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Trade facilitation reform in Sri Lanka can drive a change in culture

Marcus Bartley Johns's picture

Two years ago, we started counting how many Sri Lankan agencies were involved in trade facilitation processes such as issuing permits and managing the movement of goods in and out of the country.  We counted at least 22 agencies in this assessment, and today, the Department of Commerce estimates that number at least 34 agencies are involved in issuing permits or publishing regulations that affect trade.
We know trade is critical to Sri Lanka’s future and that there are strong links between trade, economic growth and poverty reduction.

However, the trading community reports a lack of transparency, confusion around rules and regulations, poor coordination between various ministries and a dearth of critical infrastructure—you can see why trade has suffered in Sri Lanka.


When the World Bank evaluates a country’s performance in critical rankings like Doing Business, the ease of trading across borders is one of the benchmarks we consider. In this, and in other lists like the Logistics Performance Index, Sri Lanka is underperforming compared with its potential. Here, the average trade transaction involves over 30 different parties with different objectives, incentives, competence and constituencies they answer to, and up to 200 data elements, many of which are repeated multiple times. This environment constrains the growth of Sri Lanka’s private sector, especially SMEs.  
But now for the good news. By ratifying the World Trade Organisation Trade Facilitation Agreement, Sri Lanka has signalled its determination to intensify reform efforts.

Six reasons why Sri Lanka needs to boost its ailing private sector

Tatiana Nenova's picture
 Joe Qian / World Bank
A view of the business district in Colombo. Credit: Joe Qian / World Bank

Sri Lanka experienced strong growth at the end of its 26-year conflict. This was to be expected as post-war reconstruction tends to bring new hope and energy to a country.
And Sri Lanka has done well—5 percent growth is nothing to scoff at.  
However, Sri Lanka needs to create an environment that fosters private-sector growth and creates more and better jobs. To that end, the country should address these 6 pressing challenges:

1. The easy economic wins are almost exhausted

For a long time, the public-sector has been pouring funds into everything from infrastructure to healthcare. Unfortunately, Sri Lanka’s public sector is facing serious budget constraints. The island’s tax to growth domestic product (GDP) ratio is one of the lowest in the world, falling from 24.2% in 1978 to 10.1% in 2014. Sri Lanka should look for more sustainable sources of growth. As in many other countries, the answer lies with the private sector.
2. Sri Lanka has isolated itself from global and regional value chains 

Over the past decades, Sri Lanka has lost its trade competitiveness. As illustrated in the graph below, Sri Lanka outperformed Vietnam in the early 1990s on how much of its trade contributed to its growth domestic product. Vietnam has now overtaken Sri Lanka where trade has been harmed by high tariffs and para-tariffs and trade interventions on agriculture.

Sri Lanka dropped down by 14 notches to the 85th position out of 137 in the recent  Global Competitiveness Index.
3. The system inhibits private sector growth

Sri Lanka’s private sector is ailing. Sri Lankan companies are entrepreneurial and the country’s young people are smart, inquisitive, and dynamic. Yet, this does not translate into a vibrant private sector. Instead, public enterprises are the ones carrying the whole weight of development in this country.
The question is, why is the private sector not shouldering its burden of growth?

From the chart above, you can see how difficult it is to set up and operate a business in Sri Lanka. From paying taxes to enforcing contracts to registering property, entrepreneurs have the deck stacked against them.
Trading across borders is particularly challenging for Sri Lankan businesses. Trade facilitation is inadequate to the point of stunting growth and linkages to regional value chains. The chart explains just why Sri Lanka is considered one of the hardest countries in the world to run a trading business. Compare it to Singapore–you could even import a live tiger there without a problem.

Bangladesh corridor vital to India’s ‘Act East’ policy

Sanjay Kathuria's picture
India-Bangladesh land border crossing, Photo by Sanjay Kathuria
India-Bangladesh land border crossing. Credit: Sanjay Kathuria

Deepening connectivity and economic linkages between India and Bangladesh will be critical for the success of India’s ‘Act East’ policy.

Here are five priority areas that have the potential to change the economy of Northeast India:

1. Transport Connectivity

After 1947, Northeast (NE) India has had to access the rest of India largely via the “Chicken’s Neck” near Siliguri, greatly increasing travel times. Traders travel 1600 km from Agartala (Tripura) to Kolkata (West Bengal) via Siliguri to access Kolkata port. Instead, they can travel less than 600 kms to reach the same destination via Bangladesh, or even better, travel only 200 km to access the nearby port of Chittagong in Bangladesh.

