Financial Times

Maximising on the World Bank rankings through process re-organisation and automation

By Mohan Mendis

On-line payments are possible today and the secured routing of supporting documents such as Shipping Notes is within our easy reach.

Newspapers recently gave publicity to the latest World Bank Report "Doing Business in 2009" released in September 2009 which comes out mid year, in the year previous to which it relates and with the very wide circulation in countries and organizations spread over the four quarters of the globe, looking to trade and do business with the developing world in the year following, these indicators, needless to say plays a big part in decision making.

This year not surprisingly Switzerland was placed in the highest position for overall ease of doing business, while four of the most difficult places to operate were the African countries viz. Burundi, The Central African Republic, Chad and Niger, The question we need to ask ourselves is, where do we want to be placed?

How we got there
This year Sri Lanka's overall ranking was enhanced more particularly for two significant achievements apart from our sustaining regional supremacy gained previously with respect to "Trading Across Borders". The Company Law Reform with the new Company Law becoming operational in 2007 and the vast strides in terms of good governance and modern concepts of corporate responsibility now incorporated as a consequence of the new law coming into operation, helped us to take this great leap forward.

The Credit Information Bureau (CRIB) was another positive development with information relating to creditworthiness becoming more current and accessible with an online system for uploading information, enabling quicker financial transactions. The recovery procedure for secured debt is made lender friendly in the new Company Law and the claims of secured creditors are no longer frozen when a company goes into liquidation.

Importance of transacting electronically
The purpose of this article however is more to highlight the window of opportunity that immediately exists. The importance of making Sri Lanka a Logistics and eBusiness hub in South Asia by improving on our rankings in terms of Trading Across Borders cannot be gain said. With our country entering into a period of more stable and safer conditions all round, the timing would be perfect to launch on initiatives such as e-commerce and governance in 2009, to optimize our gains.

Lanka best in the region for Cross Border Trading 2009
World Bank's Doing Business Report is a series of annual reports published each year by the World Bank, which investigates the regulations that enhance business activities and those that constrain it.
Doing Business presents quantitative indicators on Business regulations in 10 areas and the protection of property rights that can be compared across 178 economies. Significant to the rankings for this part of the World last year is that we are ahead of our neighbours.(Sri Lanka- 66th ,India-90th, Pakistan- 74th, Bangladesh-105th).

Starting a business, dealing with licenses, employing workers, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and closing businesses are all factors which are evaluated in arriving at the rankings. Hundred and Seventy-eight economies from Zimbabwe to Afghanistan are researched and compared on an annual basis. The report shows that Sri Lanka is well above the surrounding countries with respect to the majority of indicators.

The race is ongoing, no country can stay still. At the same time we cannot afford to be complacent and it is important to recognize that other countries have recently been more active than ourselves in regard to improving on reforms in this particular segment.

Azerbaijan amongst others for example, the top reformer worldwide recently, has jumped to a ranking in the thirties while being well behind us previously! Austria, Slovakia and Botswana have also taken enormous strides. In the previous year ie in the "Doing Business 2008 Report", our ranking for "TRADING ACROSS BORDERS" was 60th and we had leap frogged from 99th position in 2006 to that exalted rank in 2007 well ahead of all neighboring countries.

The number of documents involved, number of days, and cost are the key factors which enter into the reckoning. Despite the higher cost in 2007,our position was exalted based on reduction of documentation and time.

The previous year's report highlights the fact that Sri Lanka achieved that improved ranking mainly by introducing Electronic Data Interchange (EDI) where it became possible for Exporters/Importers to send Cusdecs electronically to Customs and other government agencies and consequently improving on cutting delays and paperwork.

The cost saving to Sri Lanka

  • Each day lost reduces the total volume of Sri Lanka's potential trade volume
  • By improving supply chain performance-simultaneous elimination of Port/Logistics delays
  • Efficiency can generate benefits equivalent to increasing GDP by nearly 0.5%
  • This equates to Rs 12 billion annually
  • Easing of traffic, security in the city centre is immeasurable What must be done
  • The process of moving ahead on enlarging the scope of electronic transacting appears to have slowed down and the reasons need to be examined on an urgent basis.
  • It is absolutely necessary for all government agencies to be re-organized and to ensure that related business processes are re-engineered to prepare the ground to transform the country to electronic transacting. Above all, a sense of urgency is needed which is yet conspicuous by its absence.
  • On-line payments are possible today and the secured routing of supporting documents such as Shipping Notes is within our easy reach.
  • A change of attitude and approach with a will to do it in the national interest is what is required.

There is perhaps a lacuna in not having a inter-ministerial steering committee with leadership from the highest levels to see this initiative through.
As an industry expert remarked recently the gains from this could be bigger than that from completing the Mahaveli.

Global Competitiveness Report 2008/2009 - Lankan private sector optimistic
The Sri Lankan private sector is optimistic amidst a deteriorating macroeconomic environment according to a World Economic Forum (WEF) Global Competitiveness Report for 2008/09 which places Sri Lanka at 132 out of 134 in terms of macroeconomic stability. The Report's findings show that Sri Lanka's overall ranking is 77 out of 134 countries in the world, down from last years ranking of 71 out of 131 countries. The rankings of almost all countries in the South Asian region have dropped in this latest report although Sri Lanka has improved in terms of innovation and business sophistication.

According to a press release from the Ceylon Chamber of Commerce (CCC), the Report found that labour market efficiency in Sri Lanka is the poorest performer in this index ranked at 115. The goods market efficiency seems to have improved considerably during the year with a ranking of 42 as opposed to 53 last year. However, Sri Lanka performed poorly on basic requirements and is ranked 92 this year, down from 85 the previous year. The basic requirements for competitiveness include institutions, infrastructure, macroeconomic stability, health and primary education.

According to the Report, the United States (US) still tops the world in competitiveness despite the economic slowdown and the financial crisis. The US is followed by Switzerland, Denmark, Sweden and Singapore. The US is ranked first in innovation and fourth in business sophistication. It remains the most efficient in the world, ranked first in efficiency enhancers. Despite the financial crisis, it ranked 9th on financial market sophistication but fares poorly in terms of soundness of banks with its ranking sliding to 40 from 26 last year.

The US also recorded its worst performance in terms of macroeconomic stability, being ranked 66 this year. In terms of government debt, the country is ranked 102.

China has further moved up in the competitiveness rankings to 30 this year from 34 last year and has made significant progress in terms of innovation and business sophistication, with the overall ranking moving to 32 from 50 last year. China has also improved in innovation, ranked 28 from 38 last year and has further made progress in business sophistication to 43 from 57 last year.

India's ranking has been declining over the past three years to 50, down from 48 the previous year and 42 the year before that. India has also declined in terms of basic requirements to 80 from 74. It also ranks 108 in terms of macroeconomic stability and its economy has been ranked 33 in terms of efficiency, down from 31 last year.

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