The Federation of Chambers of Commerce and Industry of Sri Lanka (FCCISL) commends the government efforts to develop and upgrade the infrastructure such as fisheries farm zones for fish production for commercial purpose.
It’s important that government further needs to focus on exploiting the concept called Blue Ocean Economy - the Exclusive Economic Zone in the sea area (sq. km 517,000) which is eight times bigger than Sri Lanka (sq Km 65,610).
We consider the proposed budgetary allocation of (Rs 2 billion) to upgrade the fishery industry is a stepping stone towards a much larger sea-based economy in the future. The Blue Ocean Economy is one aspect of the budget proposals of FCCISL sent to the government.
FCCISL is also happy to note that government has embarked on a very ambitious infrastructure development projects such as fully-fledged plug and play Techno Parks in Galle, Kurunegala, Anuradhapura, Kandy and Batticaloa districts; the establishment of a modern investment zone for local and foreign private investors for manufacturing pharmaceuticals under the Strategic Development Act; and the development of the plantation sector.
We have seen in the past various governments award tenders to overseas contractors despite the fact those local companies with the required level of competencies offering lower prices than overseas companies. We hope the present government will change this discriminatory and unfair tender practices happened in the past.
We also note that the budget has provided many cash and non-cash incentives such as startup capital of Rs 500,000 at the rate of 4 %, PA, a special loan scheme up to Rs. 500,000 at an interest rate of 7.5% per annum for the purchase of dairy cattle, setting up of eco-friendly cattle sheds etc. relief on customs duty and in the energy sector government is to facilitate private entrepreneurs at the rural level, to install solar power plants connected to 10,000 transformers. We expect these measures to provide many business opportunities to SME’s in the country provided the implementing agencies to adopt a more flexible approach towards disbursement of these schemes.
The budget fails to effectively address the tourist sector. We request a reasonable grant to sustain the life for those who were dependent on tourism and who do not now have any income source.
We welcome that the Sri Lankan government will have a consistent tax policy for 5 years. We appreciate this bold step taken by the government to instil the confidence into the business community.
In pre-budget proposals, FCCISL pointed out the need to address the cost of PCR tests done for the workforce the expense of which has to be absorbed by companies. This is a substantial cost for an SME company, which has a workforce of 100. We appreciate that the government has proposed an insurance scheme for workplaces at a subsidized rate and we hope this insurance cover includes health issues as well. FCCISL considers this as a timely move.
In Sri Lanka, another notable lapse is once the government introduced the budget there is no proper or scientific impact analysis taken place after one year. We sincerely request the ministry of finance to submit a report of impact analysis to the country for the benefit of the taxpayers.
Volume led to growth or Productivity led growth?
When analyzing the budget 2021 one stark reality is, as a strategy the government will more depend on the incentives driven Infrastructure development and construction sector for economic growth instead of productivity lead growth. However, FCCISL considers that the current budget is a reflection of government’s thoughts to achieve medium and long-term economic stability and would serve as a stepping-stone towards a productivity lead growth where the country has to focus on labour productivity, use of new technology, efficient management and production systems etc.
The good example is the substantial waste of food and fruits taking place in Sri Lanka. It’s calculated that Sri Lanka 50 % of the agriculture, produce is wasted while transporting from the cultivation to end consumer skyrocketing the wholesale retail price creating an unbearable cost to consumers and food manufacturers. We request the government to implement measures to tackle this issue by taking necessary steps, which is possible even outside the budgetary guidelines. Another example is the introduction of IT to facilitate paperless trade, national single window, which restricts the movement of workers in a bigger way, which is a strong answer to mitigate COVID 19. Overall, (except for the apparel industry) all other industries need a major productivity drive to be competitive in the world market. We regret that the policymakers have not yet fully focused on this important aspect.
As a matter of urgency Sri Lanka, needs a national drive for innovation and sustainability from the education system, especially the university level for innovations. Programs such as the Accelerating Higher Education Expansion and Development (AHEAD) Operation of the Ministry of Education and University Grant Commission, funded by the World Bank Group, can be extremely useful for trade chambers and other stakeholders to access innovations from universities to generate economic development.”
Finally, we like to emphasize that before taking decisions to enter into any trade negotiations or trade agreements, the government needs to introduce a progressive national trade policy through consultations with all stakeholders.
We hope that the prime minister’s assurance during the budget speech to review the agreements signed in the past will have a positive and realistic impact on the future course of Sri Lanka’s foreign trade.
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