By Nishel Fernando 
The rent-seeking nature of Sri Lanka’s public sector is blamed for the failure to fully implement the key e-government initiatives, including the Electronic Government Procurement (e-GP) System aimed at enhancing the efficiency and cutting wastage in the public sector.   “I am still unable to buy a pack of A4 paper via the so-called Electronic Government Procurement (e-GP) System. People have been working on it for years. 

However, it’s not happening. 

When I asked from some of the people who were working on it last week, they said they were still unable to find space to set it up,” Economic Reforms and Public Distribution Non-Cabinet Minister Dr. Harsha de Silva said.

He shared these remarks at API Asia Conference 2019, held in Colombo, yesterday.

The conference was organised by the Federation of Information Technology Industry Sri Lanka (FITIS). 

As the government procurements account for 15 percent of GDP, the Finance Ministry last May launched the e-GP System, aiming to improve transparency and competitiveness, while aiming to make a saving of Rs.30 billion per annum to government coffers.

As the e-GP System eliminates the discretionary powers of state officials and politicians, de Silva noted that there is strong disincentive for  such projects to succeed. 

“I wanted to get some potted plants in my office recently. It took them one month because it had to go through a process and they don’t consider checking online to get quotes on potted plants, as it violates AR and FR. Hence, they had to get it from Rainbow Pages or similar source.

No matter how much we try to make these changes, there’s resistance. Why is there such resistance? Because of the rent-seeking nature of the persons who have the 
discretion,” he said.

He also noted that the coalition government was another hindrance to execute  ambitious projects. 

“It was rocky because it was a tough marriage and we still have to put up with each other. However, the marriage is going to end soon and we will find a better bride. In another month, we will have a consolidated, younger, cleaner and professional  set of people hopefully giving leadership.” 

The minister also suggested that the public sector needs to be incentivised in order to secure their support to implement the e-government projects. 

“It doesn’t matter how much technically superior you are, unless you incentivise the public sector to change the paradigm, it’s going to become an issue,” he said.

Govt. to remove dividend tax on tech start-ups 

The government is currently contemplating to abolish the dividend taxes imposed on tech start-ups to support their growth.

“We are going to remove all dividend taxes on start-ups to support tech firms to grow. We are almost there to completely remove the dividend tax on tech firms going forward,” Economic Reforms and Public Distribution Non-Cabinet Minister Dr. Harsha de Silva said.

However, the minister failed to mention as to when exactly the tax cut will come into force. He said it would come into force at the “earliest possible opportunity”. 

He noted that the government has identified the dividend taxes as a key obstacle for start-ups to grow in Sri Lanka, as most tech firms, which are mostly run by their founders,

depend on the dividend income as a return on their investment and efforts. 

Further, he pointed out that there are additional expenses for start-ups, such as the costs involved in acquiring Intellectual Property registrations. 

Dr. de Silva said he believes the removal of the dividend tax on the tech start-ups would lead to a paradigm shift in Sri Lanka’s start-up eco-system. 

Further, he noted that the government has brought down the effective corporate tax rate on the IT industry to mid-single digits.