Expanding exports

Exports and investment are critical to a developing economy, and the Government has staunchly backed them with the National Export Strategy (NES) to be rolled out this week. But it is important to look at the red tape that may be hampering exporters and reducing the quality of the local business environment. 

Think-tank Verité Research recently released a policy note calling on the Government to simplify the process for registering exporters to make it more effective, as the present system is seen as too cumbersome and time-consuming, and open to abuse.

Although the current registration process was introduced with the intention of identifying and supporting new exporters, its execution severely impedes the achievement of this goal, a new study has found. This is largely because some of the features of the registration process undermine its aim by making the process lengthy and inefficient, especially for Small and Medium Enterprises (SMEs) that are more in need of Government assistance to enter international markets compared to larger firms.

The process also imposes an undue burden on businesses, particularly SMEs that are registered as sole proprietors/partnerships and that are located outside the Western Province. Rules and regulations that are burdensome and lack a clear rationale serve to discourage businesses from exporting, and therefore undermine the objective the Government aims to achieve. 

In this light, the Government may benefit from re-evaluating this process to identify how it can be made simpler and more effective in achieving its objectives. The Government can reduce financial and time costs significantly, by rationalising and simplifying the process and making all the relevant information available at a single, easily accessible location (preferably online).

The study found that the current registration process is unnecessarily lengthy, inefficient and unduly burdensome for sole proprietors and partnerships in comparison to other businesses. These steps stem from fulfilling the requirements of the registration process at the Export Development Board (EDB), which enables businesses to export. 

Registration with the EDB is also a prerequisite for registration with two other Government agencies that are central to the export process: the Inland Revenue Department (IRD) and Sri Lanka Customs (SLC). The Verité Research study found that the current registration process for a sole proprietor and partnership involves a minimum of 10 steps and six different agencies and can take between 1-3 weeks to complete. 

Businesses exporting products that require export permits or licenses are subject to an extended process that adds a further 2-4 weeks, increasing the total time taken to register as an exporter to 3-7 weeks.

Verité Research said the present process is burdensome due to its opacity and information paucity, given difficulties businesses face in finding information for registration. Due to the lack of a single source of information, detailing the entire registration process, businesses are required to peruse every institution’s website and/or visit the agencies in-person to obtain information. 

Unfortunately this current process is vulnerable to abuse, with some businesses struggling to find funding if they fail to complete the entire process or resorting to bribery to fast track the process. What makes this situation even more disappointing is that this was a process begun to encourage exporters. It is imperative that the Government increase engagement with stakeholders, follow best practices and fast track implementation to provide constructive assistance to exporters. It is hoped that implementation of the NES will have greater success.