Political power in Sri Lanka has been increasingly concentrated in the executive since 2006. According to Freedom House 2011, President Mahinda Rajapaksa has introduced a more authoritarian and centralised rule with the majority of decisions being made by him and a small group of trusted advisors. This has raised concerns over the lack of transparency in policy formulation and decision-making. Sri Lanka was formerly committed to a policy and process of privatisation of public companies and made some progress in privatisation, including part of the national airline and some hotels. However, according to the US Department of State 2010, privatisation was conducted in a corrupt manner, which is estimated to have cost Sri Lanka USD 1.3 billion. For example, Lanka Marine Services and Sri Lanka Insurance Company were privatised in 2002. Over the course of 2008 and 2009, the Supreme Court of Sri Lanka reversed the decision to privatise these two companies. In its 2009 report, the Supreme Court denounced the corruption associated with the privatisations in the strongest terms. Both companies were undervalued by complicit auditors and sold off to private interests well-connected to high-level government officials.

It is further noted in the World Economic Forum Global Competitiveness Report 2011-2012 that corruption is one of the major constraints on business operations. According to the former chief justice, as cited in an August 2011 news article by Reuters, corruption has become systemic in Sri Lanka, which will discourage foreign investors from investing in the country. Likewise, the US Department of State 2011 also reports that foreign companies identify corruption as a constraint to foreign investment, but that in the big picture it does not pose a major threat after the contracts have been won. Corruption seems to have the greatest influence on investors in large projects and on those seeking government procurement contracts. Companies seeking to contract agents to facilitate business transactions on their behalf, whether planning to invest in or already doing business in Sri Lanka, are strongly recommended to conduct extensive due diligence to avoid contracting potentially corrupt agents.

The level of corruption is markedly high in public procurement. Business executives in the World Economic Forum Global Competitiveness Report 2011-2012 report that the diversion of public funds to companies, individuals, or groups due to corruption is fairly common. It is estimated that the percentage of a public sector contract paid in bribes has tripled in recent years, according to the USAID Sri Lanka Democracy and Governance Assessment 2006. One of the reasons for this is insufficient legislation. For instance, the law on declaration of assets does not require political parties and parliamentary candidates to declare the sources of their funding, thus obscuring potential biases politicians may hold towards bidders. Political bribery has reportedly reached considerable proportions, and it is reported that in order to obtain large contracts, commissions and bribes are often paid overseas and in hard currency. Therefore, companies are recommended to develop, implement and strengthen integrity systems and conduct extensive due diligence during the procurement process when planning to invest in or when already doing business in Sri Lanka.

According to the World Economic Forum Global Competitiveness Report 2011-2012, Sri Lanka's inefficient government regulations and political instability are significant, problematic factors for doing business. The country's political instability and frequent policy shifts create uncertainties among companies, impeding their ability to make a proper business risk assessment. Nevertheless, according to the World Bank & IFC Doing Business 2012, starting a business in Sri Lanka has become simpler and quicker, now requiring 4 procedures and taking an average of 35 days. The costs, when calculated as a percentage of income per capita are very low (only 4.7 %) and there are no requirements for minimum capital. According to the US Department of State 2011, there is no apparent discrimination against foreign companies. The Board of Investment (BOI), a government agency that is responsible for foreign investments, functions as a one-stop shop for investors. The BOI is quite effective in helping investors who intend to set up business in the BOI-established industrial processing zones, which also offer better infrastructure and reliable public supplies and utilities. However, the US Department of State 2011 maintains that the BOI is less effective in assisting investors seeking to operate outside these zones. Some of the operating difficulties cited by companies pertain to difficulties in clearing supplies and equipment through customs, finding a factory location, and obtaining approvals for operations.

The Sri Lankan tax regime is characterised by a cumbersome bureaucracy. According to the World Economic Forum Global Competitiveness Report 2011-2012, tax rates and regulations are identified by the surveyed business executives as major business constraints. Attempts have been made to reduce red tape by introducing standard tariff rates and in order to minimise corruption and attract more foreign investment to Sri Lanka, uniform administrative procedures have been introduced. Despite such measures, the total tax rate paid by companies is very high compared to the OECD and the regional average, which according to the World Bank & IFC Doing Business 2012, amounts to approximately 105.2% of profits.

Companies should be aware that resolving disputes in the courts may be a lengthy process because the procedures allow for one party in the dispute to prolong the case indefinitely. The court system is considered unreliable and cannot be depended upon for upholding the sanctity of contracts; therefore, companies often prefer to resolve matters out of court, for example through arbitration, as reported by the US Department of State 2011. The Arbitration Act of 1995 recognises foreign arbitration awards. Arbitral awards made outside Sri Lanka can be enforced in Sri Lanka, and similarly, awards made in Sri Lanka are recognised and enforceable abroad. The Institute for the Development of Commercial Law and Practice (ICLP) arbitration centre has been established to facilitate settlement of commercial disputes. If the Sri Lankan government is party to the dispute, often the case when foreign companies are involved, the ICLP is unlikely to become involved in the dispute. However, Sri Lanka is a member of the International Centre for the Settlement of Investment Disputes (ICSID) and has ratified the New York Convention 1958. Access the Lexadin World Law Guide for a collection of legislation in Sri Lanka.

Individual Corruption

According to a survey of judges in the Transparency International Global Corruption Report 2007, the largest group of court personnel taking bribes are court clerks. Bribes are paid to influence the issuance of court summons and trial dates. Others who benefit from bribes are public prosecutors, police and lawyers. Furthermore, it is also reported that people who are willing to pay bribes can have better access to the legal system, according to Freedom House 2011.

