New study helps track economic strengths/weaknesses in districts

The 5th sub-index was infrastructure and business services which measure the perceived adequacy of infrastructure and business services.

The Economic Governance Index (EGI) study in Sri Lanka has assisted in identifying and facilitating an understanding of government-influenced constraints to private sector development and economic growth.

The recently concluded Sri Lankan study, conducted by The Asia Foundation in conjunction with the Nielsen Company, had its findings presented this week to an audience of individuals from businesses and local government around the country. The study follows the success of similar studies carried out by The Asia Foundation in Indonesia, Philippines, Cambodia and Vietnam.

For the first time in Sri Lanka, the EGI facilitated the measurement of the enabling environment for private enterprise. Focusing at the local level, it covers all 48 municipal and urban council localities of seven provinces with the exception of the Northern and Eastern provinces due to 'logistical constraints.' The Asia Foundation noted the absence of peace and order made it impossible to conduct research in these areas.

Central Bank Governor, Nivard Cabraal also spoke at the event and stressed the importance in accepting the findings of the study. "If something can't be measured, then it can't be improved," he said. Cabraal added that the central mission of the Central Bank was to work towards the prosperity of the nation, particularly towards a 'balanced regional development.' The Western Province has increased its share of GDP contribution which is close to 51% but said this was to be expected given that the harbour, the tourism sector and industries were located in the Western Province. Cabraal also pointed out that per capita income for 2006 was US$1,410 but was over US$2000 for the Western Province. The per capita income for the other provinces is somewhere between US$730 to US$790. He said unless the business environment was conducive, growth was not possible. "Profit is not a bad thing," Cabraal added."It is important for generating business."

Sri Lanka's business sectors are growing and expected growth this year was at 6.7%. Cabraal also spoke of the CB's Statistics Department's plan to track prosperity through a prosperity index.

The comparative analysis of local economic governance was based on 10 sub-indices.
The final report ranked different localities after gauging their particular strengths and weaknesses based on the 10 sub-indices. The first was registration, permits and licenses or start up costs and the time it takes to register a business.
Kuliyapitya ranked the highest on the index as being the most efficient in this category while Puttalam ranked the lowest.

Second sub-index
The second sub-index is land access and property rights which play an instrumental role in economic development. Legal property rights encourage investment in fixed assets and by allowing the use of land title as collateral, facilitate access to finance. Chilaw ranked highest and Anuradhapura ranked the lowest.

Third sub-index
The third sub-index was transparency and participation and it focused on the ease of obtaining proper planning and legal documents as well as business-related information in addition to the extent of private sector involvement in the decision making process related to the conduct of businesses. Matale ranked the highest in this category while Ambalangoda ranked the lowest.

Fourth sub-index
The 4th sub-index was the regulatory environment, compliance and costs and it essentially measures the ease of working with officials, compliance with the laws and regulations and the time and monetary cost of complying with regulations in conducting business. Hatton-Dickoya ranked the highest and Puttalam came in last.

The fifth sub-index
The 5th sub-index was infrastructure and business services which measure the perceived adequacy of infrastructure and business services.
Infrastructure includes highways, electricity, telephone connections, street lights and market facilities. Business services include garbage disposal, water supply and technical advisory services. Nuwara Eliya and Avissawella both received the highest score while Ja-Ela came in last.

Sixth sub-index
The 6th sub-index was tax administration, burden and services and refers to the administrative and fiscal burden imposed by the tax administration. Localities are also rates on the extent to which the private sector perceives taxes as reasonable given the services provided. Horana had the highest score while Puttalam came last once again.

Seventh sub-index
The 7th sub-index was legal institutions and conflict resolution.
The Asia Foundation said Sri Lanka is distinguished from other countries in the region by its relatively more developed judicial institutions and processes and therefore, it was not surprising to see the high scores across all localities. Minuwangoda scored the highest and Matara came in last. The eighth sub-index is government attitude toward business in which Haputale scored the highest on the index and Embilipitiya scored the lowest. On average, this was the lowest indicator.

Ninth sub-index
The 9th sub-index was informal charges, favouritism and discrimination. Corruption was often cited as a key factor in the lack of economic development because it restricted access to markets and services but also hindered competitiveness by increasing the cost of doing business. Nawalapitiya scored the highest while Matara came in last.

Tenth sub Index
The last sub-index was crime and security which was the protection of property rights and the overall feeling of security and its importance for the promotion of private enterprise as they affect the cost of doing business and the willingness to invest.
Gampola ranked highest while Dehiwala/Mount Lavinia ranked the lowest.