Professionals Quash chicken-brained Mangala’s Budget criticisms Part II
Posted on November 26th, 2020

By : A.A.M.NIZAM – MATARA.

Although the chicken-brained lingerie designer cannot understand the economic progress being made by this government it must be pointed out despite progress affecting in many firlfd of economic development inflation for which the opposition rabb;e-rousers make even poojas for a steady increase is reported to be dwindling appreciably,  Inflation in October reached 5.5%, which was a reduction from 6.4% in the previous month. The Census and Statistics Department said that the reduction was largely down to changes in food prices.  

We now present fitting responses given to the chicken-brained lingerie designer who attempted to mislead the people about the visionary futuristic budget thinking that the people of this country are economic liliputs similar to him.

National Chamber welcomes 2021 Budget; stresses on implementation

The National Chamber of Commerce (NCCSL) welcomed the 2021 Budget presented on by Prime Minister and Finance Minister Mahinda Rajapaksa and stressed its success hinged on effective implementation.

Following is the full text of the NCCSL statement:

The National Chamber at the outset acknowledge and appreciated the Government efforts to maintain consistency in taxation policy framework commenced last year with introduction of certain tax cuts and relaxations, without resorting to ad-hoc revenue enhancement measures in the midst of extremely difficult times confronted with the COVID-19 pandemic on behalf of the membership, business community and general public at large. 

We observe the Budget proposals deliberated under agriculture, local diary industry, fishery economy, plantation, etc., with budgetary allocations under the Ministries of Agriculture, Irrigation, Water Supply, Plantation, Trade, Fisheries and Land, etc., together with a wide spectrum of tax exemptions extended would augur well for SMEs of the economy where the National Chamber has a remarkably high level of representation. 

The National Chamber is cognisant that the budgetary framework revolves around the sustainability of local entrepreneurship under ‘Vistas of Prosperity and Splendour’ while keeping certain import restrictions in order to maintain economic stability of the economy as elaborated under foreign trade and national economy of the Budget speech. We sincerely expect that the Government would endeavour to reconnect with global value chain eventually starting with the regional trade collaborations at the appropriate time moving forward.

We are of the view that up-skilling of the technical knowhow of the local work force would be of paramount importance in order to improve productivity level and quality of the output of the local entrepreneurs. While appreciating Budget proposals directed towards in the areas of technological infrastructure, connect Sri Lanka, techno parks, distance education, and specifically opportunities for vocational education and expansion of university facilities we stressed that such efforts need to be continued under ‘Vistas of Prosperity and Splendour’ vision of the Government in order reap the benefits in the medium and long term horizon.

Finally, we are of the view that the successful implementation of the Budget proposals of 2021 hinges on achieving the revenue targets of the Government which would be challenging under current prevailing circumstances and expect more light will be shed in this area through deliberations within the next few days finally extending the assurance in the minds of rating agencies, investors and foreign financing agencies.”

CCC welcomes ‘growth-oriented’ Budget

  • Awaits timely implementation and private sector consultation 
  • Wants engagement on holistic labour reform, change in retirement age and COVID insurance fund 
  • Says wage reform should rely on time-tested collective bargaining and Govt. reconsiders plantation wage in Budget 
  • Wants focus on debt management and SOE reforms

The Ceylon Chamber of Commerce said it welcomed the proposals put forward by the Prime Minister Mahinda Rajapaksa in the National Budget 2021 which it termed as business friendly, production-oriented and demonstrative of policy continuity. 

The Budget has focused on boosting economic growth by enhancing exports, providing investment relief for key thrust sectors supplemented by public investment proposals, promoting capital markets and supporting the growth of startups and SMEs,” the Ceylon Chamber said in a statement. 

The emphasis on tax policy continuity and measures announced to strengthen tax administration demonstrates a strong commitment to policy consistency while strengthening and broad basing revenues. 

The Chamber said in its pre-Budget proposals highlighted the importance of the Government maintaining the current tax laws and rates at least for the next five years or so thereby providing the necessary consistency in tax policy. The adoption of a consistent tax policy under the National Budget 2021 would not only provide a platform for proper planning for business but would also help the Government in long-term cash flow planning and strengthening fiscal consolidation.

The Chamber also welcomed the tax relief for investment in machinery and equipment for domestic manufacturing and exports and the relaxing of import restrictions on certain sectors in line with past recommendations by the Chamber. 

Proposals on enhancing digital governance, investments in technology and infrastructure including rural connectivity to facilitate digital inclusion are also notable.

We trust the commendable proposals in the Budget will see timely implementation and will continue to involve private sector consultation.” 

The Chamber said it looked forward to the facilitation of further stakeholder engagement with respect to holistic labour reform and the placement of the proposals related to the extension of the retirement age and the contribution of 0.25% on turnover towards an insurance fund, within the context of the said broader reform agenda.  

