PM's economic policy receives mixed reviews

Combining EPF and ETF could lead to mismanagement warn experts:

By Shirajiv Sirimane

Prime Minister, Ranil Wickramasinghe's speech in Parliament on economic policy on Thursday makes some of right noises that will go down well with international lenders and the business community.

Business leaders, Chambers, economists and bankers too echoed this sentiment.

The Chairman of the National Savings Bank, Ashwin de Silva and Chairman of the People’s Bank, Hemasiri Fernando said that it was a good move to merge the EPF and ETF. “This would make the fund stronger and secure.” They said that this is a step in the right direction and should have been done earlier.

Chief Executive Officer, NDB, Rajendra Thiyagarajah said that the economic policy spelt out by the Prime Minister is a clearly articulated vision for the next phase of economic transformation of Sri Lanka. “The fact that this vision has been presented to Parliament spells a message of intent to respect the accountability to Parliament which is welcome.”

“While the policy statement looks at improving national revenue collection and increasing the contribution from Foreign Direct Investment and Export diversification towards funding growth, there is also a message which embraces rural economic growth and entrepreneur empowerment through connecting supply chains to regional and global market access.’

“Employment focussed education and vocational training has been recognised as critical to national economic prosperity which is welcome. Of course, now the key challenge for the PM and his government is to effectively translate this vision into action by placing the right talent in key positions, continuous monitoring of performance against goals and regular disclosure to the public on delivery against plan,” he said.

CEO and Executive Director, Expo Lanka Holdings, Hanif Yusoof said that he sees great potential for long term economic growth and prosperity in the outlined economic reforms in Prime Minister’s proposed economic reforms.

“As head of a Group with business interest in the export field, I am more than happy with the proposed ideas to plug exports to global value chains.

The proposed restructures of entities such as the BOI and the Export Development Board will complement the other suggested strategies to develop the export industry.”

“While applauding the Government’s sense of urgency and vision in bringing forward these action plans that cover a wide range of areas, I would like to stress on the need for proper channelling and allocation of resources.”

“Great ideas should be carried forward with greater care, integrity and attention to detail.”

Senior Company Director and Economist, Dinesh Weerakkody said that that generation of one million jobs, improving the rural economy, giving property rights to rural people, estate workers and public servants and improving the quality of education are great proposals.

“The Government now needs to focus on building capacity to deliver,” he said.

The Chairman of the Ceylon National Chamber of Industries, Tissa Seneviratne said that the Policy Statement leading to the hopeful destination of a social market economy will be a strong platform for Sri Lanka to emerge as a fast developing country in the world. “As spelled out the competitive exchange rate policy, plugging the Sri Lankan economy to global supply chains, digitalization of the economy, restructuring of the BOI and EDB according to the day’s demands and formation of an International Trade Agency will make the business environment more conducive bringing out avenues and opportunities.”

“It is also similarly important to ensure that the policies will be active without any bureaucratic hindrance and there should be counter mechanisms to make sure that proper justice is done, which will further result in attracting more FDIs,” he added.
 

President, National Chamber of Commerce, Tilak Godamanne said that the fresh policy to re-look at State enterprises is a timely move and the Singapore model would be the best to turn them around.

The idea to re-look at some of the trade agreements again too is timely. “We also pleased that the economic policy has laid emphasis on SME farmers and also on the rural economy.”

Economist Ravi Ratnasabapathy said, “The most important thing is the commitment to fiscal responsibility with a target to reduce the budget deficit to 3.5% of GDP by 2020. The tax base is to be widened with the ratio of direct to indirect income tax generation to move from 80%:20% to 60%:40%. The tax management processes will be strengthened, to improve collection and rationalise the multitude of tax holidays and benefits.

He said that the retrospective taxes imposed in the mini budget of January 2015 are to be suspended as they had undermined the investment environment.

“While this is most welcome, analysts are left wondering why the Government took the trouble to pass these very taxes in parliament barely three weeks ago.”

He asked was it a case of the left hand not knowing what the right was up to.

“A Government is judged by its deeds as well as its statements. Its actions on the retrospective taxes apparently belie the otherwise sound sentiments expressed in the policy statement. Given the dichotomy, many analysts will wait for the budget to judge if the statement will translate to meaningful action,” he said.

Chairman, Federation of Chamber of Commerce and Industry, Ajith Wathuhewa said that it was good to note the interest by the Prime Minister to re-look at the Export Development Board. “I think EDB could do much more towards increasing exports specially using the SME sector.

The EDB should do regular international surveys and tell the SME sector and the Chambers the products and opportunities that are globally available. Currently this is not happening.”

A tourism industry professional said that the Prime Minister should look at fine tuning the Tourism act which is over almost seven years old. “I think it needs some modifications to meet current demands and trends.”

by Rukshana Rizwie

While there has been positive reviews for the Economic Policy statement that has been put forward by Prime Minister Ranil Wickremesinghe, Economists were quick to point out that there are severe deficiencies in the modalities of his concepts. The Prime Minister made special mention of the ‘amalgamation of the EPF and the EFT funds’ citing that the government would secure the funds in the EFP and EFT and amalgamate it to create a new national pension fund that would have a combined value of Rs. 1.7 trillion.

Executive Director and Head of Research at Verite Research, Dr. Nishan de Mel told the Sunday Observer that it wouldn’t be fair on the part of the government to take away the right, employees have to access their EFF and ETF by combining it into a pension fund.

“The Prime Minister’s statement is not very clear, the word amalgamation is ambiguous. The EFP and EFT were set up under different laws for different purposes, combining it and giving it away to an employee at retirement wouldn’t make it a pension fund,” he said.

de Mel said that the EPF and ETF should be managed separately since combining them into a form of annuity could easily lead to mismanagement.

“Everyone should have the option of either keeping it or converting it to a pension fund. The important thing here is that they should have a choice whether to reinvest their EPF and ETF funds for the benefit of the government,” he said.

“The Federation will issue a collective statement on its sentiments. However, it is premature at this point for us to comment as it representatives of the industries have not been consulted over the matter yet,” he said.

CEO and MD, Chevron Lanka PLC, Kishu Gomes said the decision taken by the government to present a policy document is a good move for the stakeholders to understand the thinking and direction of the new rulers.

The government has to meet the expectations of all in line with the election manifesto. Rather than focusing on equitable distribution of wealth taking from those who have and giving it to those who don’t is not sustainable and will not help elevate overall economic performance, eg. the super gains tax.

The government should focus on driving economic growth with a strategy to bring in wealth from the rest of the world for which there has to be a predictable investment climate created by way of policy and practice.

HVA Group Chairman Rohan Fernando said we are encouraged by the positive discussions on trade cooperation between Sri Lanka and Thailand following the visit of the President Sirisena. It was also a heartening to note the well planned policy decisions on the economy spelt out by the Prime Minister in Parliament on Thursday.

“While we welcome the correct direction adopted by the government we must not loose sight of the important factors in making the policy work as envisaged. Attention should be paid to achieving economic independence and prosperity for citizens by liberalization of trade and economic activities with the government setting policy and direction for the private sector to achieve the set goals, re-organization of the most inefficient public sector which has been the main obstacle, retarding growth in districts outside the Western Province, stable policies to encourage investments by local and foreign investors and a central policy implementation unit to fast track development,” he said.