While large corporations may have the ability to weather such inefficiencies, small and medium-sized enterprises, in particular, are vulnerable to these delays, as they often lack the resources to absorb the additional costs.
Research findings reveal that delays within Sri Lanka’s Customs operations are significantly undermining the country’s competitiveness and fostering an environment ripe for corruption. A study published by Sri Lanka’s Institute of Policy Studies (IPS) found that inefficiencies in Customs procedures are not only increasing business costs but are also eroding investor confidence in the country’s trade sector.
According to the research, bottlenecks in Customs clearance processes are forcing businesses to endure long waiting times for imports and exports, ultimately affecting the timeliness and cost-effectiveness of trade. The study highlights that delays in the clearance of goods are causing financial losses for businesses, adding up to a national economic disadvantage in the competitive global market.
Complex, Slow System
The research points to Sri Lanka’s complex and outdated Customs procedures as the root cause of the delays. Customs clearance, which includes the inspection of goods and documentation checks, is often bogged down by bureaucratic inefficiencies, inadequate technology, and inconsistent enforcement practices. In some cases, businesses are forced to pay higher costs due to extended storage periods, demurrage fees, and the disruption of production schedules.
Small and medium-sized enterprises (SMEs), in particular, are vulnerable to these delays, as they often lack the resources to absorb the additional costs. While large corporations may have the ability to weather such inefficiencies, SMEs face a disproportionate burden, which stifles their growth and limits their participation in global markets.
“Businesses are struggling with unpredictable delays in Customs clearance. These inefficiencies add unnecessary costs and uncertainty, which in turn make Sri Lanka a less attractive destination for international trade and investment,” said Dr. Dushni Weerakoon, Executive Director of IPS, during a presentation of the study’s findings.
The IPS study found that Sri Lanka ranks poorly in comparison to its regional competitors in terms of trade facilitation. For instance, in the World Bank’s Logistics Performance Index, Sri Lanka’s Customs procedures lag behind countries such as India, Bangladesh, and even smaller regional players like Myanmar, despite the island nation’s strategic location and significant potential as a trade hub.
The Cost of Delays
The impact of these delays is not only financial but also reputational. Sri Lanka’s ports and airports, which serve as key gateways for trade, are increasingly seen as unreliable by foreign investors. A delay in Customs clearance can disrupt an entire supply chain, causing knock-on effects that extend to downstream industries, such as retail, manufacturing, and logistics.
One major concern highlighted in the report is the high cost of perishable goods and the vulnerability of the agricultural sector. Delays in clearing agricultural imports or exports can cause spoilage or reduce shelf life, leading to financial losses for producers and traders.
Moreover, Sri Lanka’s reliance on imports for raw materials and essential goods means that delays are also affecting domestic industries that depend on timely deliveries. In industries such as electronics, machinery, and pharmaceuticals, the research notes, disruptions can lead to product shortages and increased prices, further exacerbating inflationary pressures on the economy.
Corruption and Transparency
The study further found that Customs delays are fostering an environment where corruption can thrive. While not widespread, bribery and kickbacks have been reported in relation to speeding up clearance processes. Customs officers, whose discretion often plays a large role in clearance decisions, have been accused of soliciting payments to expedite shipments, a practice that can create an uneven playing field for businesses.
“Customs inefficiencies and lack of transparency are breeding grounds for corrupt practices. Without a clear and streamlined process, businesses often find themselves under pressure to pay bribes to avoid costly delays, perpetuating a cycle of corruption,” said Weerakoon.
The IPS researchers argue that Sri Lanka’s Customs operations require an urgent overhaul, including better training for officers, the adoption of modern technology, and a more transparent approach to Customs procedures. The implementation of a digital system to track and expedite the flow of goods is seen as a potential game-changer in reducing delays and improving efficiency.
The Road Ahead
Addressing the Customs inefficiency challenge, however, will require coordinated efforts across the government, private sector, and international partners. There is a need for political will and institutional reforms to simplify regulations and modernize Customs processes. The study advocates for the establishment of an independent body to monitor and ensure the effectiveness of reforms, ensuring that they are implemented consistently and equitably.
For Sri Lanka to reclaim its competitive edge as a regional trade hub, experts stress the importance of aligning the Customs operations with global best practices. The government has already made some attempts at modernization, including the introduction of the Sri Lanka Customs Automated System, but the report stresses that more needs to be done to streamline operations and reduce delays further.
As Sri Lanka seeks to recover from the economic challenges posed by the COVID-19 pandemic and rebuild investor confidence, the findings of this research present an important opportunity for policymakers to address one of the key bottlenecks hindering the nation’s economic growth.
Improving Customs operations could not only boost trade but also foster a more transparent, efficient, and competitive business environment for the country’s future.
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