With respect to wage reform, the Chamber recommended the placing of continued reliance on the time-tested mechanism of collective bargaining which has so far been adopted consistently across industry sectors and encompasses factors related to productivity and worker welfare, and as such that the Government reconsiders the budget based wage intervention for the plantation sector. 

The incorporation of productivity linkages within the proposal to increase wages of plantation sector workers is also a subject which merits further consultation. 

The Chamber said it trusted that the positive benefits accrued from the macro stability set out by National Budget 2021 would provide a foundation for sustainable growth acceleration over the medium and long-term as envisaged. 

The Chamber is also hopeful that the Government will pivot on the growth foundation established, to continue its progress in reforms on several key agendas including but not limited to those related to Local and Foreign Investment, Debt Management, Export Promotion, State-Owned Enterprises (SOEs), Capital Market and productivity enhancements in the public sector. 

The Ceylon Chamber in its capacity as the premier representative of the private sector, looks forward to an ongoing engagement with the Government, and for the opportunity to play a meaningful role alongside the private sector at large, with respect to the implementation of the Budget proposals. 

The Chamber will continue to support the Government’s initiative to effectively execute a public-private shared vision for accelerated economic revival and social sustenance,” the statement added.

2021 Budget more significant given COVID-19 challenge: – CEO of Standard Chartered Bank.  

CEO of the Standard Chartered Bank Sri Lanka Nr.Bingumal Thewarathanthri said that the National Budget of 2021 was more significant given the challenges arising from the COVID-19 pandemic.

He emphasised that Year 2020 has been challenging. Extended lockdowns in Sri Lanka contributed to a loss of business, affecting both domestic production and the import-export economy. Needless to say, this adversely affected the banking sector, both in terms of (necessary) loan moratoriums and a rise of NPLs.  In this backdrop, the National Budget plays a significant role as compared to any other time,”  

According to him, all over the world successful governments have accepted stress on fiscal deficit to support the industries and Sri Lanka is not an exception. However, Sri Lanka will have to balance its ambition with medium-term debt sustainability. 

After a long time, we have seen some assurance on policy consistency with this Budget, which will support the FDI agenda for the country and will also boost the domestic companies venturing into sectors specified by the Strategic Development Projects Act,” Thewarathanthri pointed out.

Now, the banking sector needs to boost confidence in the market, repurposing financial instruments to suit the unique needs of the economy and innovate more holistic value propositions to respond to differing circumstances. Whilst financial sector stability is a top priority, it is imperative that banks offer unconventional financial services with calculated risks,” the SCB Sri Lanka CEO emphasised.

With the Government flagging the national need to change the Sri Lankan mindset to a production-based economy that supports exports and domestic production capabilities with less imports, the onus is on the banks to assist the Government to kick-start the economy, for businesses to thrive and the nation to progress,” Thewarathanthri added. 

New era for local motor vehicle assembly with 2021 Budget,

claims Sri Lanka Automative Component Manufacturers Association (SLACMA)

In appreciation of the Government’s efforts to encourage entrepreneurs in the automobile industry engaged in vehicle assembly using locally-manufactured brand-new auto components, SLACMA President Dimantha Jayawardena said the 2021 Budget had proposed local automotive assembly using 30% of locally-manufactured brand-new parts; promotion of local automotive products by giving them preference in Government tenders (domestic preference) and elimination of unfair competition for local auto manufacturers by preventing under-invoicing by importers.

SLACMA has submitted a 10-year master-plan to the Finance Ministry as a crucial step to take the local assembly industry and component supply to the next level, as they seek quality certification from their regional counterparts to boost growth. 

The association reiterated the role of the Ministry of Finance under the Prime Minister, Ministry of Industry and Supply Chain under Wimal Weerawansa and Dilum Amunugama, MP, the State Minister of Vehicle Regulation, Passenger Transport Services, Railway Carriages and Automobile Industries, the Department of Motor Traffic, Export Development Board and the Board of Investment of Sri Lanka for their active support in driving this policy forward. 

The SLCMA said it was currently in talks with seven world-renowned automobile companies, in order to supply locally-assembled and manufactured automobile components. Jayawardena expressed confidence in a better future for the industry in creating many jobs in the months to come.

EDB lists key 2021 Budget proposals and impact on export sector

The Export Development Board (EDB) said it was pleased to see an export-focused budget, which will support strong export growth led by investment, value addition and maximising Sri Lankan natural resources. 

This is a pivotal change in Sri Lanka’s growth strategy, which will be led by the exporters,” the EDB said.                

Following is the list of export focused proposals of 2021 Budget, it said..

 Corporate Income Tax

Exports, Tourism, Education, