Friday, 6 September 2013 00:00
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Sri Lanka’s business competitiveness is usually a highly volatile debate. While the Government would back its argument on extensive investment in infrastructure, others would point at good governance, transparency, knowledge transfer and efficiency of public institutions as detractors from improvement.
This proved to be the case when Sri Lanka was ranked at 65th place among 148 countries in the Global Competitiveness Index released on Wednesday. Climbing just three notches from last year with a score of 4.2 out of 7, it failed to improve its score and remains well behind the 52 scored three years ago.
Perhaps stating the obvious, the index showed that macroeconomic stability is the weakest indicator, along with labour market efficiency.
The performance of a country was measured on 12 indicators (Pillars) in three categories. Institutions, Infrastructure, Macroeconomic Environment and Health and Primary Education were included in the Basic Requirements, for which Sri Lanka ranked 77 overall out of the 148 countries surveyed.
In this regard, tax and tax rates showed a reduction from the previous index along with poor confidence on clamping down of corruption. Sri Lanka’s major stride had been in efficiency enhancers, moving up to 69th place from 77th. In the other two Sri Lanka’s rank has slipped.
In the Efficiency Enhancers category, which included the Higher Education and Training, Goods Market Efficiency, Labour Market Efficiency, Financial Market Development, Technological Readiness and the Market Size scores were positive indicating that Higher Education and Training as well as Market Efficiency has improved to a certain extent. However, Technology and Labour Market Efficiency slipped significantly.
The most problematic factors for doing business with Sri Lanka were the access to financing, tax rates, poor work ethic in national labour force policy instability and inefficient Government bureaucracy.
Sri Lanka, which has gained 19 ranks since 2006, is the only SAARC country that has made gains in the global competiveness. India which ranks five notches above Sri Lanka at 60th rank this year has lost 15 places since 2006. Pakistan, the second largest country in South Asia, has slumped 28 positions over the 2006-2013 period, the fourth biggest decline out of all economies.
Putting that aside, economies with strong and transparent institutions continued to dominate the index with Switzerland retaining the top place in the world and Singapore grabbing the top spot in Asia. In fact both are excellent examples for Sri Lanka to show how a small economy can evolve on the pillars of a highly trained, strongly institutionalised and efficient foundation.
It is clear that Sri Lanka cannot push forward unless its policy makers make a genuine effort to provide financial accountability. A genuine need that is almost daily on show in Parliament as project after questionable project is pushed through for tax concessions or loans without due process. The payback for such actions will be felt by the future generations and the environment. In fact even the International Monetary Fund (IMF) has repeatedly called for large scale projects to be debated in Parliament before they are finalised.With a hobbled Judiciary, impunity is the winner and will engender sustainable development for Sri Lanka.
