As Sri Lanka gears up for its next budget proposals, the business and corporate community have already begun to come up with suggestions, concerns and proposals that could help create a wholesome strategy for the next year.
The Government announced that it would present the budget proposals for 2016 on November 20. Even though the upcoming budget will not be the first time where Finance Minister Ravi Karunanayake would be spelling out his plans for the nation’s economic progress, the context in which he is going to do so has added to the interest of the stakeholders and people alike.
The first reason is that it would be the first budget after the formation of the National Government. The interim budget proposals in January this year was more or less considered to be a populist budget, in order to score some brownie points from the people at the general election held in August.
The other reason the budget is much anticipated is due to the impact of the global phenomena on the local economic progression. The strengthening of the dollar against the rupee has had a hurtful impact on the importers and exporters.
The Nation Gain sought the opinion of several key stakeholders in various sectors for their expectations from the budget proposals, and the concerns that needed to be addressed through these proposals.
Masakorala calls for maritime policy
As far as the shipping industry is concerned, Chief Executive Officer (CEO), Shipper’s Academy, Colombo, Rohan Masakorala stated that Sri Lanka lacked the tools that were need for market reforms and are missing in institutions and laws.
He said that the country’s maritime/logistics sector needed modernization in rules and regulations to attract international capital and investment. “These can be customs, merchant shipping, ports, etc. a maritime policy must be adopted in Parliament,” he said. “A strong maritime economy can help exports and trading environment of the country and achieve major development goals.”
Gomes wants public sector restructured
Managing Director/CEO, Chevron Lubricants Lanka PLC, Kishu Gomes speaking to The Nation Gain on his expectation of the next budget proposals stated that the government needed to make the public sector productive and self-liquidating to eliminate the burden on the economy and re-structure all the public sector commercial entities to eliminate losses.
Further, he pointed out the importance of encouraging Foreign Direct Investments (FDI) while suggesting consistent tax policy that wouldn’t discourage FDIs.
In addition, he also urged the government to look at ways and means of minimizing foreign currency drain by allowing foreign universities and private investment in graduate and post graduate studies.
Do away with the minimum hotel room rate to be more competitive against Thailand, Malaysia, Vietnam, Indonesia and countries where the rate is 30% less.
Exporters hit by rupee dip – Daluwatte
Former Chairman, Exporters Association of Sri Lanka, Rohan Daluwatte stated that despite the perception that the rupee depreciation had benefited exporters, it was not so. He stated that sectors such as apparel did not reap the full benefit since its expenditure on importation of intermediaries had increased owing to the rupee dip.
“If the average income is US$ 4 billion, the import expenditure would be approximately US$ 1.3 to 1.7 billion, which is a big amount. The government has to have a serious look into these issues,” he said.
He further pointed out that next month’s budget proposals needed to draw focus on three main sectors, namely apparel, tea and fisheries.
“The Government has taken certain issues pertaining to the fisheries ban in the European Union countries and also on regaining the GSP+ facility. However, the Government has to have a plan to support the apparel and fisheries sectors until the existing issues are sorted,” he said.
Impact of rupee depreciation being studied – Wickramasinghe
The reign of the new regime after January 8 did not paint a rosy picture for the construction industry, which was thriving during the previous government owing to the numerous infrastructure development projects island-wide.
However, most of these projects were either halted or had to slow down when the interim government launched investigations on the tender processes.
The Chamber of Construction Industry (CCI) said that at least 1000 projects were halted due to these investigations.
President, CCI, Dr. Surath Wickramasinghe said that they were currently in the process of drafting the proposals to the Treasury and added that these factors would also be included in the document. He told The Nation Gain that they were also studying two crucial aspects, namely the impact of the rupee depreciation on the industry and also the increasing cost of construction. “We have a huge problem due to the shortage of labor. We are compelled to import labor along with other materials. Therefore, it has become very expensive. This aspect too will be incorporated in our proposals,” he said.
Liberalize tea imports – Rohan Fernando
Chairman, Tea Exporters Association of Sri Lanka (TEA), Rohan Fernando says that they had called for the liberalization of tea imports so that it would allow import of tea for value addition and re-exports. “The liberalization is the only way forward if we are to enhance revenue earnings of the tea industry,” he said.
The tea industry had been facing one of its worst crises in recent times owing to the domestic issues faced by the export market such as Iran, Syria and Russia.
Fernando stated that the government needed to encourage companies that invest heavily on equipment and machinery to the value of over Rs. 200 million through providing tax concessions and front-load depreciation allowances.
He also suggested that the government simplify Cess collection on tea exports. Accordingly, at present, a cess of Rs.4.00 per kg is charged on the export of pre-packed tea products while the cess on bulk tea exports is 2.5% of the average tea auction price of previous month subject to a minimum amount of Rs.10.00 per kg.
“In addition, a promotion and marketing levy of Rs.3.50 per kg is payable to Sri Lanka Tea Board. It is proposed to simplify the cess payment by introducing a flat rate Rs.4.00 per kg for all tea exports,” he said.
Strengthen tax collection base – Jinadasa
Chief Strategist at CAL Securities, Purasisi Jinadasa listed several aspects that needed to be focused on the budget including the strengthening the tax collection base. He said it was important to implement a better mechanism to collect income taxes to reduce loopholes and avoidance and lower the burden/prevent double taxation on people who do pay.
He also said that the budget should discuss the sense of applying a retroactive tax on income on corporates. “Will the little amount of money collected really offset the negative signal to both investors and consumers, which is much more long lasting?” he asked.
Another key aspect Purasisi pointed was the development of the export sector. “Emphasizing traditional exports is likely to lead to failure and the newer sectors (other than services) will take several years to develop in any meaningful form,” he said.
“Education and medical system in Sri Lanka needs a significant overhaul. What are the plans to strengthen these two vital institutions? Providing them for free is wonderful, however mismanagement of the resources and system negates the gift (drain on national resources),” Jinadasa added.
Sri Lanka’s strategy on foreign policy is also a factor that needed to be looked into while drafting the budget proposals, according to Jinadasa. “Mismanagement/short-term visions and bending over will lead to chaos and prolong Sri Lanka’s development curve,” he said.budget proposals (6)