Corporates anticipate business-friendly Budget

By Lalin Fernandopulle

With the countdown for the 2013 Budget to end soon the corporate community anticipates a Budget which would create a more business-friendly environment in the country.

KIK Group, Chairman Lalith Kahatapitiya said that the Budget should support exporters to enhance income for the country which is essential to reduce the trade deficit and increase foreign reserves.

The trade deficit narrowed in the middle of this year due to the drop in imports triggered by high vehicle import duty and the surge in oil prices. Exports also plummeted this year due to the recession in Europe and the turmoil in the Middle East.

Kahatapitiya said that policies should be in place to create a vibrant export sector to generate revenue for the country rather than depending on foreign remittances from migrant workers.Partner Gajama and Company, N.R. Gajendran said that tax concessions for the SME sector are good but there should be a stable exchange rate and low interest rates on loans to develop small and medium scale enterprises.

“Foreign Direct Investment is low partly due to the global economic crisis. The Budget should focus on how to encourage international and multinational companies to set up businesses and have holding companies in Sri Lanka,” he said.

Experts said that the country will not surpass last year's FDI earning which was little over $ 1 b.

“Revenue is vital for macroeconomic stability. The Budget deficit will be high in 2013 because this year's expenditure will be rolled over for next year,” Gajendran said.

Senior Fellow in Entrepreneurship at the University of Moratuwa, Dr. Nishantha Nanayakkara said that the Budget should focus on transforming Sri Lanka into a middle income generating country with priority for human resource development.

“The 2013 Budget should pay special attention to make Sri Lankans a more disciplined, law abiding, tax paying nation and develop a sound transportation and information technology systems to connect every village and home. This objective can be achieved by a good road network, tax files being opened for everyone, and easily traceable criminal records through e-ID cards, e-driving licences and e-passports,” he said.

“We should save foreign exchange by curtailing imports of drugs and put a stop to the drug mafia in the country. We cannot be proud as a nation until we give Samurdhi recipients jobs for self-sustenance. Some percentage of the GDP should be allocated for sustainable energy development, loss and waste reduction of the Ceylon Electricity Board,” Dr. Nanayakkara said.

He said that a certain percentage of the GDP should be allocated to restructure secondary and higher education without giving a lump sum to universities.

Ideal Motors, Chairman Nalin Welgama said that although we would like to see a reduction in the vehicle import duty it is not feasible due to the depreciation of the rupee. We expected the rupee to stabilise at around Rs. 125 but it is still around Rs.130.

“Steps should be taken to improve the liquidity situation in the country so that the public and private sectors could benefit and develop businesses,” Welagama said.

Atlas Logistics Lanka (Pvt) Ltd, Managing Director Sujeiva Samaraweera said that as a service provider he appreciated the initiatives taken by the Government to improve infrastructure facilities such as development of airports and seaports.

To make maximum use of the infrastructure facilities we need to position Sri Lanka on the world maritime map.

To achieve the desired income from the facilities, the Government should reconsider the ports rate structure to be competitive among major players such as Singapore and Dubai. We expect the government to formulate strategies in the 2013 Budget to increase the transshipment volume thereby increasing productivity in the Port of Colombo. Whilst appreciating the steps taken to improve business at the Hambantota Port a proper strategy to attract ship owners is vital.

“We expect the Government to strengthen the export sector to increase the export volumes. The depreciation of the rupee is affecting entrepreneurs in planning their export and import strategies. Steps should be taken to stabilise exchange rate fluctuations,” Samaraweera said.

He said that protecting small and medium entrepreneurs is difficult due to the high freight rates. Steps should be taken to protect them by revising regulations that affect the industry.

Economists said that the Budget deficit could exceed the target of 6.2 percent. The estimated government expenditure for 2013 is Rs. 2.52 trillion.

Heladiv Group, Chairman Rohan Fernando said that as an entrepreneur dealing in value-added branded tea exporter he was looking forward to a Budget that would create a realistic and long-term platform for economic expansion. Sri Lanka must focus on expanding external trade, particularly in developing export-related manufacturing, marketing and service oriented sectors to reach a good export turnover of at least $ 20 by 2020.

To achieve this objective, the Budget should focus on creating medium and long-term strategies for a sustainable export economy, rather than giving handouts and subsidies. The current problems retarding the growth of the economy by curtailing mega investments of local and foreign investors in sectors which are classified as traditional should be looked into.

“Bold decisions should be made to drive the economy based on market forces with a time frame to wean off handouts and subsidies.

The traditional agricultural sector is a case in point when it comes to wage increases. If the Budget could address this particular issue leaving it to the industry to have in place a time table for the implementation of wages, which are currently at 65 percent of the production cost, based strictly on productivity, the industry could then become profitable while improving the lifestyles of workers by re-investing part of the profits,” he said.

Shippers’ Academy, Chairman Rohan Masakorala said that as Sri Lanka moves into a middle-income country it should focus on developing new industries and services during the next five years.

The government should invest on human capital development and encourage companies to increase productivity for the success of the five-hub policy.

“The shipping and logistics industry will make a major contribution to the economy provided a proper business environment is created through reforms and its quick implementation,” he said.

“We expect a stable and predictable policy and the Budget deficit to be kept in check,” Masakorala said.