Business Corruption

According to the US Department of State 2011, the judiciary is perceived to be the most corrupt institution in Sri Lanka. The courts are subject to political influence and they do not always result in impartial verdicts. This, combined with the knowledge that court procedures are very time-consuming as their procedures are such that one party in a dispute can prolong the cases indefinitely results in companies avoiding taking commercial disputes to court. This is especially the case when the Sri Lankan government is one of the parties in a business dispute because it is more difficult for a company to secure impartial judgement from the court. However, the Supreme Court made several rulings against the government in 2008.

Political Corruption

According to the Transparency International Global Corruption Report 2007, judges who do not adhere to the political line are warned, and if that does not provide the desired result, they are often dismissed on some pretext. 'Uncooperative' judges are frequently intimidated and/or transferred. On the other hand, judges who toe the political line can act with impunity, even if there is evidence of corrupt practices such as bribe-taking litigants or junior staff.

Freedom House 2011 reports that judicial independence has been respected by successive governments, and judges are generally free to make decisions without explicit political intimidation. However, there has been a growing concern about politicisation of the judiciary in recent years, in particular in the appointment of high-level judges. In addition to political interference, corruption, especially in the lower courts, is fairly common. It is reported that people who are willing to pay bribes will have better access to the legal system.

Frequency

The World Bank & IFC: Doing Business 2012:
- In order to enforce a commercial contract, a company must on average go through 40 procedures, taking 1,318 days at an average cost of 23% of the claim (most of it being attorneys' fees).

World Economic Forum: The Global Competitiveness Report 2011-2012:
- Business executives give the independence of the judiciary from influences of members of government, citizens, or companies a score of 4.3 on a 7-point scale (1 being 'heavily influenced' and 7 'entirely independent').

- Business executives give both the efficiency of the legal framework for private companies to settle disputes and to challenge the legality of government actions and/or regulations a score of 4.5 and 4.3 respectively on a 7-point scale (1 being 'extremely inefficient' and 7 'highly efficient').

Transparency International: Global Corruption Report 2007:
- Out of 441 litigants and professionals, 84% perceived the judiciary not always being fair and impartial, of which 20% maintained that it was never fair and impartial.

- Among judges, lawyers and court personnel, 83% claimed that the judicial system was corruptible.

Individual Corruption

According to a 2007 survey conducted by an NGO, cited in Global Integrity 2007, the police force was perceived by Sri Lankans as the most corrupt institution.

The website of the Commission to Investigate Allegations of Bribery or Corruption and a 2008 article published by the Asian Human Rights Commission reveal that corruption in the police is a problem, as many of their cases pertain to corrupt practices by the police, such as extortion, making false charges against citizens who refuse to pay. Similarly, there have been cases of police harassing and extorting money from certain sexual oriented groups such as homosexuals, as reported by the US Department of State 2010.

Political Corruption

According to the Transparency International Sri Lanka Sri Lanka Governance Report 2008, the police are used by the government to suppress criticism. According to a 2007 news article by TamilNet, members of the government opposition claim that if they make allegations about corruption within government institutions they will be subject to police harassment.

A 2008 news report from UPI Asia reveals that the Supreme Court of Sri Lanka has made several decisions against police officers for abusing their power of arrest, and torturing people purely to obtain bribes, but the rulings have been ignored. This adds to the general perception of police impunity.

Frequency

World Economic Forum: The Global Competitiveness Report 2011-2012:
- Business executives give the reliability of Sri Lanka's police services to enforce law and order a score of 4.1 on a 7-point scale (1 being 'cannot be relied upon at all' and 7 being 'can always be relied upon').

Centre for Policy Alternatives April-May 2007 (cited in Global Integrity 2007):
- 43% of the surveyed Sri Lankans believed that the police force was the most corrupt institution in the country.

Individual Corruption

According to Transparency International Sri Lanka Integrity in Government Hospitals in the Colombo District 2009, the Sri Lankan health sector is plagued by petty corruption, bribery and nepotism. According to the report, nepotism appeared to be the most common form of corruption, as the majority of the surveyed households stated that they had used personal relationships with hospital employees to avoid formal procedures. Bribery is also reported to be widespread, and some of the major reasons cited by households for paying bribes to hospital employees were to get a better care/attention and to release a body from the mortuary.

Both the June 2009 Position Paper and the 2010 Annual Report published by Transparency International Sri Lanka describe how corruption has permeated Sri Lanka’s education system, from the appointments, transfers and promotions of teachers, to a principal of a prestigious school soliciting bribes from students’ parents. The June 2009 paper also highlights how corruption has affected the quality, equality and efficiency of the education service. For example, through school principals or educational personnel soliciting illegal payments from parents who desire to send their children to a privileged school, or the appointment or promotion of unqualified personnel into the education service.

Business Corruption

According to the World Economic Forum Global Competitiveness Report 2011-2012, the surveyed business executive indicate that it is rather common for companies to make irregular payments or bribes connected with public utilities and awarding of licences.

Political Corruption

An example of misappropriation of public funds was the deficit of the Ceylon Electricity Board (CEB) which accumulated a debt of approximately LKR 600 billion. According to the Committee on Public Enterprises First Report (2nd Session) 2007, the CEB's management conducted fraud when it routinely introduced procedures that covered up its corrupt practices.

The US-based NGO Government Accountability Project (GAP) published a report in 2009 on corruption in the privatisation of Sri Lanka Insurance Company (SLIC). Over the course of 2008 and 2009, the Supreme Court of Sri Lanka reversed the decision to privatise SLIC. In its report, The Court expressed its opinion strongly, writing that the improper way in which the sale of SLIC took place "shocked the conscience". The company was undervalued by complicit auditors, and sold off to private interests well-connected to high-level government officials. Further, Milinda Moragoda, the former Minister under whose jurisdiction the dishonest privatisation of SLIC had occurred was named Minister of Justice and Judicial Reforms in Sri Lanka with authority of the Attorney General, who directs the CID to carry out criminal investigations, thereby excluding the possibility of prosecuting him.