This is set to change as close cooperation between Bangladesh and India (including various ongoing initiatives such as the transshipment of Indian goods through Bangladesh’s Ashuganj port to Northeast India, expanding of rail links within Northeast India and between the two countries, the BBIN Motor Vehicles Agreement) can dramatically reduce the cost of transport between Northeast India and the rest of India.

The resultant decline in prices of goods and services can have a strong impact on consumer welfare and poverty reduction in the Northeast. Such cooperation also opens up several additional possibilities of linking India with ASEAN via Myanmar.

Moving forward, expanding direct connectivity between NE India and the rest of India via Bangladesh, while giving Bangladesh similar access to Nepal and Bhutan via India, is critical.

2. Digital Connectivity

Broadband connectivity of 10 gbps is now being provided from Bangladesh’s Cox’s Bazar to Tripura and beyond, to help improve the speed and reliability of internet access in NE India. Bangladesh has the capacity to provide more.

Reforms Sri Lanka needs to boost its economy

Idah Z. Pswarayi-Riddihough's picture
 Joe Qian/World Bank
The Colombo Stock Exchange. Credit: Joe Qian/World Bank

Many Sri Lankans understand the potential benefits of lowering trade costs and making their country more competitive in the global economy. The majority, however, fear increased competition, the unfair advantage of the private sector from abroad and limited skills and innovation to compete.

Yet, Sri Lanka’s aspirations cannot be realized in the current status quo.  

While changes in trade policies and regulations will undeniably improve the lives of most citizens, I’m mindful that some are likely to lose. However, many potential gainers of the reforms who are currently opposed to them are unaware of their benefits.

Implementing smart reforms means that government funds will be used more effectively for the people, improve access to better healthcare, education, basic infrastructure and provide Sri Lankans with opportunities to get more and better jobs. Let me focus on a few reforms that I believe are critical for the country.  First, Sri Lanka needs to seek growth opportunities and foreign investment beyond its borders.    

First, Sri Lanka needs to seek growth opportunities and foreign investment beyond its borders.

Experience shows that no country in the world today has been able to create opportunities for its population entirely within its own geographic boundaries. To succeed in this open environment, Sri Lanka will need to improve its skills base, better understand supply and demand chains as well as produce higher quality goods and services

Experience shows that no country in the world today has been able to create opportunities for its population entirely within its own geographic boundaries. To succeed in this open environment, Sri Lanka will need to improve its skills base, better understand supply and demand chains as well as produce higher quality goods and services.

Fresh thinking on economic cooperation in South Asia

Nikita Singla's picture
 Aamir Khan/ Pakistan, Sreerupa Sengupta/ India, Sanjay Kathuria/ World Bank, Mahfuz Kabir & Surendar Singh/ Bangladesh) Photo By: Marcio De La Cruz/ World Bank
Young Economists sharing the stage with Sanjay Kathuria, Lead Economist and Coordinator, Regional Integration (Left to Right: Aamir Khan/ Pakistan, Sreerupa Sengupta/ India, Sanjay Kathuria/ World Bank, Mahfuz Kabir/Bangladesh & Surendar Singh/ India). Photo by: Marcio De La Cruz/ World Bank

That regional cooperation in South Asia is lower than optimal levels is well accepted. It is usually ascribed to – the asymmetry in size between India and the rest, conflicts and historical political tensions, a trust deficit, limited transport connectivity, and onerous logistics, among many other factors.

Deepening regional integration requires sufficient policy-relevant analytical work on the costs and benefits of both intra-regional trade and investment. An effective cross-border network of young professionals can contribute to fresh thinking on emerging economic cooperation issues in South Asia.

Against this background, the World Bank Group sponsored a competitive request for proposals.  Awardees from Bangladesh, India, and Pakistan, after being actively mentored by seasoned World Bank staff over a period of two years, convened in Washington DC to present their new and exciting research. Research areas included regional value chains, production sharing and the impact assessment of alternative preferential trade agreements in the region.

Young Economists offer fresh thoughts on economic cooperation in South Asia

Mahfuz Kabir, Acting Research Director, Bangladesh Institute of International and Strategic Studies and Surendar Singh, Policy Analyst, Consumer Unity Trust Society (CUTS International) presented their research: Of Streams and Tides, India-Bangladesh Value Chains in Textiles and Clothing (T&C). They focus on how to tackle three main trade barriers for T&C: a) high tariffs for selected, but important goods for the industries of both countries; b) inefficient customs procedures and c) divergent criteria for rules of origin classification.

