Budget 2012:

The great leap forward

The following report is based on the speech Economic Development Minister Basil Rajapaksa made, concluding the debate on the second reading of the Budget for 2012. This is the seventh Budget presented by the Government of President Mahinda Rajapaksa.

“I regret that there was no constructive criticism at all during the debate on the Budget for 2012. Therefore, let me conclude the debate by recalling our childhood days. When we had no one to play cricket with, we became the batsman and bowler both rolled into one. We batted and then we ran and picked up the ball. I am facing a similar situation today because the Opposition has failed to make a worthwhile contribution to the debate.

At the same time I am happy over a proposal President Mahinda Rajapaksa made to the Opposition during his Budget speech. It was the suggestion made, especially to the UNP, to show its political clout by strengthening the party. Unfortunately for them, a strong, intelligent, duty-conscious and honest member elected by the people has today agreed to vote for the Budget with the Government.

The people gave a mandate on November 17, 2005 to President Rajapaksa to govern the country. However, at the time his power extended only to two thirds of the country’s land area and two thirds its territorial waters. Most districts of the North and sections of the three districts in the East were accepted as LTTE-administered areas under the Ranil-Prabha agreement. Leave alone the President, Ministers and MPs, even uniformed soldiers were not permitted to enter these areas carrying arms. Even a soldier coming home on leave had to obtain permission from the LTTE. The Yala National Park area, the entire stretch from Kumbukkan Oya via Ampara to Batticaloa, Mullaitivu and Point Pedro and from there to Kankesanturai as well the Western coastal area via Poonaryn to Kalpitiya were recognised as LTTE territory.

No protection

The law could not be enforced and consequently no protection was given for life and property. This situation affected all communities - people in the North and the South. Even the TNA MPs who freely express their views today know this. Their conscience knows that they had no protection at the time. It is perhaps for this reason that their families left the country.

This was the situation when President Rajapaksa took over the reins. Virtually the entire infrastructure of the country had been either weakened or destroyed. Similar to some of the South Asian countries which still cannot provide their citizens with electricity throughout the day, we too were compelled to resort to power cuts. Highways and other roads were in an extremely dilapidated condition. There was hardly any investment in the area of water supply and telecommunications.

Social infrastructure, health, education and public transport had deteriorated rapidly. Not only private bus services, but even the CTB was virtually paralysed. The CTB did not have the required number of buses. Per capita income, economic growth and even official reserves had declined to some extent. Inflation, interest rates, poverty and unemployment had risen.

As you are aware, this was the time when the country was trying to recover from the calamitous impact of the tsunami. The disaster hit several areas of the country. The first task of the President, after taking over the administration, was to launch the Mahinda Chinthana program while simultaneously taking action to eliminate separatist terrorism that had plagued the country for 30 years. He undertook these steps without weakening public welfare and development work.

He completed his first term of six years last November 17. Three years, six months and one day of this first term was spent on combating terrorism – that is until May 18, 2009. He ruled the country without terrorism for only two years, six months and 12 days up to today.

A greater part of his first term was therefore devoted to ridding the country of the terrorist menace. But at no time did he use it as an excuse to suspend welfare programs and development work or reduce allocations for them. After having successfully met these obligations, thus bringing peace to the country and ensuring the freedom and fundamental rights of the people, he had to face a number of problems resulting from global crises.

For the first time within a short period, the world faced two crises. This is the first time the world is experiencing two economic recessions. As soon as the world started recovering from the crisis of 2008-2009, we faced another one during 2010-2011. We know that in 2009 the world economy was down by six percent. In all developed countries it was 3.9 percent. In America it was 2.6 percent while in Europe it was 4.1 percent. In Britain the downturn was 4.9 percent. Japan marked a minus 6.3 percent.The oil crisis aggravated and prices shot up. We have seen the same trend again from the beginning of this year. With the exception of Sri Lanka, almost the entire world experienced the food crisis. Despite all this, we have marched towards a new Sri Lanka from 2005 to 2010, via the Mahinda Chinthana.

GDP growth

We accelerated the growth of the Gross Domestic Product (GDP). If we consider the growth of the country’s economy at different periods we will see an average of 3.7 percent in 1985-1990, 5.5 percent in 1990–1995, 5.1 percent in 1995-2000 and four percent in 2000-2005. In 2001 it was negative. But during 2006-2010 the average was 6.4 percent. Especially between 2010 and 2011 a growth of eight percent was recorded.

Even during the conflict we maintained a high growth level. Per capita income increased from US $ 1,242 in 2006 to US $ 2,399 in 2010. In 2002-2004 the average was US $ 918. In 2005-2010 the average was US $ 1,792. Our aim is to increase this to US $ 2,850 this year and US $ 3,200 in 2012.

