Project Dates: November 2016 - October 2020
Subcontractor Partner: Chemonics International, Inc.
- Assist policymakers in relevant government ministries and agencies to formulate reform policies, draft legislation and regulations as needed, and build capacity for administrative implementation once reforms are approved.
- Catalyze advocacy for reforms among civil society by working with industry associations, trade unions and other civil society organizations, and by sparking competition by using Doing Business indicators and other measures at the national and provincial levels to measure reform progress compared to other countries and within a country among provinces.
IDG selectively and appropriately applies this company strategy to SAIL, based on priorities, opportunities, and constraints. The four-year project aims to provide policy and institutional support to improve the business enabling environment and promote investment in Sri Lanka, improve performance on World Bank Doing Business indicators, strengthen investment policies and promotion activities, and support the government’s goal to become an upper-income country. An improved investment enabling environment will lead to greater domestic and foreign investment in Sri Lanka that will create jobs, increase economic growth, promote stability, level the playing field for all foreign investors, build the tax base, and reduce Sri Lanka’s dependence on USAID and other donors.
The project focuses on identifying and removing barriers to investment; improving policies, laws, and regulations concerned with the business enabling environment impacting investment; streamlining investment approval processes; providing capacity building of reform related agencies; and supporting civil society advocacy and public-private dialogue.
SAIL is working in the following areas:
- Contract Enforcement. A significant hurdle the business community faces is the excruciatingly long time it takes for commercial courts to hear and adjudicate commercial disputes. IDG conducted an analysis of the commercial dispute processes in commercial courts to identify the most significant factors in this problem and is working with an inter-agency working committee to agree and then implement an action plan of procedural changes to address the problems. The inter-agency committee includes the Ministry of Justice (MOJ), MODSIT, the Judicial Service Commission, and private practitioners among others. SAIL recognizes that advocacy for this reform needs to come from associations of private businesses who have an interest in seeing a more effective, streamlined dispute resolution process, in order to overcome the inertia of the courts and the lack of enthusiasm for reforms that comes from commercial lawyers who benefit financially from the current lengthy processes.
- Investment Approvals. To speed the process of getting approvals for foreign and domestic investors, IDG is working with the Sri Lanka Tourism Development Agency (SLTDA) and the Urban Development Authority (UDA), to reduce the number of steps needed before moving forward with investment, to streamline processes, to simplify and reduce the numbers of forms, and to make information better available to potential investors as to what the processes and requirements are for getting investment approvals. The team also is advising on creating a simple database to track approvals through the system, as a stopgap improvement until a more comprehensive automated system can be developed and put in place. Since some investment approvals are needed at the national level and some are needed at the provincial levels, it would be helpful also to assess the speed and ease of approvals at the provincial level, and compare across provinces, to encourage competition among provinces to make their processes better.
- Labour Law Reform. Sri Lanka has a particularly onerous labour regime in terms of the requirements placed on employers with respect to employment of workers, including some of the world’s lengthiest mandatory severance payments for terminated workers. While intended to help workers, these requirements wind up harming workers as many companies seek to evade the formal labour regime by hiring workers informally, or only in a short-term capacity, or through third-party employment agencies. Only roughly ten percent of the working-age population works in formal employment in the private sector—a level much lower than most countries. The labour regime also is very confusing, with different rules applying to different industries, and multiple conflicting laws and regulations applying to labour. At the same time, Sri Lanka lacks many protections afforded to workers in other countries, including protection against discrimination on the basis of gender and ethnicity. To address these issues, IDG is providing advice aimed at introducing a new, unified labour law that will address these issues and better safeguard workers without onerously burdening companies. IDG is collaborating with an inter-agency working group led by the Ministry of Labour and Trade Union Relations (MOLTUR); trade unions; the Employers’ Federation; the Attorney General; and MODSIT. The Employers’ Federation is the main civil society advocate for labour reforms, and SAIL is working with the trade unions to build their interest in advocacy, recognizing that a less onerous labour regime will increase formal-sector employment and also trade union participation. IDG is organizing roundtable discussions with local partners in key provinces to spread understanding of labour market problems and advocacy for reforms.
- Capacity Development of Key Reform Ministries. IDG is providing comprehensive capacity building support to MODSIT, MOJ and SLTDA. The project is providing MODSIT with onsite support as well as technical assistance to support policy analysis and implementation of agreed reforms related to making improvements in the investment climate. IDG also provides support to MODSIT to build capacity to improve its outreach on reforms being implemented. The project is supporting MOJ to implement reforms proposed in the justice sector to improve the functioning of the Commercial High Court and disposition of commercial cases. The project provides onsite support to build capacity of government staff to implement the proposed reforms. IDG is also building capacity of SLTDA One Stop Unit to implement streamlined investment approval processes and to become a real “One Stop Shop” for investment in the tourism sector in Sri Lanka.