PM's economic policy statement and Budget 2016:

Need for a development policy framework vital

by Keerthi Gunawardena

The 2016 Budget was commented on by most as a 'mixed budget'. The Business community and the people looked at the Budget based on the Prime Minister's policy reforms statement in the Parliament on November 5.The PM's statement was quite positive and promising. But some of the areas the PM addressed in his policy statement are not reflected fully in the Budget. We, as a country, need a clear cut economic policy which can win the confidence of businessmen, foreign direct investors and the masses.

Lowest FDIs

Generating one million job opportunities is the first priority of the PM's policy statement. He said this needs Foreign Direct Investments (FDIs). As it is, we are one of the countries in Asia that attracted the lowest FDIs. How are we to achieve this big target? Are we using the same strategy, the same people?

We need to think of a good strategy and a process to achieve it. This should be the next step and I hope the government will implement the right mechanism to realise the goal of one million jobs in three years.

I believe the PM wanted to create a large number of jobs in the private sector and not in the government sector. If this is so, then the call in the Budget to private sector employers to increase salaries by at least Rs. 2,500 per month is unethical.

Sri Lanka has a free market economy and the salaries of the private sector should be based on supply and demand. Most private companies today practise and promote productivity based wages. Talented workers achieve higher productivity and make more money. This will improve the competitiveness and productivity.

The Employers' Federation of Ceylon (EFC) addresses issues in this area with the State and with the Chambers involved in trade and commerce. There was no consultation with the Chambers, nor with the EFC and this announcement in the Budget can create a negative impact on generating the one million job target.

The Ease of doing business index is very vital for Sri Lanka and needs quick improvement.

We have come up a long way from 1980 to 2014. However, in comparison, China and India, with over a billion people each, have done well with their huge populations.

Value addition

Our country has a very high literacy rate supported by IT literacy too. We should create good opportunities for our talented youth to stay in the motherland, create higher value addition and enhance the income levels.

As it is, we are performing much lower than the potential. We need a clear vision and a mission to improve income levels in our country. The agriculture-based rural areas should be assisted by the government with new technology and innovation to improve the productivity.

Development of rural economies: This has become more of a political promise for a long time. This is something easy to say but difficult to handle with the existing system.

We found that this is a subject addressed from the time of election campaigns until the end of regimes. The results produced in the past are unsatisfactory.

State enterprises

The biggest challenge here is how to use the same old systems and the same old people and produce rapid results. There should be an innovative approach and a motivating mechanism to be created. Land ownership is also an identified problem for the development of rural economies. The delays should be minimised by changing bureaucratic system with a more modern approach. If the government is capable of handling the development of the rural economy well that itself can create a wide and a strong middle class in Sri Lanka.

We find from the PM's policy statement the government has identified one weak area. "We all agree that State enterprises must be run more efficiently. This can be achieved by ensuring that good economic management is practiced and efficient managers are put in place."

We have to wait and see whether good people will be brought to manage State enterprises and what results they will produce. If good managers are not appointed this will create a 'hole in the bucket' situation.

When we refer to Budget 2016 we see a few conventional issues. How will the Inland Revenue Department increase the tax net for personal income? It is very important to increase the number of personal tax files as well as for Small and Medium enterprises too.

If this can be done they will also start good business practices which can benefit everyone rather than putting more burdens on poor people through more indirect taxes.

Tax on withdrawals of over Rs. 1 million from banks: The Finance Minister recently requested all Sri Lankans living abroad to bring their money to Sri Lanka and said that no questions will be asked. After bringing the money to the country, every time they withdraw their money they will be taxed. Therefore, the chances of this money coming to Sri Lanka is very remote. As a country we have to create a clear policy framework for development. What we lack is policy. If we can maintain consistent polices rather than changing it from time to time and in every Budget there will be clear progress.

We are very hopeful and patient. We have to wait for sometime to see the results. This reminds me of a quote of Aristotle: "Patience is bitter, but its fruit is sweet."

The writer is the Chairman of the International Chamber of Commerce, Sri Lanka.