Frequency

The World Bank & IFC: Doing Business 2012:
- In order to obtain a construction permit, a company must go through 18 procedures and spend 217 days at a cost of approximately 41% of income per capita.

World Economic Forum: The Global Competitiveness Report 2011-2012:
- Business executives give the government administrative requirements (permits, regulations, reporting) in Sri Lanka a score of 3.7 on a 7-point scale (1 being 'extremely burdensome' and 7 'not burdensome at all').

Transparency International Sri Lanka: Integrity in Government Hospitals in Colombo District, February 2009:
- 98.5% of the surveyed households reported they had used personal relationships with hospital employees to avoid formal procedures. Amongst them, 61% cited the reason for using personal relationships was to avoid procedures, while 17% cited getting attention from the employees was the reason.

- Of all reasons given by households for paying bribes to hospital employees, 25% cited seeking attention and care, 19% cited release of a body from the mortuary of the government hospital, while 15% cited getting a wheel chair as reasons for paying bribes.

Business Corruption

According to the US Department of State 2011, foreign investors are permitted to buy land from private sellers, but the government has introduced a 100% transfer tax for foreigners. Companies should be aware that concerns have been raised as to the proper definition of property rights, and although the property registration pertaining to land ownership is said to be quite reliable, the forging of documents and fraud have also been registered.

Political Corruption

According to the Transparency International Sri Lanka Sri Lanka Governance Report 2008, the former President Chandrika Kumaratunga had appropriated a wetland area near Parliament for public purposes, but then decided instead to give the land to a private developer to create a golf course and luxury housing. The Supreme Court ruled that this constituted abuse of power and betrayal of public trust, and the President was fined approximately USD 30,000. This was the first time a former President had been indicted and convicted in Sri Lanka.

According to the Transparency International Global Corruption Report 2008, when the Mahaweli Dam was constructed, corruption was one of the reasons why the government neglected to provide resettled households with compensation, which was otherwise agreed upon with the donors of the project.

Frequency

The World Bank & IFC: Doing Business 2012:
- It takes 8 procedures and 83 days to register property at an average cost of 5.1% of the property value.

World Economic Forum: The Global Competitiveness Report 2011-2012:
- Business executives give the protection of property rights in Sri Lanka, including financial assets, a score of 4.5 on a 7-point scale (1 being 'very weak' and 7 'very strong').

Business Corruption

According to the World Economic Forum Global Competitiveness Report 2011-2012, companies view the tax system as a major constraint for doing business in Sri Lanka. Companies should also be aware that tax laws are not always enforced uniformly and without discrimination, as reported by Global Integrity 2007.

Political Corruption

Officials in the Sri Lankan tax department have large discretionary powers, which leave room for corrupt practices. This seriously hampers the country's economy. According to Global Integrity 2007 and Freedom House 2010, the biggest scandal in Sri Lanka's recent history was the Value Added Tax (VAT) scam that involved the Sri Lankan Inland Revenue Department between 2002 and 2004. The estimated loss of tax revenues amounted to almost USD 4 billion. This was a substantial amount when considering that the total annual tax revenue in Sri Lanka was a mere USD 3.5 billion in 2004. The scam involved collusion between a number of businesspeople and officials in the Tax Department. The fraudsters obtained VAT refunds for fabricated VAT payments in relation to nonexistent goods and companies. The scam was exposed in 2004 due to an audit by the Auditor General's Department.

Frequency

The World Bank & IFC: Doing Business 2012:
- A medium-sized company must make 71 payments to the tax authorities each year, spending 256 hours each year on preparing, filing, and paying taxes.

- The total tax rate is estimated to be 105.2% of profits.

Business Corruption

The Sri Lankan customs system lacks transparency and is not always efficient, as illustrated in the World Economic Forum Global Enabling Trade Report 2010, where business executives rate the transparency of the border administration, in relation to irregular payments in export and import, and the efficiency of customs administration as relatively low, constituting a competitive disadvantage for the country.

Political Corruption

Sujith Prasanna Perera, former Assistant Superintendent of Customs was assassinated in 2001, as a result of a conspiracy by two Customs officials, whose corrupt activities Sujith had exposed. According to a 2010 news release by Transparency International Sri Lanka, Sujith exposed an incident where a customer officer illegally altered or deleted data in order to help a group of businessmen to cover up their fraudulent activities so a post-audit could be avoided. Another case exposed by Sujith, was another customer official who had assisted smugglers by clearing several import consignments on falsified customs duty payment receipts. Sujith was posthumously awarded the National Integrity Award 2010 for his attribution.

According to the US Department of State 2011, corruption is still a persistent problem in customs clearance and enables extensive smuggling of certain consumer items.

Frequency

The World Bank & IFC: Doing Business 2012:
- Exporting a standardised shipment of goods requires a company to prepare 6 documents, taking an average of 21 days at a cost of USD 715 per container.

- Importing a standardised shipment of goods requires a company to prepare 6 documents, taking an average of 19 days at a cost of USD 745 per container.

World Economic Forum: The Global Competitiveness Report 2011-2012:
- Business executives give the efficiency of customs procedures (burden of customs procedures) in Sri Lanka a score of 4.4 on a 7-point scale (1 being 'extremely inefficient' and 7 'extremely efficient').

World Economic Forum: The Global Enabling Trade Report 2010:
- Business executives give the transparency of border administration (irregular payments in exports and imports) a score of 3.1 on a 7-point scale (1 'not transparent' and 7 'transparent').

Business Corruption

The US Department of State 2011 reports that corruption seems to have the greatest influence on investors in large projects and on those seeking government procurement contracts. In addition, the US Commercial Service 2011 also reports that it is difficult for foreign companies to participate in major infrastructure projects due to a lack of transparency and accountability in the tender process, as well as unsolicited proposals in the infrastructure sector.

