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| Sunday, 21 November 2004 |
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Editorial |  |
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Editor, Sunday Observer. E-mail: [email protected] Snail mail : Sunday Observer, 35, D.R.Wijewardana Mawatha, Colombo, Sri Lanka. Telephone : 94 11 2429239 / 2331181 Fax : 94 11 2429230 A well-focused budget Finance Minister Dr. Sarath Amunugama and the UPFA government should be congratulated for presenting a well-focused development oriented pro-poor budget. In a radical departure from previous experience, Budget 2005 marked a new development strategy. The salient features of this strategy are emphasis of agriculture and the SME sector, a shift from services to manufacturing, emphasis on higher technology, re-defining the crucial role of the public sector, priority development of the rural economy and greater emphasis on skills and man-power development. As the Finance Minister aptly demonstrated in his Budget Speech the development strategy that we require today in the context of globalization and its challenges is one that actively favours manufacturing and agricultural production. It is in these sectors that new values are created unlike in the service sector, which merely distributes values earned through agriculture and industry. Development hitherto had been lopsided. The consequences were the marginalization of the rural people and the poor. Fruits of development did not reach them. The share of the poorest 40 percent in the national income, which was 21 percent in 1980, has declined over the years to 14 percent in 2002. In contrast the rich 20 percent's share increased to 54 percent. Budget 2005 for the first time in post-independence history recognizes the importance of the Small and Medium Enterprise sector in the economy. It says: "Over 50 % of our Gross Domestic Product is produced by this sector, 65% of our tea production is by smallholders in the plantation sector. 50% of our nation's apparel and garments industry is handled by individual entrepreneurs. Around 70% of public transportation is dominated by private bus and lorry operators.80% of domestic trade activities are done by sole proprietorships and partnerships. 45% of tourism and recreation services are handled by family entrepreneurs. 50% of the construction industry is supported by small and medium enterprises. In a nutshell, the economic backbone and much of the economic muscle are provided by the SMEs and the entrepreneurs behind them" The creation of the SME Bank will go a long way in strengthening this sector and enabling it to utilize advanced technology. It is ultimately the application of higher technology that will improve productivity in the economy. Heeding the advice of the World Bank and Western aid agencies Sri Lanka has been downgrading the public sector. Divesting public sector enterprises was the norm and even profit making concerns were sold for a song. However, the private sector was reluctant to invest in high risk or slow yielding ventures like infrastructure development, particularly in the rural areas. This was one cause for the lopsided nature of development that we witnessed under the open economic policies introduced in 1977. Recent experience in many developing and even developed countries shows that the public sector has a vital role to play in the development process. Besides infrastructure development, the public sector is better suited to develop human resources. Countries like Malaysia and China that have shown tremendous advances in the recent years have invested huge sums on human resource development as part of their development strategy. In the context of globalization we have opportunities to leapfrog to a developed status by taking advantage of the new knowledge and technology produced by the revolution in information and communications technology. Hence, the emphasis on knowledge development and skills building given in the Budget is timely. Apart from the strategic shift in development policies Budget 2005 should be acclaimed for the relief measures it has given to vulnerable sections of the population like public servants, pensioners and Samurdhi beneficiaries. The reduction of VAT on essential commodities like sugar, dhal, potatoes, onions, dried fish, milk powder and vegetables will have a salutary effect in reducing the cost of living. Unlike in the past the government has taken a decision to curtail and discourage conspicuous consumption and wasteful or socially harmful expenditure. The increase of VAT on certain electronic goods, heavy taxes on casinos and betting centers and proposals to do away with subsidy on fuel for non-public transport are some measures designed to achieve that objective. It is not only the poor that will benefit from the Budget. There are enough incentives for entrepreneurs and exporters as well as proposals to attract more FDIs. Of special significance in this regard is the proposal to develop Sri Lanka as a financial center for offshore operations. |
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