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').