Sreerupa Sengupta, Ph.D. Scholar at Centre for Economic Studies and Planning, Jawaharlal Nehru University, New Delhi discussed Trade Cooperation and Production Sharing in South Asia – An Indian Perspective. Reviewing the pattern of Indian exports and imports in the last twenty years, her research focuses on comparing the Global Value Chain (GVC) participation rate of India with East Asian and ASEAN economies. Barriers to higher participation include a) lack of openness in the FDI sector; b) lack of adequate port infrastructure, and long port dwell times; and c) lack of Mutual Recognition Agreements (MRAs).

Aamir Khan, Assistant Professor, Department of Management Sciences, COMSATS Institute of Information Technology, Islamabad presented his work on Economy Wide Impact of Regional Integration in South Asia - Options for Pakistan. His research analyzes the reasons for Pakistan not being able to take full advantage of its Free Trade Agreement (FTA) with China, and finds that the granting of ASEAN-type concessions to Pakistan in its FTA with China would be more beneficial than the current FTA arrangement. The work also draws lessons for FTAs that are currently being negotiated by South Asian countries.

Twitter chat: Economic benefits of environment management in Sri Lanka

Ralph van Doorn's picture

Join us for #SLDU2017: Economic Benefits of Environment Management. This Twitter chat will be hosted by World Bank South Asia

What’s happening?

Join us for #SLDU2017: Economic Benefits of Environment Management. This Twitter chat will be hosted by World Bank South Asia (@WorldBankSAsia) in collaboration with the Institute for Policy Studies IPS (@TalkEconomicsSL).
When is it?
August 21, 2017 from 5.30 – 7.30 pm
Unpacking #SLDU2017
The chat will explore the findings of the Sri Lanka Development Update (SLDU), published this June.
I look forward to engaging with you together with a panel from different areas of expertise.
We’ll be discussing priority reforms with a focus on how Sri Lanka can better manage both its business and natural environment to bolster economic growth and sustain development.
In recent years, natural disasters have left parts of this island nation devastated, exacting a significant economic, fiscal and social toll. The SLDU identifies other challenges as well, pressing the case for fiscal consolidation, a new growth model, improved governance and programs to buffer against risk.
The latest update cautions against adopting piecemeal solutions, noting that the challenges facing the island nation are inter-linked and require a comprehensive and coordinated reform approach.
In the end, we also hope this Twitter chat will allow us to learn from you as we begin our preparations for the next SLDU.
How can you participate?
Never taken part in a Twitter chat before? It’s simple. Just think of this as an online Q&A. @WorldBankSAsia will moderate the discussion, posing questions to panellists. You are encouraged to join in too! Follow along, retweet and engage. If you have a question, simply tweet it out using the hashtag #SLDU2017. We’ll see it and try to get you some answers.

Collecting primary data in Afghanistan: Daunting but doable

Tommaso Rooms's picture
Also available in: دری | پښتو

Afghanistan is not exactly an easy place to undertake a rigorous study on the ease of doing business. And collecting primary data for a micro-based study in Kabul and several Afghan provinces can be a daunting task. Just how daunting is underscored by the fact that the country conducted its most recent census almost 40 years ago, in 1979. Vast tracts of the country remain unsafe and many of its provinces are inaccessible.
Despite the security challenges, our experience from the recently launched Subnational Doing Business in Afghanistan report shows that the barriers to collecting micro data are not insurmountable. The data and related findings can help guide business reforms toward the kind of smart regulations that are imperative for attracting private sector investment to the capital city and beyond. A regulatory environment that enables private enterprise, especially small and medium firms, to function and be creative boosts job creation and is, therefore, good for the economy.

The report, the first of its kind in Afghanistan, benchmarks Kabul and the provinces of Balkh, Herat, Kandahar and Nangarhar across four Doing Business indicators: Starting a Business, Dealing with Construction Permits, Getting Electricity and Registering Property.

The key takeways?
  • Kabul leads in two of the areas measured, Starting a Business and Getting Electricity. Kandahar ranks first in Dealing with Construction Permits and Registering Property, while Balkh comes in second in all four areas measured by the report.
  • Regulatory quality and efficiency vary considerably among the five locations. Rolling out reforms already implemented in Kabul across all of Afghanistan would improve the business environment for entrepreneurs in the provinces.
  • By adopting all the good practices, Afghanistan could move up 11 places in the global Doing Business ranking, to 172.

