Government’s policy inconsistency hurts US and foreign companies

US and foreign companies have expressed dissatisfaction on inconsistent and unpredictable policies, including taxation, Customs procedures, and regulatory approvals of the Sri Lankan government, a recent government report on ‘ Sri Lanka Market challenges’ disclosed.

US and foreign companies have also raised concerns regarding opaque public tendering processes and widespread corruption.

The present government has publicly committed to business process reforms and has moved up the World Bank’s Ease of Doing Business Index in 2019. However, overall progress remains slow and uneven, the report revealed.

The government generally supports import substitution. Importers to Sri Lanka face high import duties and other taxes.

A variety of taxes have effectively increased Sri Lanka’s tax rates on a range of imported items to between 60 and 100 per cent of the cost, insurance, and freight ( CIF) value of the product.

Agricultural imports face stiff health regulations that sometimes exceed global standards. For example, genetically- modified ( GM) regulations restrict imports of US agriculture commodities, the report noted.

Congested roads slow the movement of goods throughout the island, although the Government of Sri Lanka is working towards improving road infrastructure.

Unreliable power supplies, particularly outside the capital, force manufacturers and service providers to install on-site generators.

Businesses cite a lack of sufficient labour supply as a major hindrance for operating in Sri Lanka.

Qualified workers are in short supply as a result of the education system producing too few engineers, technicians, scientists, and English speakers.

Business representatives complained that the rigid labour laws, including exceptionally high severance pay regulations, make it difficult to adjust staff size and composition to market conditions.

There are also numerous and overlapping labour regulations that are often difficult for investors to understand.

Piracy is a problem for US rights- holders in music, film, software, and some consumer products. Sri Lanka also lacks anti-competition laws, the report revealed.