Business community hails Budget 2009

‘Private sector anticipated more benefits’:

by Lalin FERNANDOPULLE

[email protected]

The business community while welcoming the 2009 Budget as a good move to develop domestic industries said given the current global economic crisis there should have been more benefits to strengthen the business sector.

Partner, Gajma and Co, Chartered Accountants, N.R. Gajendran said the Cess imposed on imported items will have long term benefits to promote local industries but in the short term industries are not geared to meet the supply demand and that the prices of essential food items will skyrocket.

He said while the reduction in the Value Added Tax (VAT) from 15 per cent to 12 per cent will be beneficial to industries the Nation Building Levy will affect the growth of businesses.

The industries will not reap the full benefit of tax reductions by imposing new taxes.

The slash in fuel prices is a welcome move but consumers have not been given the full benefit of the drop in world crude oil prices during the latter part of the year.

By not passing on the full benefit to the users the Government is trying to recoup the loss incurred by the Ceylon Petroleum Corporation.

Gajendran said the private sector hails the move to widen the tax slabs which will benefit private sector employees.The increase of the Port levy from 3 per cent to 5 per cent will increase the cost of production.

Managing Director, Chevron Lubricants PLC, Kishu Gomes said the current global economic turmoil and its adverse impact on the country’s economic growth has not been addressed.

A consistent plan to face global challenges and enhance exports has not been looked into in the budget.

“The Nation Building Levy will increase the cost of operation. The reduction in VAT will not help companies. The Government is taking from companies to grant relief to people,” he said.

Director/CEO, Bartleet Trans Capital Ltd., Indrajith Fernando said a key highlight of the 2009 Budget is the support given to develop the agriculture sector, industries and the SME sector.

“Despite the gloomy global scenario of staggering food and energy prices the budget has brought a sense of hope and security for a better tomorrow. The reduction in fuel prices is a big relief for the low income earning families”, Fernando said.

President, Sri Lanka Chamber of Small Industries, Aloy Jayawardena said the proposals made by the Chamber through the Export Development Board to bridge the budget deficit has not been addressed.

“Though the budget has granted relief to the public sector the private sector, the backbone of the economy has been neglected. The tough times in the world economy should have been taken into account in granting relief to the private sector”, he said.

He said there are no benefits for the SME sector industries. The concessions given to develop the agriculture sector is satisfactory.

“The Chamber welcomes the allocation for defence and the pledge made by President Mahinda Rajapaksa to end terrorism and develop the North and East”, Jayawardene said.

President, National Chamber of Commerce of Sri Lanka, D. Essuwaran said the Chamber hails the measures taken to support the agricultural sector and the relief given to the low income families through the reduction in fuel, electricity and water.

“The high exchange rate which has not been properly addressed in the budget is a major drawback for the export sector. Problems affecting major export sectors such as tea, rubber and textiles have not been adequately addressed”, Essuwaran said.

The Government has granted a pay hike of Rs. 1,000 and has increased the cost-of-living allowance from Rs. 1,000 to Rs. 3,500 with effect from January 1, 2009.

The Government’s estimated expenditure is Rs. 1,191 billion and the revenue target is Rs. 855 billion for the coming year. The budget deficit is Rs. 337 billion.

President, Chamber of Construction Industry, Sarath Wickramasinghe said at a glance the budget appears to be more broadbased and comprehensive than previous Budgets.

The Budget deficit which was 10% in 2004 has been reduced to 7%, and the Government borrowings reduced from 100% to 85%. Furthermore, the Budget reducing the VAT by 3% is commendable. The incentives given for power generation, export promotion, which we hope will also include professional services and for furniture manufacturing is encouraging.

The allocation of 70,000 Ha. of land for agriculture we believe is mainly for import substitution and the mechanism to facilitate early acquisitions of land for Road Development by using Treasury Bills for settlements of heavy compensation is noteworthy.

The boom referred to in the budget of 9% growth in the construction Industry is due to the mega projects undertaken by the Government over the past few years in the power, ports, tank rehabilitation and construction, Road Sector, Tsunami re-construction of housing and infrastructure, Maga and Gama Neguma.

Most of these projects are foreign funded and undertaken by foreign consultants and contractors, or the projects are given to Government organisations for implementation.

Consequently, the local private sector consultants and the majority of the small and medium scale contractors have not benefited by this impressive growth and are facing severe hardships.

Kosala Wickramanayake, President, FCCISL said, “Overall it appears to be a good budget. The most positive feature is that local industries are encouraged via the increase in tax for imported products”.

He said that the reduction in VAT is also a welcome feature.

Wickramanayake said the negative feature of the budget is the introduction of a new tax “Nation Building Tax” that will greatly affect the Business Industry.

This could have been introduced as a surcharge rather than a new tax. However, the President had tried to balance the budget by taking both the local and the international situation into consideration.”