Red tape, regulations stumbling blocks for Sri Lanka startups
Jul 06, 2019 14:03 PM GMT+0530 | 0 Comment(s)
ECONOMYNEXT- Bureaucratic red tape and regulatory barriers are hampering Sri Lankan startups, according to a survey carried out by the Sri Lanka Association of Software and Service Companies (SLASSCOM).
The survey found that 49 percent of respondents think lack of government support to enable a startup environment was extremely challenging, while 15 percent thought it was somewhat challenging, and 21 percent slightly challenging.g
"Red tape has been identiﬁed as a major obstacle, where delays create an uneven playing ﬁeld for founders who do not have contacts in higher ranks, and therefore experience delays when trying to get approvals necessary for the business," the survey report said.
SLASSCOM said that it is important for the government to cater to fledgling startups whose requirements may differ from traditional businesses.
"The divide between resources and drivers of startups hinders the swift development of new businesses," SLASSCOM said.
"For example, Artiﬁcial Intelligence and similar newly developed segregations are unheard of in the business registration department, which delays the operations of startups in those ﬁelds."
Regulations and laws are also hindering startups by restricting access to finance, the survey found.
"Most startups follow non traditional business models, and certain regulations that exist in the Sri Lankan context have resulted in an uneven playing ﬁeld for startups."
"For example, banks only provide loans against tangible securities. However, most startups operate out of home ofﬁces and do not have a tangible product, and their ideas sound risky to traditional bankers, which discourages banks from offering loans."
Laws prevent popular startup funding avenues such as crowdfunding, SLASSCOM said.
"Section 31I of the Securities Council (Amendment) Act, No. 26 of 1991 prevents private companies from “inviting the public to invest” in them."
"In addition, the Companies Act no. 07 of 2007 limits the number of shareholders of a privately held company to ﬁfty."
Government funding and support programs are disconnected with startups as they speak and think differently, SLASSCOM said.
"The government could look into partnering with bodies who work within the ecosystem and who have the capacity to follow up once resources are provided, to ensure that startups are driven forward."
Startups are also failing due to poor market research, deficiency of historical market information, lack of commitment and experience among founders of firms and low female participation, the survey found.
Just 13 percent of founders in startups were females.
However, the startup ecosystem is witnessing a brain gain from Sri Lankans who studied abroad returning home, showing promise for the future, SLASSCOM said.
Development of skills programs, exports and a one-stop shop for startups would help accelerate startups, the association said.