Business executives in the World Economic Forum Global Competitiveness Report 2011-2012 indicate that the diversion of public funds to companies, individuals or groups due to corruption is fairly common. Companies are recommended to use a specialised public procurement due diligence tool in order to mitigate corruption risks related to public procurement in Sri Lanka.

See more on public procurement under 'Public Anti-Corruption Initiatives' in the Initiatives section.

Political Corruption

The government procurement process is frequently carried out in an irregular manner. There are examples of huge projects being awarded to companies outside the tender process. According to the US Department of State 2010 and the Transparency International Sri Lanka Sri Lanka Governance Report 2008, military procurement process is laden with corruption. It is common knowledge that weapons deals are rigged, with huge commissions at the highest levels. However, laws, such as the Official Secrets Acts, prevent these irregularities from being investigated.

It is a common feature that senior officials are in charge of public and semi-public companies, such as the Lanka Logistics and Technologies which the government set up in 2007 to be the sole procurer of all military equipment. In 2006, a deal was signed for the procurement of several MiG-27 aircraft. It was the largest military deal in Sri Lanka, but it was exposed to be wrought with irregularities and fraud. It was supposed to be a government-to-government deal between Sri Lanka and a Ukrainian state-owned company, but the MiG-27s were to be delivered to a 'go-between' company registered in the UK. The Sri Lankan Air Force furthermore agreed to pay a much higher price than what they had paid for other MiG-27s. When irregularities were revealed the case was handed over to the Commission to Investigate Allegations of Bribery or Corruption (CIABOC) for further investigation, however, according to Transparency International’s Global Corruption Report 2009, the investigation was halted in February 2008 when the CIABOC’s director general was removed.

See more on public procurement under 'Public Anti-Corruption Initiatives' in the Initiatives section.

Frequency

World Economic Forum: The Global Competitiveness Report 2011-2012:
- Business executives give the diversion of public funds to companies, individuals, or groups due to corruption a score of 3.6 on a 7-point scale (1 being 'very common' and 7 'never occurs').

- Business executives give the favouritism of government officials towards well-connected companies and individuals when deciding upon policies and contracts a score of 3.5 on a 7-point scale (1 being 'always show favouritism' and 7 'never show favouritism').

Business Corruption

The Commission to Investigate Allegations of Bribery or Corruption webpage on 'Detections and Raids' cites cases of corruption in the Forest Conservation Department, where officials will, through bribes, for example draft documents that recommend the opening of a business, such as a quarry, a lumberyard etc, in a forest conservation area.

Furthermore, according to the UNDP’s 2008 report on Tackling Corruption, Transforming Lives, sand mining is a highly lucrative operation, but much of it takes place illegally. According to the report, many of such activities takes place illegally with police involvement or permits being obtained through bribery.

• Legislation: Sri Lanka ratified the United Nations Convention against Corruption in March 2004. Acts of corruption and attempted corruption in the form of extortion, active and passive bribery are criminalised under the Bribery Act No. 8 of 1973. Furthermore, the Declaration of Assets and Liabilities Law, No. 1 of 1975 stipulates that public officials must annually declare their assets in order to enhance transparency, and to ensure that public officials are not enriching themselves illegally while in office. However, according to Global Integrity 2007, there is no legal obligation that these declarations be audited, nor is there no right to public access to this information due to the absence of a freedom of information act. Sri Lankan legislation does not include whistleblower protection. A more recent legal anti-corruption initiative is the Prevention of Money Laundering Act No. 5 of 2006 (amended in 2011). In 2001, the 17th Amendment to the Constitution was passed with the purpose of depoliticising the public sector and creating truly independent commissions. Under the 17th Amendment, a Constitutional Council was to be appointed. The Council would be responsible for appointments to key posts and to the independent commissions. However, according to Transparency International Global Corruption Report 2009, the 17th Amendment continues to be ignored, which has further reduced public confidence in the rule of law and good governance.  Access the Lexadin World Law Guide for a collection of legislation in Sri Lanka.

• Government Strategies: Sri Lanka has taken some basic steps to curb corruption, and with the ratification of UNCAC and the ADB & OECD Anti-Corruption Initiative for Asia Pacific Anti-Corruption Action Plan, as well as the collaboration with USAID, to work out an anti-corruption programme to rectify some of the flaws in their governance system. The country has demonstrated political will internationally. However, more steps need to be taken. Most significantly, Sri Lanka has set up the legal framework for curbing corruption but still needs to implement more efficient enforcement of all the anti-corruption measures they have initiated - most notably the law on declaration of assets by parliamentarians and public officials should be rigorously upheld instead of being ignored as is currently the case. The President failed to appoint the Constitutional Council, which is required under the Constitution, and in this way obstructing the appointment of independent representatives to important public entities such as the Bribery Commission, Police Commission and the Judicial Service Commission. The Constitutional Council is also meant to appoint key people such as the Attorney General, the Auditor General, the Inspector General of Police, the Ombudsman and the Secretary General of Parliament to make sure they are independent from the executive. Instead Sri Lanka has a situation where the President is making personally and politically motivated appointments to these bodies that are supposed to oversee the government.

• Anti-Corruption Agencies: The Commission to Investigate Allegations of Bribery or Corruption (CIABOC) is formally an independent body functioning under the Bribery Amendment Act No. 19 of 1994. The CIABOC may investigate corruption cases, but it does not possess any powers to carry out proactive investigations. Instead, it focuses on corruption prevention and holds corruption awareness courses for politicians and officials etc. According to Freedom House 2010, even though the Commission receives over 4,000 cases a year, only one or two cases ends with convictions annually, illustrating that the Commission has been largely inefficient in curbing corruption. Another 2011 report published by Freedom House also points out that government interference, and the Treasury’s authority to withhold the Commission’s funding, have largely weakened its independence.  Finally, as the CIABOC cannot initiate investigations, it is dependent on the public. However, it is a huge disincentive for people to lodge a corruption complaint as there is no whistleblower protection. On the CIABOC website, cases of corruption detection and raids in which the Commission has been involved are posted. Yet the website reveals no large-scale corruption cases. The independence of the CIABOC was further damaged in 2008, when the President interfered with the staffing of the CIABOC, as reported by Freedom House 2010.  Since March 2010, the CIABOC has been rendered inactive after the terms of previous commissioners expired, with no replacements appointed. In early 2011, the Sri Lankan government transferred 56 police officers assigned to the Commission, and appointed 56 new officers who have not been screened nor trained in anti-corruption work, according to the US Department of State 2011.

