on approval such as shelf–reduc�on, change of pack size, change of the manufacturer 24

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without changing physical site etc. Due to the unavailability of renewal approvals or approval for varia�on, private sector is forced to apply for shipment approvals, but ‘Special Approvals’ are pending for a long �me.

No �melines have been defined for Electronic-submi�ed applica�ons to receive 1st feedback/payment le�er. Some were submi�ed more than 6 months back, but they are pending for a long �me.

S�ll certain site registra�ons are pending. Due to NMRA delay of receiving approval, private sector companies miss the renewal dossier submission deadlines. This is applicable for both drugs and devices.

Permission to import reduced shelf life was expired on 31.12.2020. As a result, when remaining shelf life is less than 75% companies are unable to clear it from customs. (Even paying the penalty). During the pandemic with great difficulty, companies secure products for Sri Lanka.

In eNMRA portal, for sites which are already registered in manual system has to be reapplied.

Despite mul�ple follow up, many company profiles have not been approved by the NMRA. This has resulted in temporary stop of new products registra�on imported through these sites and even renewal applica�on can’t be applied �mely.

No appeal commi�ee or provision is available for complaints or escala�on any pending issues.

Limited space for Dossiers: There is very limited space for storage of dossiers in progress even though the completed ones are stored in two other separate stores. This can lead to undue distress among employees for efficient work.

There is no proper guideline for the evalua�on of Drugs/Devices. Dossier evalua�on is more of evaluator specific and no consistency in terms of expecta�ons of dossier.

B.2.3. Trade, Customs and Import Control:  

Certain devices that are registered with NMRA are subject to VAT. Companies have already approached Customs and currently discussions are going on to get a VAT waiver.

During the pandemic, companies are managing stocks for Sri Lanka with great difficulty. Due to quan�tys are small in Sri Lanka, private sector supply stocks with common packs that are shared with the rest of countries as formula�ons, packing and requirements on the packs are same. Therefore some �mes companies will receive certain shipments with less than 75% remaining shelf life. Import control requirement is to import stocks with above 75% remaining shelf life on arrival. When companies import less than 75%, import control charge penalty and these penal�es going up to 10% on CIF.

In order to improve this situa�on and to remove the exis�ng obstacles, it could be helpful to learn from lessons iden�fied of other regulators in this sector. Examples from other countries could be used as best prac�ce:       

Stakeholder Consulta�ons for any new regula�ons/guidelines, and proper feedback mechanism Very robust implementa�on of regula�ons including electronic submission Quarterly mee�ng with trade associa�ons Proper �me management as the registra�on and company success depends upon the �me taken by product to reach the market first Know and be compliant with na�onal requirements.

Health authority rela�onships cri�cal, local talent important.

Training programme and incen�ves for agency staff.

Frequent and early communica�on with Health Authori�es.

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Early integra�on of emerging market strategy into development plans and integra�on of regional requirements into a global regulatory plan.

Be the first with a product for an unmet medical indica�on and proper invest in the region.

B.3. FINANCIAL AND INSURANCE SERVICES At present, all foreign banks in Sri Lanka operate as branches. All banks opera�ng in Sri Lanka, including foreign banks are required to establish two branches outside the Western Province for each new branch established in the Western Province. The Central Bank also requires all banks opera�ng in Sri Lanka to direct a minimum 10 percent of lending for agriculture.

Only companies incorporated in Sri Lanka may be registered to carry on the business as an insurer.

Foreign insurance companies that provide health insurance services to Sri Lankans must sell through an insurance broker registered in Sri Lanka and are restricted to insurance products not sold by local insurance companies. The Sri Lankan government requires all general insurance companies to cede 20 percent of their reinsurance coverage to a state-run insurance fund.

B.4. TOURISM Sri Lanka's 2005 Tourism Act provides the main legal framework for the sector. There are also several regula�ons in place that provide minimum requirements for registra�on, licensing, and fees for certain tourism ac�vi�es including tourist water sports establishments, tourist diving centres/schools/ establishments, tourist shops, spice garden shops, tourist guest houses, and tourist restaurants.31 The regula�ons generally provide minimum requirements for the provision of the service but do not discriminate regarding who may provide the service.

Tourist hotels in Sri Lanka are required to be classified pursuant to the Tourist Act Regula�ons (Tourist Hotels Code 2010), following a 5-star tourist hotel ranking system32. According to the authori�es, pursuant to the most recently updated classifica�on system of April 2016, the ranking system is based on interna�onal standards. The ranking of tourist hotels is based on a set of mandatory requirements for each star level and a minimum number of points based on another list of criteria. To operate a tourist hotel in Sri Lanka, registra�on is necessary and based on compliance with minimum criteria in the Gaze�e of the Democra�c Socialist Republic of Sri Lanka; therea�er an annual licence is issued to operate a�er a control check.

In contrast to hotels, tourist restaurants do not have a classifica�on system and operate under the local authori�es. Licences need to be obtained to operate restaurants.

31 32

Gaze�e of 6 September 1999, No. 1096/6.

