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SEC’s directive on related party disclosures helps SL climb business index

By Duruthu Edirimuni Chandrasekera View(s):

The directive by the Securities and Exchange Commission (SEC) in 2010 on related party disclosures has helped Sri Lanka climb the  index of ‘Ease of doing business’ in the World Bank Doing Business Report, a Central Bank (CB) official said.

“We came up to 89 from 98,” Kumudhini Saravanamuttu, Director Statistics CB told a forum of top corporates on Thursday at the Sri Lanka Economic Summit 2012 organised by the Ceylon Chamber of Commerce. She added that the country’s rank in the report improved over the last two years and that from 183 countries, Sri Lanka’s rank moved from 110 to 98 in 2011 and to 89 in 2012.
‘SEC took us ’9′ notches’

The SEC’s directive sets out certain guidelines for public firms pertaining to related party transactions where disclosures were to be made in their annual reports setting out details of investments of each related party transaction if it exceed 10% of audited equity or 5% of the audited total assets, whichever is lower and called for an immediate disclosure if there are any investments with related parties exceeding 10% of latest equity or 5% of the latest audited total assets whichever is lower. Ms. Saravanamuttu told the Business Times on the sidelines of the plenary session, ‘Ease of doing business – Sri Lanka ranked 89 – Fact or Fiction?’ that protecting investors was the major reason that took Sri Lanka nine notches up.

The World Bank focuses on three areas when measuring ease of doing business – namely  the number of procedures, the time taken to complete them, and the costs involved. Ms. Saravanamuttu added that while there’s no ranking system that is perfect, what is more important is the progress in reforms in a bid to have material improvements in the regulatory framework and systems to ease business processes.

“In the area of protecting investors, we have done some work on this but we need to improve. In fact, we need to improve in all areas, even in those areas in which we score fairly high because if we stand still, we will be overtaken by another country,” she pointed out. She added that Sri Lanka is doing quite badly when it comes to enforcing contracts – the procedure takes 1,318 days, which is more than four years. “With commercial courts coming in, there could be some reduction in that area and that is going to be one of our focuses in the future as it is important.”

Improving efficiency
She added that as measures in the future, the Government institutions should improve the efficiency of services provided to the general public, simplify their processes (less procedures, less time taken and less cost of services), and should have their own website with details of services.

“All applications should be available in the website for download, check lists/guidelines should be available, there has to be a method to inform the status of the applications, the institutions need to monitor own performances regularly and there has to be a One-Stop-Shop approach.”

Joining in the panel discussion, Ajith Gunawardena, Deputy Chairman John Keells Holdings said that there are many ‘one-stop shops’, but none seems to be open. “Essentially we are talking about being attractive and globally competitive. We can distill this down to two key areas – being efficient and being highly productive. Focusing on what that means, I think we should focus on three core areas – development of human capital, quality infrastructure and a free and transparent business climate,” he said, adding that as a country we should set ourselves certain goals.

He noted that our literacy is high but that does not give ‘us’ good human capital. “We need to progress to the next level, from secondary to tertiary and vocational education. In terms of our demographics we need to go into providing skills to our labour,” he added, highlighting that capital investment needs to be done in a focused manner. He said that what is needed is not so much labour reforms as it’s not a priority, but that judicial, land and education reforms are needed. “It is important to monitor the indices but it is merely a mechanism to help us focus on priorities. If we set ourselves goals, a lot of action will follow in terms of competiveness and efficiency,” he added.
The panel discussants also said that with the present holiday regime, the country will not be productive.

Highlighting the importance of efficiency and productivity, Roshan Devapura CEO, ICTA said that indices are all relative but if all the other countries (which are below) have done more work, you are still lagging behind. “At the end of the day indexes are good but that is not the end goal. We have to create a more conducive environment so that it is easier for people to do businesses and for the Government to be more efficient.”

Sumal Perera, Chairman Access Group noted that Sri Lankan should have brand based skills. “We need to concentrate on core competencies and not do all things at once. “As a country we are all over with policies,” he said.

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