Budget 2007: Leading Chambers focus priority on strengthening infrastructure

by Surekha Galagoda

The budget for 2007 is scheduled to be presented in Parliament on November 14 by President Mahinda Rajapaksa who is also the Finance Minister. The Sunday Observer Financial News spoke to the leading Trade Chambers to get their views on what their expectations are and the way forward.

The President of the National Chamber of Commerce of Sri Lanka (NCCSL) Nirmali Samaratunga said that since the government has many development projects, the aid utilisation is expected to be very much higher than before, especially in the infrastructure sector. Aid is now being used more proactively compared to the previous years, she said.

The NCCSL expressing its views on the forthcoming budget, has proposed that it be a pro poor growth oriented, development budget. To achieve this she said that regional and rural development is essential. Furthermore priority should be placed on strengthening the infrastructure, particularly roads and power.

Mrs. Samaratunga said that the country can achieve a growth rate of 8% but it should be sustained and to meet this goal, the key Macro Economic Issues, such as regional development,meeting the energy requirements and accelerating infrastructure development need to be focused on, which will in turn also attract more FDI inflows.

The law and order situation too needs to be strengthened and maintained, as this is of vital importance.

Mrs. Samaratunga also said that developing the renewable energy sector to counter the rising energy cost is essential. A proposal is being forwarded by the NCCSL on this area following a very useful study tour to India, undertaken by the Power and Energy Sub Committee.

The overriding factor is the need for the significant progress in the peace process, leading to a sustainable solution to the ethnic conflict. In this regard, the NCCSL welcomes the bipartisan approach reached by the two major political parties to work together on major national issues and hoped that the proposed National Agenda will be implemented soon.

We all should put the country before self and support the government to resolve the ethnic conflict which affects us all one way or the other, said Mrs. Samaratunga.

The chairman of the Ceylon National Chamber of Industries (CNCI) A. K. Ratnarajah said that there will be an improvement in aid utilisation compared to last year. Last year the tsunami, elections and change of officials led to a drop in aid utilisation but this year the momentum will pick up with the new infrastructure projects that are lined up.

He said the CNCI has focused mainly on industry specific issues such as cost of power, quality of roads and importation of substandard goods among other issues.

Ratnarajah said that prior to the recent increase the cost of electricity was the highest in the region. With the increase the cost has increased by 34-38% depending on the industry.

In certain industries the energy cost is as high as 30% of their cost of production. To recoup this loss they have had to revise the prices by 5-6% and this cannot be done overnight in the export market. Even in the local market if the cost of production is 10% they have to revise the prices by 3%. In this scenario can local industries compete with goods coming to the country under the Free Trade Agreements? he asked.

We are happy because President Rajapaksa and the officials said that the cost of power will be reduced with the commissioning of the Norochcholai Power Plant. But it will take at least another four years. We would be delighted if the project could be accelerated and added that if there is a will there is a way. Ratnarajah said that most industrialists are complaining that they cannot survive until then.

At present the manufacturing sector is paying Rs. 7 billion more under the recently increased tariff. The transmission loss is 17-18% while pilferages amount to Rs. 5 billion. In the UK the transmission loss is only 1.5%.

If our country can reduce the pilferages by 50% and transmission losses by 3-5% the Rs.7 billion could be recouped and the industrial sector saved. He said that the government has understood the importance of infrastructure and started the projects. It is now only a matter of keeping to time schedules or accelerating them according to the requirement.

The CNCI also suggested limiting the number of cars being registered adopting the Singapore permit system until such time the roads can absorb the increasing traffic.

President, Sri Lanka Chamber of Small Industry Aloy R. Jayawardene said that the FTA between India and Sri Lanka was a landmark.

India is now the largest supplier to Sri Lanka. However, Sri Lankan exporters are concerned about the discriminatory sales taxes on the Sri Lankan imports by the Indian State governments. This clearly shows that India wants its manufacturers to be protected.

It is impossible for us to change the tax system of the Indian state governments which has been imposed to protect their local manufacturers. This will open our eyes as to why we should not allow all foreign manufacturers to enter our territory to compete and kill our industry.

It is pathetic to note that the local industry is closing one by one or are in the process of closing down their manufacturing activities giving into foreign manufacturers who already have a local market share have now realised that it is more profitable to import and sell than manufacture and sell.

Therefore we request the government to introduce a non-tariff barrier on finished goods, import an equal or higher volume than that of India to protect and boost our local industry.

With this we hope that new industries will emerge all over the country. It is obvious that non-tariff barriers would result in a new manufacturing culture in Sri Lanka paving the way for a developed Sri Lanka.