Big businesses must reform now

The Ceylon Chamber of Commerce

Sri Lanka requires a renewed economic direction. The new Government has initiated important reforms to stabilise the economy, strengthen public institutions, and enhance transparency. To sustain this progress but also improve people’s wellbeing, meaningful private sector reforms are now essential. Large firms, in particular, must support this transition by adopting purpose-driven, ethical, and sustainable business practices. Reforms should prioritise fair competition, innovation, worker protection, environmental stewardship, rural development, strong governance, and responsible foreign exchange management

Sri Lanka is entering a new chapter. The country is trying to recover from one of the most severe economic crises in its modern history. The new Government has begun important reforms to stabilise the economy, strengthen public institutions, and improve transparency. These steps matter. But they are not enough on their own. The private sector also needs to change and help mend the broken nation if the country is to move forward.

Ramifications of profit maximisation

For many years, significant segments of the private sector have prioritised short-term profit at the expense of broader national interests. Some firms failed to invest adequately in their workers, while others neglected essential environmental responsibilities. Many continued to profit from non-essential imports even as the country faced a severe external debt crisis. 

Price gauging was rampant, and a number of economists including Isabella Weber (Author: Sellers inflation, profits and conflict) and political leaders at multilateral institutions have accepted that corporate profits are a primary driver for inflation today.  Sri Lankan businesses need a fundamental change to move away from short-term profit maximisation for the longer term benefit of people and the economy.

The pressure to maximise profits has compromised the conduct of many actors in the private sector. Several businesses have engaged in bribery, lobbying, and undue influence over public institutions for corporate or personal gain. More than half of the wealth accumulated by Sri Lanka’s private sector has been generated through transactions with the Government —often through supernormal profits gained by purchasing public assets below market value or selling goods and services to the state at prices above market rates (Murtaza Jafferjee, Advocata Institute, 2025).

Moreover, certain exporters have engaged in illicit financial flows, robbing the nation of vital foreign exchange (Global Financial Integrity, 2024). Others have embarked on import/re-export scams that destroy local production.

Corporate tax evasion has been widespread, and some businesses engaged in large scale VAT scams have deprived funds to the Government. According to the Attorney General Department Annual Report of 2023, unpaid VAT arrears and penalties accounted for Rs. 369 billion ($1.23 billion) of the total Rs. 904 billion ($3.01 billion) in tax arrears.

Big businesses have focused disproportionately on indulging affluent consumers, while neglecting the needs of low-income communities in both rural and urban areas.

Some local agents of multinational corporations have not adequately safeguarded the national interest, allowing global firms to exploit monopoly power through complex financial arrangements and market practices. This has contributed to environmental harm, adverse health impacts, shifts in local food systems due to intensive farming models, and exploitative financial dealings, including offshore accounts and illicit flows.

Such practices have weakened the economy, heightened vulnerability to external shocks, and deepened social inequality.  If Sri Lanka seeks long-term stability, broad-based prosperity, sustainable path to development and social justice, fundamental reforms within the private sector are essential.

The idea of purposeful economic activity should guide Sri Lanka’s private sector reform. Purposeful business creates value not only for owners, but also for workers, consumers, communities, and the environment. It focuses on meeting real needs rather than producing goods that have little long-term benefit

Broader national interests

A responsible private sector should align with national efforts to strengthen governance and uphold the rule of law.  While anti-corruption efforts often focus on public sector corruption, private sector corruption remains under-addressed, despite its significant impact on market integrity, competition, and economic stability.  Reforms are necessary for many reasons. Big businesses influence employment, wages, foreign exchange flows, investment behaviour, innovation, and environmental outcomes.

Private firms, including small and medium enterprises (SMEs), play a decisive role in shaping the national economy. Reducing excessive market concentration and encouraging constructive collaboration between the private sector, the Government, and state-owned enterprises can strengthen rural communities and promote a more balanced and inclusive economic landscape. SMEs account for more than 75% of all enterprises in Sri Lanka, provide around 45% of employment, and contribute roughly half of national GDP (Asian Development Bank). Domestic credit to the private sector stood at 25.5% of GDP as of September 2024 (Central Bank of Sri Lanka), underscoring its central importance. At the same time, the combined revenue of the country’s top 100 companies amounted to nearly 23% of GDP in 2024, reflecting the dominant position of the largest firms (LMD Magazine). When the private sector acts responsibly, the entire country stands to gain; when it does not, the economy becomes vulnerable and unstable.

As economist Kate Raworth argues in Doughnut Economics, any economy—including Sri Lanka’s—should function within a safe ecological ceiling while remaining above a social foundation that guarantees justice and wellbeing. Private sector reforms must be geared toward achieving this balance.