• The Auditor-General: The Auditor General Department monitors all government units at the national, provincial and local levels to ensure transparency. The department is an independent body and the Auditor General is appointed by the President. According to Global Integrity 2007, overall the AG Department has a strong foundation with increased transparency as their reports are posted online at the Auditor General's website, but not much action is taken. The audit reports were previously referred to two committees, the Committee on Public Accounts (COPA) and the Committee on Public Enterprises (COPE), which were supposed to take action on the audit reports. However, the government has interfered with the work of the two committees after they reported on widespread corruption and waste of resources and money in state-owned companies. This step has left the Auditor General Department and its anti-corruption work in a weak state. An illustration of this is, as mentioned in the Transparency International Sri Lanka Sri Lanka Governance Report 2008, that in 2007 more than 7,000 audit queries never received an answer from public institutions. According to a 2006 article by the Asian Human Rights Commission, the Treasury Secretary further tried to intimidate and weaken the Auditor General Department. This has raised concerns about the continued independence of this department.

• Committee on Public Enterprises: The Committee on Public Enterprises (COPE) was established in 1979 in order to ensure that financial discipline was upheld in public corporations and semi-governmental organisations where the government is a financial stakeholder. The COPE is obliged to report to Parliament on financial procedures, performance and management of the corporations. COPE has so far published two reports, both in 2007 that show massive corruption and financial malpractice in public enterprises and state institutions. However, according to Transparency International Sri Lanka Sri Lanka Governance Report 2009, many of the suggestions and recommendations proposed by the COPE have been disregarded. The same report also pointed out several factors that undermine the effectiveness and credibility of the COPE. One of which is the competing lines of accountability of the current COPE Chairman. As a chairman of the COPE, it is his/her role to point out the failures of public enterprises, while at the same time the government is responsible for the failures of these enterprises, but, with the chairman of COPE, also being a Member of Parliament and a Government Minister, a clear conflict of interest exists. Despite of its weaknesses, the COPE still plays a vital role of oversight, and for instance, in its August 2007 report, revealed corruption and mismanagement by 20 state institutions that had cost a loss of LKR 600 million.

• Public Accounts Committee: The Public Accounts Committee (PAC) was established with the objective to oversee and ensure managerial efficiency and financial discipline of the government, ministries and provincial and local authorities. In November 2007, PAC published a report on government tax revenue that reveals VAT fraud. In May 2008 the President, just as he had done with the COPE, shut down the PAC and then reopened it in July 2008, appointing a government minister to head the committee. This has weakened the legislature's scrutiny of the executive, as usually a member of the opposition heads the committee.

• Mandatory Code of Corporate Governance: According to Transparency International Global Corruption Report 2009, a Mandatory Code of Corporate Governance for Licensed Banks came into force by January 2008. The code was set up by the Central Bank of Sri Lanka. The implementation of the code is expected to improve the soundness of the banking system, which is vital to the maintenance of the financial system's stability.

• Ombudsman: The Ombudsman is called the Parliamentary Commissioner for Administration and investigates complaints against government departments, institutions, officials and government maladministration, as well as corporations regarding infringements of rights. According to Global Integrity 2007, the Ombudsman does not have power to initiate investigations, nor impose penalties, but can only mediate and give recommendations. Furthermore, the same report also states that the government does not act on the Ombudsman’s findings. The Ombudsman is appointed by the President. However, according to the Constitution, the Ombudsman should be appointed by the Constitutional Council.

• E-Governance: E-governance in Sri Lanka is still in its infancy. The Government of Sri Lanka Official Web Portal is quite useful, although citizens might have the most use out of what is hidden behind the button GIC - 1919 at the bottom of the page, which leads to the government Information Centre. Generally the official websites are one-way, top-down communication. Please be aware that the Government of Sri Lanka Official Web Portal as mentioned above is different from the Official Website of the Government of Sri Lanka. For companies, the situation is improving constantly. The Board of Investment website features considerable business and investment information. This is a more interactive site where one can make payments online, download documents, post comments etc. The National Procurement Agency website may be consulted for procurement queries (see 'Public Procurement' below).

• Public Procurement: The Procurement Guidelines 2006 stipulate that government procurements are to be advertised publicly, stating the specifications and timeframes of the tender. Unsuccessful bidders have one week upon being informed of who won the contract to complain to the Procurement Appeal Board, which will then launch an investigation. The National Procurement Agency (NPA), which supervises and administers the tender process, has a list of blacklisted companies that are barred from bidding on contracts. A manual and all relevant documents may be found on the NPA website. The tender-awarding process is very time-consuming because most procurement must not only go through tender evaluation committees, but must also be approved by Cabinet. The NPA has a mandate to address corruption issues, but the agency is not very effective because they often interpret their mandate very narrowly. Furthermore, according to Transparency International Global Corruption Report 2009, the NPA merged with the Treasury as the result of a presidential directive in March 2008. This brought the plans of the previous government to establish the NPA as an independent body with powers to supervise all tender processes to the end. As the Treasury is under the purview of the Ministry of Finance, from now on there will be no independent control of national procurement. Global Integrity 2007 rates procurement in Sri Lanka as 'weak'.