چالشها و دشواری های موجود را هنگام جمع آوری ارقام و معلومات ابتدایی در افغانستان میتوان مهار کرد

Tommaso Rooms's picture
Also available in: English | پښتو

مطالعه و راه اندازی یک تحقیق همه جانبه پیرامون انجام تجارت و کسب و کار در کشوری مثل افغانستان، بدون شک عاری از چالش و دشواری نیست. جمع آوری معلومات ابتدایی به منظور مطالعه مقایسوی مقررات تجارتی و چگونگی تطبیق آن در کابل و فراتر از آن در چهار ولایت دیگر در شرایط کنونی بسیار مشکل است. افغانستان حدود ۴۰ سال قبل یعنی در سال ۱۹۷۹ مطالعه را در خصوص مقررات تجارتی انجام داده بود ولی از انزمان به بعد بنابر نا امنی ها دسترسی به بسیاری ولایات به منظور انجام همچو یک تحقیق ناممکن بود.
علی الرغم دشواریهای موجود امنیتی، تجارب ما از تهیه و نشر گزارش تازۀ  انجام تجارت در افغانستان۲۰۱۷ بیانگر آنست که جمع آوری ارقام و معلومات ابتدایی یک امر دشوار، اما ممکن است. این معلومات و یافته های مرتبط آن می توانند یک رهنمود جامع به منظور اصلاح مقررات تجارتی و ایجاد یک محیط مناسب برای جذب سرمایه گذاری سکتور خصوصی در کابل و سایر ولایات گردد. بهبود فضای مقررات تجارتی یک فاکتور عمده به منظور تشویق تشبثات کوچک و متوسط محسوب میشود که ابتکار عمل آنان را در راستای ایجاد زمینه های شغلی و رفای اقتصادی مورد حمایت قرار میدهد.
انجام تجارت در افغانستان اولین گزارش تحقیقاتی در سطح ولایات است که اینبار مقررات تجارتی را برعلاوه شهر کابل، در ولایات بلخ، هرات، کندهار و ننگرهار نیز مورد مطلعه قرار میدهد که در آن شاخص های انجام تجارت که عبارت اند از: آغاز تجارت ( کسب جواز کار)، اخذ مجوز ساختمان، توزیع لین برق و ثبت ملکیت مورد بررسی قرار میگیرد.
نقاط کلیدی:
  • کابل در دو بخش این مطالعه، آغاز تجارت و اخذ لین برق، پیشتاز شناخته شده است. با اینحال، کندهار در اخذ جواز ساختمانی و ثبت ملکیت ها مقام اول دارد، درحالیکه ولایت بلخ در تمامی این چهار ساحات مورد مطالعه این گزارش تحقیقی، در جایگاه دوم  قرار دارد.
  • کیفیت و موثریت تنظیم مقررات در میان این پنج ولایت بطور قابل ملاحظۀ متفاوت می باشد. پروسه اصلاحات از قبل در کابل آغاز و تطبیق گردیده است، بنابرین با گسترش آن در تمامی ولایات افغانستان سبب بهبود محیط تجارت و سرمایه گذاری برای متشبثین در آن ولایات نیز خواهد گردید.
  • با اتخاذ تمامی این کار شیوه های مناسب و اصلاح مقررات تجارتی، توقع میرود که افغانستان در رده بندی جهانی انجام تجارت، ۱۱ پله صعود نماید و به مقام ۱۷۲ نایل آید.

په افغانستان کې د لومړنیو معلوماتو او شمېرو د راټولولو په وخت کې ننګوونې او ستونزې مهار کیدلی شی