The idea of purposeful economic activity should guide Sri Lanka’s private sector reform. Purposeful business creates value not only for owners, but also for workers, consumers, communities, and the environment. It focuses on meeting real needs rather than producing goods that have little long-term benefit.  Economist Jason Hickle states in “The Double Objective of Democratic Ecosocialism”, that purposeful business includes offering goods and services that ordinary people can afford.  A market that includes the majority of the population is resilient and dynamic.  Progressive private sector reforms must be built on a foundation of purposeful economic activity.

A call to The Ceylon Chamber of Commerce

The Ceylon Chamber of Commerce (CCC) positions itself as a leading advocate for the private sector, championing its interests and addressing key industry concerns.  With 537 members and 19 sectoral and steering committees, it remains a significant institution in advancing sustainable and equitable economic growth in Sri Lanka.  

Sustainable Social Equity:  The CCC describes itself as the most influential and effective voice promoting an environment conducive to national economic development within a framework of “sustainable social equity.” To uphold this mandate credibly, the Chamber would benefit from clearly defining what it means by sustainable social equity, openly reflecting on the role its membership has played in the country’s economic crisis, and identifying the private-sector reforms that might have prevented the severe hardships now experienced by the 25% of Sri Lankans living in poverty (World Bank, 2025).

Does “sustainable social equity” encompass living wages that reduce poverty, private-sector salaries aligned with housing costs, wealth taxes to address extreme inequality, affordable credit and insurance for micro businesses, and universal access to quality health care, education, social care, transport, utilities, and a robust social safety net?

In its recent annual report, the Chamber asserts its intent to “boldly lead” the private sector in moving the economy from stability to robust growth. Such a commitment requires transparent and honest engagement with past shortcomings. Without this, the Chamber’s claims will appear ungrounded.

Policy Advocacy: As part of its strategic mandate to represent member interests within the political and regulatory landscape, the Ceylon Chamber of Commerce is well placed to champion stronger legal safeguards against private sector corruption—an essential requirement for economic recovery, international credibility, and investor confidence.

The 2025 Verité Research report, “Gaps in the Guardrails: A Review of Laws on Private Sector Corruption in Sri Lanka,” identifies nine significant deficiencies in the country’s legal and regulatory framework when assessed against the standards of the United Nations Convention Against Corruption (UNCAC). The CCC should actively advocate for closing these gaps and strengthening the governance architecture governing private sector conduct.

Economic Summit:  The CCC’s upcoming Economic Summit is framed around the idea that “Stability has been Secured” and that “Growth must be Unleashed.” It proposes to examine the next phase of Sri Lanka’s economic strategy, including ports, logistics, and value-added services; assess the capital market as a potential catalyst for growth; consider pathways for diversifying exports; and evaluate the country’s investment outlook.

For the summit to be genuinely constructive, it should mitigate the risks posed by an unjust global economic order, assess the implications of Sri Lanka’s unsustainable external debt burden on public investment and social wellbeing, and critically examine alternatives to an economic model that has entrenched inequality and persistent poverty. Only by engaging with these issues directly can the Chamber contribute meaningfully to shaping a fairer, more resilient, and sustainable economic future for Sri Lanka.  Without such engagement, the private sector cannot credibly claim to serve as the engine of inclusive growth.

If major businesses fail to reform, they risk perpetuating harm, undermining their reputations, and facing growing exposure to litigation and other accountability-driven costs. If they choose to adapt, however, they can play a pivotal role in shaping a fair, resilient, and sustainable future for all Sri Lankans

Private sector reforms are crucial

Sri Lanka requires a renewed economic direction. The new Government has initiated important reforms to stabilise the economy, strengthen public institutions, and enhance transparency. To sustain this progress but also improve people’s wellbeing, meaningful private sector reforms are now essential. Large firms, in particular, must support this transition by adopting purpose-driven, ethical, and sustainable business practices.

Reforms should prioritise fair competition, innovation, worker protection, environmental stewardship, rural development, strong governance, and responsible foreign exchange management. Companies that centre their operations on people and the environment, pursue purposeful economic activity, and reject corrupt practices will help build a more stable, resilient, and broadly prosperous nation.

If major businesses fail to reform, they risk perpetuating harm, undermining their reputations, and facing growing exposure to litigation and other accountability-driven costs. If they choose to adapt, however, they can play a pivotal role in shaping a fair, resilient, and sustainable future for all Sri Lankans.

(The author  is co-founder of the Institute of Political Economy (ipe-sl.org) and a former local councillor in London. He can be reached at [email protected].)