Gaze�e of 20 April 2016, No. 1968/28

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The Sri Lanka Tourism Development Authority (SLTDA) regulates and provides licences to travel agents, i.e. those that sell travel-related products and services, in par�cular package tours, business travel, etc. The main requirements are: a minimum paid-up capital of not less than Rs 500,000 for a limited liability company (LLC) or Rs 600,000 for a sole proprietorship; the sole proprietorship or majority shares of an LLC should be held by Sri Lankan ci�zens, although certain excep�ons may apply33; a current account at a Sri Lankan bank and a guarantee of not less than 10% of the paid-in capital; adequate business facili�es; employing a minimum of three professionally qualified staff; and employing tour guides that are trained and licensed by the SLTDA34. Licensing of tour guides and chauffeurs follows a�er a training course at the tourism training centre.

Travel agency licences for air travel are issued by the Civil Avia�on Authority (CAA) pursuant to the Air Naviga�on (Special Provisions) Act No. 55 of 1992. Any person, partnership, or company that is an air transport service provider must be issued such a licence to operate. There are two types of licences, "A" or "B" depending on the stated capital/capital contribu�on: Rs 500,000 or higher for type "A", and Rs 250,000 to Rs 500,000 for type "B", thus a minimum of Rs 250,000 is necessary to establish a travel agency in Sri Lanka. Other requirements for the licence are an appointment le�er from an airline or similar designa�ng the agent, two IATA/UFTAA qualified staff members, sufficient office space, business registra�on cer�ficate, and cer�fica�on le�er of bank guarantee if required35.

Pursuant to Sri Lanka's Tourism Development Strategy 2011-16, Sri Lanka planned to issue new regula�ons or guidelines to bring certain aspects of the tourism sector in line with interna�onal standards or best prac�ces. These include new regula�ons/guidelines on: adventure sports centres, apartment hotels, camping sites, cruise liners/luxury vessels, eco lodges, elephant safari, guest houses, heritage hotels, house boats, home stay units, bou�que hotels and villas, Ayurvedic hotels/centres, professional event organizers, restaurants, safari tours by vehicles, spa and wellness centres, spice gardens, tourist bungalows, tourist hotels, tourist shops, travel agencies, and whale and dolphin watching36. As of June 2016, these new regula�ons were in the process of being finalized.

The Government imposes price controls in the form of minimum room rates for star classed Colombo hotels in 201637. According to the authori�es, there are no other prices controls in the sector.

In order to a�ract investment into the sector, Sri Lanka has established a "One Stop Unit" (OSU) for na�onal investment in tourism. The Unit is a specialized unit set up under the Sri Lanka Tourism Development Authority which has specialized staff from various government agencies that coordinate ac�vi�es such as approvals, submi�ng applica�ons, obtaining licences, and iden�fying projects. The OSU provides fast-track government approvals, liaises with the BOI on incen�ve schemes, recommends visas, and coordinates building plan approvals38.

33 34

Sri Lanka Tourism Development Authority online informa�on

Sri Lanka Tourism Development Authority online informa�on. Viewed at: h�p://www.sltda.lk/sites/default/files/GuidelinesMINIMUM_REQUIREMENTS.pdf.

35 CAA online informa�on. Viewed at: h�p://www.caa.lk/index.php?op�on=com_content&view=ar�cle&id=492&Itemid=1078&lang=en.

36 37 38

Sri Lanka Tourism Development Authority online informa�on. Viewed at: h�p://www.sltda.lk/sites/ default/files/English.pdf.

Economynext online informa�on. Viewed at: h�p://www.economynext.com/news_details_print.php?id=4228.

Sri Lanka Tourism Development Authority online informa�on. Viewed at: h�p://www.sltda.lk/Tourism_Investment.

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Interna�onal Labour Organisa�on (ILO) (2015): The Skills Gap in Four Industrial Sectors in Sri Lanka Interna�onal Monetary Fund (IMF) (2016): Sri Lanka: IMF Country Report 16/150 Kalaipriya, J., Uthayakumar, S. (2019): The Rela�onship between Private Investment and Government Investment a�er Economic Liberaliza�on, Journal of Business Economics, 2019 Volume 01 Issue 01: 46-55 Mahinda Chintana (2010): Vision for the Future, Presiden�al Campaign 2010 OECD (2012): Measuring Regulatory Performance – The Economic Impact of Regulatory Policy – A Literature Review of Quan�ta�ve Evidence Rajapakshe, W. (2018): An Evalua�on of Four-Decade Experience of Industrial Policy in Sri Lanka: 19772017, Published by Human Resource Management Academic Research Society (www.hrmars.com) Transparency Interna�onal (2020): Corrup�on Percep�ons Index 2020.

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Author: Stefan Claus Beisswenger Dipl.-Volkswirt, Assessor des Verwaltungsdienstes Melanchthonstrasse 25 D-13467 Berlin Germany beisswenger@mi�elstand-interna�onal.com www.mi�elstand-interna�onal.com March 2021 30