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By Channa Kasturisinghe

The country's industrial sector could save nearly one-third of estimated profits by removing legal impediments unhealthy for enterprise development. The Deregulation Committee established under the Advisory Council for Industrial Development has found that many regulations imposed years ago do not suit the changing local and international economic environment and have put Sri Lanka in an unfavourable position in competing in world markets.

Chairman of the Committee, Bandula Perera told a press conference in Colombo yesterday that a regulatory review is urgently needed to improve the country's position in the world market and to increase the economic growth of the country.

"Sri Lanka has accumulated too many regulations over the years but they serve no useful purpose and in many cases hinder the development of the industrial sector. The Committee does not suggest that we should do away with regulations. What we really need is to fine-tune the regulatory requirements by removing unnecessary regulations and introducing better ones," Mr. Perera said.

He said regulations impede business decisions by blocking entry into the market, controlling internal business decisions, adding lengthy and complicated regulations and increasing transaction costs.

"Some regulations block the newcomers' entry into economic activities such as telecommunication, electricity and gas industries giving monopoly power to existing suppliers.

Price control in the case of electricity and passenger transport is another way of impeding business progress. There are numerous other regulations which cause cumbersome procedures to follow where licensing and permission have to be obtained before starting a business, he said.

"Our estimates show that an average enterprise in Sri Lanka hires an additional contract worker to take care of regulatory requirements. Survey findings show that on average the transaction costs add nine percent to the total productions costs and it is nearly 30 percent of the profit," Mr. Perera said.

He said the Committee has commissioned seven papers identifying many aspects of the existing regulatory procedures.

The seven papers are based on: Regulatory Impediments for Business Progress, Regulation and Transaction Costs, Customs Regulations, Tax Regulations, Regulations for Modern and Efficient Energy Sector, Regulatory Problems from an International Perspective and Review of Regulations in the Tea Sector.

Mr. Perera said the Committee has orgainised a two-day `Deregulation Conference' from February 16.

Experts in various fields will discuss regulatory issues including taxation, customs, ports, energy and the tea industry.

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