Politicians in related businesses resorting to unfair practices
Sri Lanka is gradually losing promising businessmen owing to politicians getting into the same businesses that they are in while trying to unfairly compete.
A substantial number has already migrated overseas and are setting up similar or unrelated businesses overseas, being quite successful in these ventures, analysts said.
“Most of these businesses are mediumscale ones. When doing an analysis of the competitive environment, they feel it is better to do business elsewhere,” Mahendra Jayasekera, Managing director Lanka Tiles PLC said.
Very recently, a steel factory in the northeast of Colombo closed down and the owner set up a steel business in Australia, a businessman said. He said the owner and one of his friends shifted to Australia not because of pandemic-related complications or the economic crisis, but because a certain politician was doing the same business as him and resorting to unfair practices.
“Not only politicians but also top-ranking officials are in it. The most famous example is exports, where politicians are looking to make a fast buck. Earlier we had to part with a certain percentage of the profits for their cut. Now they're trying to get into our businesses. It is really frustrating to continue business in Sri Lanka. These politicians are doing everything other than running a country,” a businessman who migrated early this year and set up businesses in another Asian country, on a visit to Sri Lanka, told the Business Times.
He also mentioned that one of his friends who had migrated several months after him to an East Asian country is also remarkably successful there. Despite having several successful businesses in Sri Lanka, he didn’t want to continue with politically-affiliated people trying to get into similar businesses. “He sold two of them and gave power of attorney to one of his siblings to run the rest. He saw no way out and realised that this East Asian country had welcomed him with open arms,” the first businessman revealed.
This, along with the general lethargic attitude of state agencies, when trying to do business and the dreary pace of the country's path to getting out of the crisis situation, were the other reasons to move elsewhere, but the last straw was the high taxation imposed recently.
Australian business visas
A toy manufacturing company CEO said that he secured a business visa to Australia a long time ago. “This came in handy recently and now I'm trying to shift my business there,” he said.
Likewise, certain businessmen have these visas ready. An economist said it is a matter of time before a hard decision is made by them.
The trend during the past four years, since the beginning of the pandemic for IT firms, was to shift elsewhere but retain the local company in Colombo. But now a large number of them are treating the local firm here in Colombo as a back office and managing the overseas office as an operating hub. “This was also due to the high taxation, amongst other things. It is easier to deal with uniform taxation elsewhere rather than in this country where policy changes constantly. It has become a headache. So, we now have a back office where software engineers work, and we pay their salaries in Sri Lankan rupees while billing is done in our Singapore office in U.S. dollars,” a CEO of an IT firm told The Business Times.
He also noted that some top-ranking officials have been trying to open IT offices themselves, which is also a challenge. “There is a grey area in whether they are allowed to engage in these types of businesses. I know it has been happening for some time over the years, but now it is really getting increasingly crowded in my space,” he added.
Another CEO of an IT company lamented that he is already losing a lot of talent to western countries, and it is a challenge to retain workers in Sri Lanka, “Especially scouting for software engineers is difficult here. In this situation, it is better to shift elsewhere and run my business,” he said noting that already plans are underway to shift to Singapore as an initial step and then to Australia subsequently.
A business analyst said that Sri Lankans are really good at adapting to businesses and their resilience is extremely high in terms of facing challenges. “We have seen a lot of a brain drain over the past few years and it is continuing. It is a really big blow to the economy at large for years to come. If entrepreneurs and businessmen also leave the shores, it will be a debilitating blow to the economy,” an economist said.