Sri Lanka’s largest private sector chamber, The Ceylon Chamber of Commerce yesterday said it welcomes the government’s willingness to undertake vital next generation policy reforms to accelerate, and sustain, economic growth in Sri Lanka.

The statement by the Chamber follows;

The Ceylon Chamber of Commerce Statement on the Prime Minister’s Policy Speech

The Ceylon Chamber of Commerce welcomes the economic policy statement made by the Hon. Prime Minister Mr. Ranil Wickremesinghe delivered in Parliament on the 5th of November, which provides important direction on the government’s future plans for the Sri Lankan economy. The private sector was seeking clarity on the government’s economic policy agenda, and this statement has provided that.

Large and persistent budget deficits have continued to be a source of macroeconomic instability in Sri Lanka for many decades and the Chamber welcomes the moves to bring down the budget deficit to 3.5% by 2020. Tackling this must come from both revenue and expenditure sides. This will no doubt be a challenge, given that the tax to GDP ratio is currently around 10%. The Chamber also cautions against compromising on important public investments in social infrastructure in the effort to substantially cut the deficit. The focus should be on ensuring efficiency of public spending and raising tax revenues in a way that does not hurt growth as well as equity. The indication that that the Super Gains Tax, and similar retrospective and business un-friendly taxes, will not continue in the future is encouraging, as such taxes hurt entrepreneurship and provide a negative signal to investors.

The proposed changes to the export policy and promotion regime are also welcome, including the creation of a new International Trade Agency. This will be critical in aggressively pushing Sri Lankan exports into current and new markets abroad. Sri Lanka has not had a robust and comprehensive trade policy strategy for some time now, while many other competitor countries have.

The Chamber also welcomes the moves to manage the ETF and EPF independently from the Central Bank, and this is an important step towards better governance of people’s pensions and ensuring higher returns to their retirement savings. Moreover, introducing a pension scheme for private sector workers is crucial to ensure that incentives on public sector jobs and private sector jobs are neutralized, and this will contribute to some easing of labour market rigidities. However, other reforms to modernize labour legislation must also be simultaneously pursued, to cater to the emerging needs of enterprises and workers.

The focus on small entrepreneurs and regional economic development is also welcome, as there still remains significant gaps in prosperity between leading and lagging regions. The Chamber strongly believes in integrating lagging regions through enterprise development.

Many of the areas of focus in the Prime Minister’s statement are those that the Chamber has been advocating for some time and have been clearly articulated in the recently launched ‘10 Principles for Guiding Sri Lanka’s Economic Transformation’. They include: promoting a competitive and export-led economy, promoting high quality FDI, good governance and an attractive business climate, innovation-led growth, and rationalizing State Owned Enterprises.

Overall, the Chamber welcomes the government’s willingness to undertake vital next generation policy reforms to accelerate, and sustain, economic growth in Sri Lanka. It is now important that, through Budget 2016 and thereafter, the necessary legislative and administrative processes are introduced to fully implement the reform agenda, and the Chamber extends its fullest cooperation to the government in this regard.