Taking paper out of Sri Lanka’s “Paperless” Trade Accepting Electronic Documents & Signatures

Taking paper out of Sri Lanka’s “Paperless” Trade
Accepting Electronic Documents & Signatures

Paperless Trade: Two decades of effort with little success

Paperless trade refers to “a trade process, where all the contracts and documentation is handled electronically with little or no use of manual documents being required”. There are significant benefits to both the private sector and the government in adopting a paperless trading system:

  • Faster document handling: saves precious time for all parties
  • Improved global competitiveness of Sri Lanka’s exports and logistics
  • Reduced processing costs to government and for business
  • Better document tracking and predictability in processing

Our regional counterparts have secured substantial process improvements in switching to electronic documents and electronic signatures in the trade process. In Malaysia, for document processing time for trade activities took 12 hours on average under the manual system. This came down to 15 minutes under the electronic system. That is, it became almost 50 times faster.

Sri Lanka’s shortcomings in moving to paperless trade does not stem from a lack of activity. The country’s attempts in this regard date back to over 20 years, when Sri Lanka established a working group called the National EDI Committee in 1995 with representation from 20 public and private organisations to serve as a forum on adopting Electronic Data Interchange (EDI). Since then, there have been several attempts to revive the paperless trade initiative, however, all these efforts have so had little success. The most recent effort to implement a paperless trade platform was in May 2016. The Ministry of Finance together with Sri Lanka Customs launched a “Single Window Platform”, which is meant to facilitate electronic communications between traders and respective government agencies. Currently this only covers a few government institutions. But the greatest failing is that it has failed to replace the need for a DUPLICATE PROCESS of manual documentation in multiple copies. This is because documents need signatures and signatures till only accepted in hard copy, not in electronic form.

Electronic Signatures: A large machine missing one small cog

Electronic signatures are a method of verifying the sender’s intent to sign a document that is transmitted electronically. Sri Lanka’s paperless system cannot be paperless without accepting Electronic signatures. Today, even when a functioning electronic platform is available for use, public agencies still demand manual documents signed by hand for their records, negating the benefits of the electronic system.

Procrastination at an epic scale: Electronic Transactions Act of 2006

The law enabling acceptance of electronic signatures was passed in 2006 with the enactment of the “Electronic Transactions Act, No. 19 of 2006” (ETA 2006). ETA 2006 facilitates acceptance of all forms of e-signatures, electronic documents and electronic contracts in all but a few specific transactions (exclusions include creation and execution of a will, license for a telecommunication system, a bill of exchange, a Power of Attorney form, setting up a trust and a contract for sale of immovable property), and it supersedes other previous and existing laws in Sri Lanka with regard to document processing requirements. The act also allows public institutions the freedom to propose guidelines on types and methods of accepting e-signatures and to customise the process to fit their particular needs. This 2006 Act was modelled after the globally accepted UNICTRAL model, and passed 10 years ago. Despite this, the Sri Lanka has still not succeeded implementing the provisions of this Act.

Accepting e-signatures: one small step for the government, one giant leap for the country

Speedy resolution of any issues that prevent acceptance of e-signatures and electronic documents is one small step the government can take even tomorrow, which will result in a giant leap forward for the country in terms of trade competitiveness. Not only is acceptance of electronic signatures a pre-requisite for improving Sri Lanka’s trade dynamic, it is also a crucial element of all key economic policy objectives set forth by the government. Policy objectives such as accelerating exports, attracting FDI, plugging into global value chains and transforming Sri Lanka into a regional logistics hub, and in realising the dreams and aspirations Sri Lanka has in implementing a digital economy and electronic governance system that is similar to those in developed Asian countries such as South Korea and Singapore.

Trade efficiency and competitiveness: A cost beyond rupees and dollars

Sri Lanka’s export sector growth has been sluggish since the turn of the century and proposed remedies have done little in improving the country’s export dynamic. This is evidenced by the value of Sri Lanka’s exports recording negative growth rates in the last two consecutive years. While it is clearly established that taking decisive measures to boost trade competitiveness is key in reviving the export sector, low-hanging fruit such as the adoption of paperless trade and the benefits offered by such a system have somewhat been ignored. Whilst Sri Lanka is slowly trudging on, its regional counterparts and direct competitors around the world have moved far ahead though the benefits of Internet and Communication Technology (ICT) adoption.

In an era where Sri Lankan traders are struggling to remain competitive and relevant in the global market, these cumbersome processes add significant amounts of transaction costs that further lowers traders’ ability to compete against low cost, high quality offerings from regional and global competitors. Sri Lanka was traditionally regarded as a provider of high quality, low cost goods and services, but has continued to lose ground as a direct result of these added transaction costs and lack of product and service diversification.

This phenomenon is evidenced by Sri Lanka’s low rank in a number of international indicators measuring efficiency in procedures that govern cross border transactions. For example, Sri Lanka lags behind most other competing countries for time taken to comply with documentation requirements for trade according to the World Bank’s Doing Business Index.

This lack of initiative and inability on the government’s part to move the country towards acceptance of electronic documents and electronic signatures, despite Sri Lanka having an enabling legislation and other core requirements in place for almost a decade, is letting down the Sri Lankan cross border traders at many different levels. Not only is this costing the country millions of rupees every year, it’s also doing irreparable damage to Sri Lanka’s trade dynamic that the country may never fully recover from. It is mandatory for the government and the private sector to make adoption of electronic platforms a national priority and work towards successful implementation of electronic documents and signatures in the trade process to ensure that Sri Lankan traders reap the benefits of moving the Sri Lankan economy into the 21st century.