Current exporter registration process discourages SMEs entering international markets: think tank

• Verité Research says current registration process is lengthy, inefficient and burdensome
• Indentifies that mandatory registration with the EDB is unnecessary and often subject to abuse

The lengthy, inefficient and burdensome exporter registration process is discouraging Small and Medium Enterprises (SMEs) entering international markets, which has also become abusive, a study conducted by Colombo-based think-tank showed. 

The latest policy note issued by Verité Research titled, ‘Reducing domestic barriers to export success; Simplifying and rationalising the exporter registration process is critical’ highlighted that Sri Lanka’s lengthy, inefficient and burdensome exporter registration process does more to hinder rather than help SMEs that are more in need of government assistance to enter international markets, compared to larger firms.

The current registration process, which includes exporter registration with the Export Development Board (EDB), has been introduced with the good intention of identifying and supporting new exporters. 

However, the policy note pointed out that its execution severely impedes the achievement of this goal.  According to the study, a sole proprietor/ partnership has to go through a minimum of 10 steps and six different agencies for 1-3 weeks to register. In addition, the businesses, which exports products that require export permits/licenses are subject to an extended process adding further 2-4 weeks.  The study identified that the mandatory registration with the EDB is unnecessary and often subject to abuse as it is mainly based on a site assessment of the business by a Grama Niladhari (GN), who is neither trained to carry out site assessments, nor is he/she given a clear set of criteria to assess the capacity of a business to export. 

“Not only does the process imposes an additional burden on new exporters, the current process is also vulnerable to abuse. 

For example, some businesses had obtained the EDB certificate to strengthen their chances of securing a loan, as banks consider an EDB exporter registration certificate as an indication of the credibility of the applicant’s business,” authors of the study stressed.

The study suggested that the EDB could identify new exporters by obtaining such information from Sri Lanka Customs (SLC).

“The SLC records all exports executed, and hence can easily provide EDB with a list of new exporters within any given period. The SLC database is a more reliable source to identify new exporters than recommendation letters from GNs,” authors pointed out. 

 The registration with the EDB is also a prerequisite for registration with two other government agencies that are central to the export process—the Inland Revenue Department (IRD) and Sri Lanka Customs (SLC). According to the study, potential exporters in particular SMEs based outside of Western Province faced difficulties in registering their businesses with SLC due to paucity of information.

“For example, to register with SLC, potential exporters need the assistance of a Customs House Agent (CHA). However, obtaining a list of CHAs registered with SLC is not easy. This opacity and information paucity places an undue burden on SMEs, especially those located outside the Western Province. This could result in several trips to Colombo for SMEs to register as an exporter,” it stated. 

In addition, the potential exporters also struggle with finding necessary information on the registration process due to the lack of a single source of information, detailing the entire registration process.

“Businesses are required to peruse every institution’s website and/or visit the agencies in-person to obtain information. Furthermore, information pertaining to registering with a single agency is scattered across several websites. 

For example, the websites of IRD, EDB and Tea Board do not provide information on the time taken to register with them on their respective websites. Instead, this information is provided on the Government Information Centre website,” it elaborated. 

The study recommended the government to revaluate the entire exporter registration process and to identify how it can be made simpler and more effective in achieving its objectives.