• Whistle-Blowing: Global Integrity 2007 rates whistle-blowing regulations in Sri Lanka as 'very weak'. The country does not have whistleblower protection, resulting in a general reluctance on behalf of citizens and private and public sector employees to report corruption. However, the Companies Act introduced in 2007 has provisions for rewarding whistleblowers by entitling them to reimbursement of legal expenses from the fines levied in the action.

• General Comments on the Public Anti-corruption Initiatives: Until the Constitutional Council has been appointed, the politisation of the allegedly independent committees that are meant to oversee the government and assure that good governance is taking place, will continue. Furthermore, as long as Sri Lanka has not implemented legislation concerning freedom of information and protection of whistleblowers, the government lacks the extra incentive to ensure transparency and good governance. The government, in cooperation with USAID, has elaborated an anti-corruption programme to rectify some of the flaws in their governance system. Although this cooperation seems to indicate that the political will is present, it is not backed by actions. Political interference in independent organs and the President's unwillingness to ensure that the Public Service Commission and the National Police Commission are independent, works against the anti-corruption initiatives and impedes real progress in anti-corruption measures.

• Media: The law guarantees freedom of speech and the press in Sri Lanka, however, media freedom in practice remains severely restricted, with journalists being subjected to legal harassment and physical intimidation, which consequently, lead to self-censorship among journalists. The state-run media is under heavy political influence and control. This was most evident during the presidential election campaign in January 2010. Private media are more diverse, but they have become more consolidated in recent years with many private media outlets now owned by government officials or their close associates. On the positive side, the destruction of the LTTE ended severe restrictions that the rebels had placed on media in their territory. According to a 2010 news article by BBC News, Sri Lanka is one of the most dangerous places to be a journalist, illustrated by nine media workers having been murdered and more than 25 assaulted in the past few years. To date, not one case involving an attack on, or murder of journalists has been solved successfully in Sri Lanka, according to the Sri Lanka Governance Report 2009 by TI Sri Lanka, leading to a climate of impunity. Freedom House 2010 also reports that the level of threats and harassment against local journalists and media outlets continued to rise in 2009. The offices of the country’s largest independent broadcasting company, Maharaja Broadcasting, were attacked in January 2009, presumably in retaliation for its coverage of the war. Several dozen other journalists have fled the country in the past two years as a result of threats. Restrictions on internet content have increased since the escalation of fighting at the end of 2008, including other local news sources as well as the sites of international human rights organisations like Human Rights Watch. The situation for the media seems to be deteriorating and, according to Reporters Without Borders 2010, Sri Lanka ranks 158th out of 178 countries, while Freedom House 2011 ranks the country 157th out of 196 countries and describes its press environment as 'not free'. For updates on the media situation in Sri Lanka, please see the Free Media Movement Sri Lanka website.

• Civil Society: Traditionally, NGOs in Sri Lanka have held connections to political parties, resulting in the government being very suspicious towards those NGOs that have ties to opposition parties. Any independent NGO is viewed as a threat to the government, and therefore is closely controlled by the government. There have been cases where NGO members have been violently attacked and murdered, and while some of these were committed by LTTE, it is generally believed that the government or its supporters have been behind some of the attacks, as reported by Freedom House 2010. Because of the political situation in the country, the main focus for NGOs is the peace negotiations. Transparency International Sri Lanka is a notable exception to this. According to a 2008 article by Reuters, in September 2008, the director of Transparency International Sri Lanka experienced an assassination attempt, suggesting that anti-corruption work is carried out at considerable risk. The attack was condemned by the international community, linking the deplorable human rights situation with anti-corruption work.

• Transparency International Sri Lanka (TI Sri Lanka): TI Sri Lanka is working for transparency awareness and towards the passing of a whistleblower protection law and a freedom of information act. TI Sri Lanka has set up a help line for people to report corruption. The information that is received is to be forwarded to the Commission to Investigate Allegations of Bribery or Corruption (CIABOC) in order for them to take action. In 2009, it published a governance report with the goal of improving the quality of public debate on issues of governance and corruption by exposing shortcomings, and pointing to best practices that should be aspired for. Moreover, TI Sri Lanka also publishes annual reports, newsletters, position and working papers regularly that can be accessed on its website.

• Centre for Policy Alternatives (CPA): The CPA focuses on strengthening institution- and capacity-building for good governance and conflict resolution in Sri Lanka. The CPA conducts a lot of research to formulate the policy alternatives it presents.

• Standards on Corporate Governance: Transparency International Global Corruption Report 2009 reports that the Institute of Chartered Accountants of Sri Lanka (ICASL) and the Securities and Exchange Commission of Sri Lanka, in consultation with the Colombo Stock Exchange, started a joint initiative in January 2007 with a view to formulating standards on corporate governance for mandatory compliance by companies listed on the exchange. These standards were incorporated into the ‘Listing Rules’ of the exchange in April 2007. The standards were formulated by a select committee, which took account of corporate governance standards in several jurisdictions, including the United Kingdom and the United States. They relate to the minimum number of non-executive and independent directors, the basis for determining ‘independence’, disclosures required to be made by listed companies in respect of its directorate and the minimal requirements to be met by listed companies in respect of the audit committee and the remuneration committee.

The websites listed below provide useful facts on Sri Lanka as well as contacts and tools for companies operating in Sri Lanka:

• International Finance Corporation: Sri Lanka SME Toolkit
  Guide to sustainable business management practices for SMEs.
• Business Fighting Corruption
  An online resource centre for business on collective action to avoid corruption which contains a guide and resources for partnerships with companies and other stakeholders to fight against corruption.
• CIA World Factbook: Sri Lanka Profile
• World Bank: Sri Lanka Data Profile

Sources for further reading:

• US Department of State: Investment Climate Statement - Sri Lanka 2011.
• Freedom House: Freedom in the World - Sri Lanka 2011.
• Freedom House: Countries at the Crossroad - Sri Lanka 2010.
• The Bertelsmann Foundation: Transformation Index - Sri Lanka 2010.
• Transparency International Sri Lanka: Annual Report 2010.
• Transparency International Sri Lanka: Sri Lanka Governance Report 2009.

