Red tape hinders registration of small businesses in Sri Lanka: think tank

From Left: Advocata Academic Program Chair Sarath Rajapatirana, Good Market Co-Founder/Managing Director Achala Samaradiwakara, Colombo Municipal Council Member Milinda Rajapaksha and Advocata Chief Operating Officer Dananath Fernando. Advocata Institute Photo.

ECONOMYNEXT- Red tape is hindering the registration of small businesses at Divisional Secretariats in Sri Lanka, discriminating against the poor and holding back entrepreneurship, Advocata Institute, a Colombo-based think tank said.

Overly complicated steps, which require would-be business owners to visit government offices multiple times, are presenting challenges to business registration, the think tank said, based on a survey.

“The registration of sole and partnership is governed by the Business Name Ordinance Number 06 of 1918, this law is over 100 years old, how can we find a solution for these problems under these laws.” Chief Operations Officer Dhannanath Fernando said in Sinhala.

He said registering a sole proprietorship at a Divisional Secretariat is more complicated than registering a limited liability firm at the Registrar of Companies.

Fernando said Sri Lanka’s business registration rank in World Bank’s Ease of Doing Business Index is 85, but only takes into consideration the starting of a limited liability company in the Colombo District.

If the national situation is appraised Sri Lanka would be much farther behind, he said.

Ease of registering businesses will promote entrepreneurship and increase living standards among poor households, he said.

Fernando was speaking at the launch of Advocata’s report ‘Barriers to Micro and Small Enterprises in Sri Lanka’, which revealed the survey’s results.

Advocata had conducted the survey in September 2019, receiving views from 1,511 respondents islandwide. Of the respondents, 1319 were micro entreprenuers while 1886 comprise of small entrepreneurs.

Due to complicated procedures at the Divisional Secretariat, a third of the businesses are not registered, and operate in the informal sector, without even paying municipal taxes.

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Milinda Rajapaksha, who was the media spokesperson to President Gotabaya Rajapaksa during the presidential campaign, and a Colombo Municipal Councillor, said informal businesses do not want pay fees or want government support, so they get registered illegally.

“Most people want to get registered without paying any fee, or they give a bribe, because they don’t want to follow procedure,” he said in Sinhala at the event.

He said businesses such as food trucks, delivery restaurants and home stay accommodation are mostly in the informal sector.

However, he said the authorities leaves such businesses alone, as taking proper legal action would lead to the economy taking a hit.

Rajapaksha said business registration procedures are slow because the government is bloated with workers.

“Because we are trying to employ everyone, lengthy procedures are created. Some are employed just to carry files, some to exclusively read reports and some only to paste stamps.”

“Some files don’t move along the process. When big projects are forwarded for approval, the process for smaller businesses are delayed,” he said.

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