Likewise, our official reserves in 2006 were US $ 2,735 million in 2006. In 2010 we increased this amount to US $ 7,197 million. Up to 2000-2004 the average was US $ 1,722 million. In 2005-2010 we increased this to US $ 4,006 million.

Foreign exchange

The country’s second biggest source of foreign exchange is remittances from abroad. During this period we were able to find new markets for skilled employees. But we reduced the number of women going abroad for jobs and instead increased such opportunities for men. As a result earnings went up from US $ 1,918 million in 2005 to US $ 4,106 million by 2010. The average in 2000-2004 was US $ 1,316 million. In 2005-2010 it was US $ 2,824 million.

We also increased government investments. In 2006 it was 4.4 percent. We increased it to 6.4 percent in 2010. During 2012 it will be 6.6 percent. The average in 2000-2004 was 2.6 percent which increased to 5.5 percent during 2005-2010.

Likewise, we have increased share market capitalisation from Rs. 584 million in 2005 to Rs. 2,211 million in 2010. On an average it was Rs. 204 million in 2000-2004 and Rs. 1,005 million in 2010.

The increased confidence of foreign investors following the end of terrorism has led to an increase in capital investment and daily turnover. Exports too have increased. In 2000-2004 exports were worth US $ 5,186 million and in 2005-2010 it was US $ 7,306 million. We achieved this growth in exports despite the loss of GSP Plus.

At the same time we reduced inflation from 11 percent to 5.9 percent. Unemployment has been brought down from 7.2 to 4.9. percent. Government debt has been reduced from 90.6 to 81.9 as a percentage of GDP.

This needs special mention. It was 108 in 1989 and 105 in 2002. By this year it has been further reduced to 74 percent. We have narrowed the Budget gap from 8.6 percent to 7.6 percent in relation to GDP.

We are trying to reduce government debt. It has already been done. We are also trying to reduce the Budget gap. We have not done away with any relief measures or reduced them. Instead we increased them. Poverty has been reduced from 15 percent to 8.9 percent. Poverty in the plantations sector has been reduced from 32 percent to 11.4 percent. In the rural sector it has been brought down from 15.7 to 9.4 percent and in the urban areas from 6.7 to 5.3 percent.

The highest defence expenditure recorded so far was in 2000. It was 5.6 percent. In 2005 it was four percent. By 2010 it was reduced to 3.5 percent. I have to state here that we consider defence expenditure as an investment.

By November 24 this year, Sri Lanka accommodated the highest number of foreign tourists in her history. The number was 750,000. In 2010 it was 654,000. In 2009 it was 500,000. Then how did this increase to 750,000? The reason is none other than strengthened national security, priority given to public safety, protection of property and protection given to tourists. This is why we say all expenses on national security are an investment.

Anyone who wants the defence budget reduced is perhaps helping terrorists. In other countries the defence budget is bigger than ours.

America faced only two external attacks since the USA was formed. One was the attack on Pearl Harbour. The other was the attack on the World Trade Centre. They are spending massive amounts on national defence. Singapore, which has never faced any terrorist attack, spends twice the amount we spend on defence. Sri Lanka’s Armed Forces are a people’s force. Therefore, military bases should be set up in all parts of the country. Hence, defence spending is vital for public security and national development.

We took steps to reduce the interest rate at a time it had climbed to 30 percent. This was a big burden on farmers, small-scale entrepreneurs and small industrialists. It was also a problem for people building houses and for the working class. During the past six years, up to 2010, the interest rate was 24-32 percent. Today we have succeeded in bringing it down to 8-16 percent. This is the transformation we have brought about through Mahinda Chinthana.

Infrastructure development

These prove we have achieved many successes in the area of economic growth. In the case of infrastructure development, Sri Lanka, for the first time, built an expressway. Steps are also being taken to build, without delay, the Colombo-Katunayake, Colombo Circular, Matara-Hambantota and Colombo-Kandy expressways. Some of these have already been completed to a great extent. The Road Development Authority has carpeted 3,753 km of highways. Foreign aid has been spent on constructing 807.1km of provincial council roads.

The Economic Development Ministry has repaired and improved 3,958 km of provincial roads during 2011 with the funds President Rajapaksa allocated under the last Budget. People feel this, but the Opposition does not feel this development because they do not fall into potholes when travelling on these roads.

The Government has succeeded in building and repairing 21,402 km of roads – 12,360 of them under Gama Neguma, 8,779 km under Maga Neguma and 262 km with the funds of Local Government bodies. This amounts to one third of rural roads completed.