UNCAC Status: Signed 15 March 2004. Ratified 31 March 2004.

Status on UNCAC Implementation
This field describes the country's status on the United Nations Convention against Corruption. Please note any declarations and reservations made upon ratification. The list of signatories can be found on the UNODC website. Read more about the UNCAC.

Other Relevant Conventions or Treaties:

• ADB & OECD Anti-Corruption Initiative for Asia-Pacific Anti-Corruption Action Plan for Asia and the Pacific: Endorsed 27 March 2006.
  Read Transparency International's summary and assessment of the convention.
• United Nations Convention against Transnational Organized Crime: Signed 13 December 2000. Ratified 22 September 2006.
  Read Transparency International's summary and assessment of the convention.

Transparency CPI: 2011: 86/182 (Score: 3.3)

Transparency CPI
This field consists of the score for the country in question on the Corruption Perceptions Index from Transparency International as well as its ranking.

World Bank CORR Index (-2.5 - +2.5): 2010: -0.43

World Bank Corruption Index
This field consists of the score for the country in question on the 'Control of Corruption' indicator in the World Bank Governance Research Indicator Country Snapshot (GRICS): 1996-2010.

OECD Country Risk Classification (0-7): 2011: 6

Country Risk Classification
The classification of countries by risk category has the aim of providing OECD countries with a basis for calculating the premium interest rate to be charged to cover the risk of non-repayment of export credits. Countries are placed in risk categories 0 - 7, with 0 being the lowest risk category and thus the least expensive. Conversely, premium group 7 is the highest risk category. Each classification is comprised of 2 components: 1) an assessment of the country's economic/financial situation, and 2) its overall political stability. Access the complete list of OECD Country Risk Classification figures.

Data Verification:

Publication date: November 2011

Data verified by: Global Advice Network

General Information Sources

• The World Bank & IFC: Doing Business 2012.
• World Economic Forum: The Global Competitiveness Report 2011-2012.
• Freedom House: Freedom in the World - Sri Lanka 2011.
• US Department of State: Investment Climate Statement - Sri Lanka 2011.
• Reuters: 'Sri Lanka corruption will scare investors-ex-chief justice', 16 August 2011.
• BBC News: 'Sri Lanka country profile', 4 February 2011.
• Freedom House: Countries at the Crossroad - Sri Lanka 2010.
• US Department of State: Investment Climate Statement 2010
• BBC: 'Sri Lanka ruling party wins majority in parliament', 9 April 2010.
• Daily Mirror: 'Some candidates violated the law - Asian monitors', 9 April 2010.
• BBC: 'Sri Lanka president wins re-election', 27 January 2010.
• Bloomberg: 'Rajapaksa Sweeps to Sri Lanka Victory as Fonseka Cries Foul', 27 January 2010.
• BBC: 'United Nations concern over Sri Lanka poll violence', 21 January 2010.
• The Sunday Leader: 'Misuse Of Public Property And Funds', 3 January 2010.
• Transparency International Sri Lanka: Annual Report 2009.
• Washington Post: 'Sri Lankan Rebels Admit Defeat, Vow to Drop Guns', 18 May 2009.
• CNN: 'Sri Lanka: Tamil leader has been killed', 18 May 2009.
• The Bertelsmann Foundation: Transformation Index - Sri Lanka 2008.
• US Department of State: Human Rights Report - Sri Lanka 2008.
• Transparency International Sri Lanka: Sri Lanka Governance Report 2008.
• Commission to Investigate Allegations of Bribery and Corruption: Detections and Raids 2008.
• Committee on Public Enterprises: First Report from COPE of the 6th Parliament (2nd Session) 2007.
• US Department of State: Background Note - Sri Lanka 2007.
• Transparency International: Global Corruption Report 2007.
• Global Integrity: Sri Lanka Country Report 2007.
• USAID: Sri Lanka Democracy and Governance Assessment 2006.
• Transparency International: National Integrity Systems Country Study Report Sri Lanka 2003.
• Sri Lanka Supreme Court ruling on SILC and Lanka Marine Services.

Corruption Levels Sources

Judicial System

• The World Bank & IFC: Doing Business 2012.
• World Economic Forum: The Global Competitiveness Report 2011-2012.
• Freedom House: Freedom in the World - Sri Lanka 2011.
• US Department of State: Investment Climate Statement - Sri Lanka 2011.
• The Bertelsmann Foundation: Transformation Index - Sri Lanka 2010.
• Transparency International Sri Lanka: Sri Lanka Governance Report 2008.
• UPI Asia: Sri Lanka: 'Politicizing the prosecutor's office', 12 December 2008.
• Transparency International: Global Corruption Report 2007.

Police

• World Economic Forum: The Global Competitiveness Report 2011-2012.
• US Department of State: Human Rights Report - Sri Lanka 2010.
• Transparency International Sri Lanka: Sri Lanka Governance Report 2008.
• Commission to Investigate Allegations of Bribery and Corruption: Detections and Raids 2008.
• Asian Human Rights Commission: Sri Lanka: 'A complainant in a corruption case is at risk from threats from the police', 27 October 2008.
• Reuters: 'New threats emerge for Sri Lankan rights lawyers', 29 September 2008.
• UPI Asia: 'Sri Lanka's Supreme Court rulings ignored', 28 March 2008.
• Transparency International: Global Corruption Report 2007.
• Tamilnet: 'Police to record statement from UNP Parliamentarian', 1 July 2007.
• Asian Human Rights Commission: Sri Lanka: 'Police harass bus driver, file allegedly fabricated charges against him', 25 August 2006.