Tommaso Rooms's picture
Also available in: English | دری

د افغانستان په څیر یوه هېواد کې د سوداګرۍ او کسب او کار په اړه د هر اړخیزې څېړنې تر سره کول، پرته له شکه، چې له خنډونو او ستونزو سره مل وي. په اوسنیو شرایطو کې په کابل او د هېواد په څلورو نورو ولایتونو کې د سوداګریزو مقرراتو د پرتلیزې څېړنې او د هغوۍ د تنفیذ د ډول په اړه د لومړنیو معلوماتو را ټولول یو ډېر ستونزمن کار ګڼل کېږي. افغانستان ۴۰ کاله وړاندې، یعنې په ۱۹۷۹ ز کال کې د سوداګریزو مقرراتو په اړه څېړنه تر سره کړې وه، چې له هغه را وروسته د ناامنیو له کبله د داسې یوې څېړنې تر سره کول زیاتره ولایتونو ته د لاسرسي نه لرلو له کبله ناشوني وه.
د اوسنیو امنیتي ستونزو سره سره ، په ۲۰۱۷ کال کې په افغانستان کې د سوداګرۍ د تر سره کولو د وروستي رپوټ له چمتو کولو او خپرولو څخه زموږ تجربې د دې ښکارندوی دي، چې د لومړنیو شمېرو او معلوماتو راټولول یو ستونزمن کار، خو شونی ده. دغه معلومات او د هغه اړوند موندنې کولای شي د سوداګریزو مقرراتو د اصلاح او په کابل او نورو ولایتونو کې د خصوصي سکتور د پانګې اچونې د جذب لپاره د یوه وړ چاپیریال د رامنځته کولو لپاره پیاوړی بشپړ لارښود وبلل شي. د سوداګریزو مقرراتو د چاپیریال ښه والی د کوچنیو او منځنیو تشبثاتو د هڅوونې لپاره یو ستر هڅوونکۍ لامل بلل کېدای شي، چې د شغلي  فرصتونو او اقتصادي سوکالۍ د رامنځته کولو په برخه کې د هغوی له مبتکرانه عمل سره مرسته کوي.
په افغانستان کې د سوداګرۍ ترسره کول د ولایتونو په کچه لومړنی څېړنیز رپوټ دی ،چې دا ځل یې سوداګریز مقررات د کابل ښار برسیره، په بلخ، هرات، کندهار او ننګرهار کې هم تر څېړنې لاندې نیولي، چې په هغو کې د سوداګرۍ د تر سره کولو شاخصونه، چې عبارت دې له: د سوداګرۍ پیلول (د کار د جواز اخیستل)، د ودانیزو چارو د جواز اخیستل، د برېښنا د لین وېش او د ملکیت ثبت تر غور او څېړنې لاندې نیول کېږي.
مهم ټکي:
  • کابل د همدې څېړنې په دوو برخو کې مخکښ پیژندل شوی، چې هغه عبارت دې له: د سوداګرۍ پیلول او د برېښنا د لین اخیستل. په داسې حال کې، چې کندهار د ودانیزو چارو د جواز په اخیستلو او د ملکیتونو د ثبت په برخه کې لومړی مقام لري او د بلخ ولایت بیا په همدغو څلورو برخو کې په دویم ځای کې راځي.
  • په دغو پنځو ولایتونو کې د مقرراتو د تنظیم کیفیت او اغیزمنتیا خورا ډېر توپیر سره لري. د اصلاحاتو بهیر له پخوا نه په کابل کې پیل او تطبیق شوی دی، له همدې کبله د افغانستان په ټولو ولایتونو کې د هغو په پراختیا سره به په همدې ولایتونو کې د سوداګرۍ د چاپیریال او د متشبثینو لپاره د پانګې اچونې د ښه والي سبب وګرځي.
  • د دې ټولو ښو کاري کړنلارو په تر لاس لاندې نیولو او د سوداګرۍ د مقرراتو په اصلاح سره، هیله کېږي، چې افغانستان د سوداګرۍ د ترسره کولو په نړیواله ډلبندی کې، ۱۱ پټې پورته ولاړ شي او ۱۷۲ ځایګی خپل کړي. 

Our commitment to the people of Afghanistan stays strong

Annette Dixon's picture
Also available in: دری | پښتو
Despite government efforts with support from the international community, Afghanistan's development needs remain massive. Photo Credit: Rumi Consultancy/ World Bank

I am still shaken and saddened by the many lives lost to the attacks in Kabul two weeks ago and since then there has been more violence. As we grieve these tragedies, now is the time to stand strong with the people of Afghanistan and renew our commitment to build a peaceful and prosperous country.

To that end, we announced this week a new financing package of more than half-a-billion dollars to help Afghanistan through its struggle to end poverty, increase opportunity to help stabilize the country, and ensure all its citizens can access basic services during a time of economic uncertainty.

Afghanistan has come a long way since 2001 and achieved much progress under extremely challenging circumstances. Life expectancy has increased from 44 to 60 years, maternal mortality has decreased by more than three quarters and the country now boasts 18 million mobile phone subscribers, up from almost none in 2001.

Yet, the development needs in Afghanistan remain massive. Nearly 40 percent of Afghans live in poverty and almost 70 percent of the population are illiterate. The country needs to create new jobs for about 400,000 people entering the labor market each year. The situation is made more challenging by the return of around 5.8 million refugees and 1.2 million internally displaced people.

Our new support is in line with our belief that Afghanistan’s economic and social progress can also help it address security challenges.  Our financing package meets the pressing needs of returning refugees, expands private-sector opportunities for the poor, boosts the development of five cities, expands electrification, improves food security, and builds rural roads.