Advocating for reforms to improve the business and investment climate 2019-2020

1. Advocating for reforms to improve the business and investment climate 2019-2020 Position Paper John Wilson Director and ECCSL Legal Advisor

2. Who We are Founded in 1996 Objective: stimulate, strengthen and promote economic and business relations between Sri Lanka and the 28 member countries of the European Union Governed by a Board of Directors deciding on activities carried out by the Chamber. Aim of the Position Paper: promote the interests of the European companies doing business in Sri Lanka by advocating for the implementation of various public policies in key sectors

3. Outline of the Position Paper 1) Customs 2) Land Acquisition 3) Public Procurement 4) Immigration 5) Labour Regulations 6) Environmental Regulations

4. Customs I. The Proposals for Legislation to replace the current Customs Ordinance • Problem with Customs inquiries: the same officer is both the prosecutor and the judge →The ECCSL recommends the appointment of an Ombudsman • Customs Inquiries are conducted without time limits →The ECCSL recommends that time limits be mandated by law or regulation • Customs officers impose unreasonable penalties so as to increase the reward share of officers to the maximum : up to three times the value of the goods →The ECCSL recommends that the law be amended to provide for less severe penalties • Disproportionate sentences are still in force: 15-year prison sentence and confiscation of property for certain offences → The ECCSL recommends that the law be amended to not provide for imprisonment as a punishment • Businesses have reported to us that there is no certainty in regard to classification in terms of the 8-digit Harmonised System code, and that typically Customs officers classify and assess duty with a view to maximising tariff revenue, or, allegedly, for personal benefit → The ECCSL recommends a clarification of the criteria for subdivisions of the 6-digit code

5. II. The Implementation of the National Single Window (NSW) • The ECCSL would like the implementation of the NSW to be set as a priority for 2019 → single submission → interoperability of systems → coordinated inspection → application of automated risk management → information and helpdesk → paperless forms → E-permits → express clearance procedures

6. Acquisition of Ownership of Land Land (Restrictions on Alienation) Act of 2014 A major deterrent against Foreign Direct Investments by European SMEs: • prohibits acquisition of ownership of land to foreign investors and deprives them of prospective capital appreciation • foreigners who purchased lands before 2013 cannot sell to other foreigners with a capital appreciation; this makes it harder to exit • businesses (foreign investments) cannot expand → The ECCSL recommends the repeal of this act

7. Public Procurement Electronic Government Procurement (e-GP) 5 out of ten modules have been developed The estimated efficiency savings are massive The ECCSL recommends that the modules should be launched immediately.

8. Immigration I. The current problems relating to The Immigration and Emigration Act, No. 20 of 1948 • The current procedures to obtain a residence visa are complex and long • Few categories of visas II. The draft Immigrants and Emigrants (Employment Visa) Regulations, 2017 • The draft regulations provide for new categories of visa which is salutary Additionally the draft new regulations should: • enable the Sri Lankandiplomatic missions to deliver employment visas in addition to the Controller General of Immigration and Emigration and • the proposed limitation of five-years as the maximum cumulative period for a visa should be extended to ten years • the minimum monthly salary to be paid to a ‘professionally qualified person’ should be lowered to US$ 750 • there should be a category of intern visas

9. Labour Regulations I. Longer authorisations for five-day work weeks • Current labour law is too prescriptive in regard to structuring of working hours (5 and a half days) • there has been a recent change to administrative practices when it comes to the Commissioner of Labour: e.g. grnating authorisations to apply five-day work weeks. European companies are reporting delays in applications for relaxation being processed → The ECCSL recommends a predictable time framework being determined in regard to such administrative practices, determining inter alia the duration of these authorisations and that autoirisation be granted for at least 12 months. II. Harmonized salary policies between the trades • The uncoordinated making of decisions by the Wages Boards has severe economic consequences in as much as it unbalances the hierarchy of salaries in the context of the level of skills of the employees → The ECCSL recommends that thorough impact analyses be carried out for all minimum rate of wages decisions by the Ministry of Labour and Trade Union Relations prior to approving the decisions of certain trades under the Wages Boards

10. Environmental Regulations PROBLEMImport of granules for the production of compostable plastic solutions (plastic bags, lunch sheets) -High taxes on imports -Due to higher price of compostable plastic solutions (3 times higher) not an attractive alternative to conventional plastic for consumers BACKGROUND -Although bans on single-use plastic are in place in Sri Lanka  (current ban was introduced in September 2017), these laws are not fully effective -Currently insufficient support of manufacturers of more sustainable alternatives to conventional plastic solutions (no tax advantages/subsidies/whatsoever) SOLUTIONS Recommendations from the Environmental Foundation Ltd. (EFL): -Alternatives to single use plastic should be made available and incentivized (to make them more affordable to the general public) -Higher taxes on non-sustainable plastic solutions + tax advantages for more sustainable alternatives -Minimal, symbolic levy on single-use plastic for the consumers, manufacturers or importers oRevenue generated from levy could go into incentivisation and subsidisation of compostable plastic solutions oSavings from the reduced pre-selection effort concerning primary separation needs of organic and non-biodegradable waste can again be used in favour of plastic reduction strategies -Additionally: clear awareness campaigns on environmental and economic impacts, stakeholder engagement and continuous monitoring

11. Regulatory Bottlenecks PROBLEM Regulatory bottle necks BACKGROUND Licenses/permits/authorizations are not granted on the basis of some other licence/permit/authorization not having been granted even though there is no real nexus or logical rationale for this. SOLUTIONS An independent agency should be set up that can speedily resolve such issues thereby allowing European investors/businesses to conduct the business without hindrance

12. Abuse of authority by Excise officers and targeting of foreigners PROBLEM Excise officers are raiding private homes of foreigners and confiscating foreign liquor in excess of 7.5 litres BACKGROUND A gazette notification was published in declaring the maximum quantity for sale by retail to be 7.5 liters. The gazette does not refer to possession. However the Excise authorities interpret this to mean that no person can possess more than 7.5 litres SOLUTIONS The Commissioner of Excise should issue a statement clarifying that persons are allowed to possess more than 7.5 litres of foreign liquor for private consumption purposes and Excise officers should be directed to cease illegal raids and asserting that the limit is 7.5 litres.