Licences, Infrastructure and Public Utilities

• The World Bank & IFC: Doing Business 2012.
• World Economic Forum: The Global Competitiveness Report 2011-2012.
• Transparency International Sri Lanka: Annual Report 2010.
• US Department of State: Investment Climate Statement - Sri Lanka 2009.
• Transparency International Sri Lanka: Corruption in Education in Sri Lanka, June 2009.
• Transparency International Sri Lanka: Integrity in Government Hospitals in Colombo District, February 2009.
• Government Accountability Project: Corrupt Privatization Does Not Deter IFI Lending to Sri Lanka, June 2009.
• UNDP: Tackling Corruption, Tansforming Lives 2008.
• Committee on Public Enterprises: First Report from COPE of the 6th Parliament (2nd Session) 2007.
• The World Bank & IFC: Enterprise Survey 2004.
• Government Accountability Project: Sri Lanka Corruption.

Land Administration

• The World Bank & IFC: Doing Business 2012.
• World Economic Forum: The Global Competitiveness Report 2011-2012.
• US Department of State: Investment Climate Statement - Sri Lanka 2011.
• Commission to Investigate Allegations of Bribery and Corruption: Detections and Raids 2008.
• Transparency International Sri Lanka: Sri Lanka Governance Report 2008.
• Transparency International: Global Corruption Report 2008.
• IPS: Rights-Sri Lanka: 'Court Steps in as Governance Falters', 29 October 2008.
• Freedom House: Freedom in the World - Sri Lanka 2007.

Tax Administration

• The World Bank & IFC: Doing Business 2012.
• World Economic Forum: The Global Competitiveness Report 2011-2012.
• Freedom House: Countries at the Crossroad - Sri Lanka 2010.
• US Department of State: Investment Climate Statement - Sri Lanka 2009.
• Global Integrity: Sri Lanka Country Report 2007.

Customs Administration

• The World Bank & IFC: Doing Business 2012.
• World Economic Forum: The Global Competitiveness Report 2011-2012.
• US Department of State: Investment Climate Statement - Sri Lanka 2011.
• World Economic Forum: Global Enabling Trade Report 2010.
• Transparency International Sri Lanka: 'Fearless Customs officer – This year’s NIA Winner', December 2010.
• US Department of State: Investment Climate Statement - Sri Lanka 2009.

Public Procurement and Contracting

• World Economic Forum: The Global Competitiveness Report 2011-2012.
• US Department of State: Investment Climate Statement - Sri Lanka 2011.
• US Commercial Service: Doing Business in Sri Lanka: A Country Commercial Guide for US Companies 2011.
• US Department of State: Human Rights Report - Sri Lanka 2010.
• US Department of State: Investment Climate Statement - Sri Lanka 2009.
• Transparency International: Global Corruption Report 2009.
• Transparency International Sri Lanka: Sri Lanka Governance Report 2008.

Environment, Natural Resources and Extractive Industry

• Commission to Investigate Allegations of Bribery and Corruption: Detections and Raids 2008.
• Transparency International: Global Corruption Report 2008.
• UNDP: Tackling Corruption, Tansforming Lives 2008.

Public Anti-Corruption Initiatives Sources

• Freedom House: Freedom in the World - Sri Lanka 2011.
• US Department of State: Investment Climate Statement - Sri Lanka 2011.
• Colombo Page: 'Sri Lankan parliament passes legislation against money laundering and terrorist financing', 24 September 2011.
• Freedom House: Countries at the Crossroad - Sri Lanka 2010.
• Transparency International: Global Corruption Report 2009.
• Transparency International Sri Lanka: Sri Lanka Governance Report 2009.
• Transparency International Sri Lanka: Sri Lanka Governance Report 2008.
• UPI Asia: Sri Lanka: 'Politicizing the prosecutor's office', 12 December 2008.
• Global Integrity: Sri Lanka Country Report 2007.
• Freedom House: Countries at the Crossroads - Sri Lanka 2006.
• Transparency International: Global Corruption Report 2006.
• Asian Human Rights Commission: Sri Lanka: 'Fear Syndrome may also extend to Auditor General's department', 26 May 2006.
• Lanka Business Online: 'Auditor protest - Sri Lanka's government auditors protest against attack on independence', 26 May 2006.
• Freedom House: Countries at the Crossroads - Sri Lanka 2004.
• Transparency International: National Integrity Systems Country Study Report Sri Lanka 2003.

Private Anti-Corruption Initiatives Sources

• Freedom House: Freedom in the World - Sri Lanka 2011.
• Freedom House: Freedom of the Press Index 2011.
• Freedom House: Freedom of the Press - Sri Lanka 2010.
• Freedom House: Countries at the Crossroad - Sri Lanka 2010.
• Reporters Without Borders: Sri Lanka Country Report 2010.
• Reporters Without Borders: Worldwide Press Freedom Index 2010.
• BBC: 'Missing Sri Lanka journalist's wife appeals for help', 22 February 2010.
• Transparency International Sri Lanka: Sri Lanka Governance Report 2009.
• Transparency International: Global Corruption Report 2009.
• Freedom House: Freedom of the Press - Sri Lanka 2009.
• Freedom House: Freedom in the World - Sri Lanka 2008.
• Transparency International Sri Lanka: Sri Lanka Governance Report 2008.
• IPS: Rights-Sri Lanka: 'Courts Steps in as Governance Falters', 29 October 2008.
• Lanka Business Online: 'Sri Lanka lawyers to protest attack on anti-corruption activist', 30 September 2008.
• Reuters: 'New threats emerge for Sri Lankan rights lawyers', 29 September 2008.
• Global Integrity: Sri Lanka Country Report 2007.
• Transparency Watch: 'Helpline launched in Sri Lanka', September 2007.
• The Bertelsmann Foundation: Transformation Index - Sri Lanka 2006.