Regarding pipe-borne water connections, there were only 907,622 consumers in 2005. By 2011, the number increased to 1,422,657. This means 515,035 more families have been provided with water supply connections. Under the Water Supply and Drainages Board’s large and small rural water supply schemes, US $ 157 million has been allocated for the supply of water to Kilinochchi and Jaffna via Iranamadu. It is the biggest water supply scheme next to that of Colombo city.

Electricity consumers

In 2006, there were only 3,797,977 families who had electricity, but by September 30, 2011, the number of electricity consumers has gone up to 5,145,284. Children of 1,347,307 families who had to do their studies with the help of bottle lamps today do the same with electric lights. The President has made allocations under this Budget for providing electricity to the entire country by the end of 2012.

We have already succeeded in providing 100 percent electricity to several districts including Kalutara and Hambantota. A massive investment has been made to generate electricity through the plants in Norochcholai and Upper Kotmale. As a result Sri Lanka has become South Asia’s only country which provides electricity 24 hours of the day.

In education too, a big investment has been made. In 2005 there were only 189,234 teachers in Sri Lanka. In 2010 this number reached 215,692 - without counting those who went on retirement.

This means 26,458 new teachers had been recruited. Parallel to this, class rooms, laboratories and other facilities have been provided. Under the Economic Development Ministry, 6,895 schools have been provided with toilet facilities this year.

If we look at examination results, today we can see a clear improvement in the number of students who have performed successfully in exams. From 47.7 percent, their number has increased to 58.8 percent. Similarly, the number of those eligible for university education has gone up from 59.2 percent to 61 percent.

The number of students admitted to universities in 2006 was 18,520 compared to 13,396 in 2005. In 2010 the number rose to 21,547. In 2011 it has increased to 22,016.

Measures have been taken to provide all schoolchildren with a sound education through 1,000 secondary schools and 5,000 primary schools and to improve literacy, knowledge in Information Technology by 14 percent, thus reaching a target of 30 percent. Steps have also been taken to increase the percentage of children in grade 5 to 97.7 percent and grade 9 to 96.9 percent.

Much progress has been achieved in the health sector too. In 2005 there were only 9,070 medical doctors. In 2010 we increased that number to 14,005. We have also increased the number of hospital beds from 61,937 to 69,501 and also provided 7,564 new beds. The number of nurses too has been greatly increased. In addition to improving large hospitals Rs. 2,031 million has been allocated for developing 1,646 maternity and children’s clinics selected under the Gama Neguma program of the Economic Development Ministry.

We have also achieved success in many other areas including agriculture and industrial services. Developing the country by improving the lot of the individual, his family and through them the village and thereafter the country is the target of the Mahinda Chintana program. Under the Divi Neguma program 1,000,000 domestic economic units were activated early this year. Under this Budget, steps have been taken to increase the number of such units to 2,500,000. Divi Neguma is not a government project, but a people’s program which they are familiar with.

The objective is to revive our ancient way of life and the traditional economy in all areas of the North and the East, in the South and the West. It will encourage people to grow their own vegetables and fruits and have their own dairies for milk production. It will also help people to start their own small-scale industries. The Opposition should sincerely assist in this scheme. This is a national movement.

Food security

The aim of the President is not only to ensure food security in the country, but also to see that Divi Neguma will help each family and each individual to have their own sources of food supply. It will give the people the opportunity not only to consume foods which will be free from the effects of poisonous chemicals, but also help reduce daily expenses. It would help improve the nation’s health and make available nutritious and tasty foods in plenty.

It would strengthen the individual’s and his family economic well-being followed by the Gama Neguma program that would contribute to the prosperity of the rural communities. This year alone we are constructing 5,162 km of rural roads via our MPs and improving 907 community water supply schemes and 4,769 preschools.

These schools were activated under the last Budget. Gama Neguma has also activated 5,074 small-scale irrigation canals at provincial level. Power supply has also been extended. As I said before, in every electorate provincial roadways between 25 km and 50 km are being carpeted. Under this Budget, monies have been allocated for provincial development. The President has allocated funds for the development from next year of all weekly fairs where 80 percent of our people do their marketing at least once a week and where farmers sell their products and buy their requirements.

In addition, funds have been allocated under this Budget for setting up bus halts and increasing opportunities for self-employment. The Government is also investing large amounts through the private sector for developing the tourism industry. I must make special mention of the investments made in the North. After May 18, 2009, 28 aircraft have arrived here, thus increasing the number of passenger seats up to 4,321.

Since 1978 when the BOI was established, Sri Lanka had foreign investments worth about US $ 6,802 million whereas from 2006 up to the third quarter of 2011 the country received US $ 4,024 million.

According to the Doing Business Index, Global Competitiveness Index, Human Development Index, Basic Requirement Index, World Travel Market and sovereign ratings, Sri Lanka has rapidly advanced during 2006-2011.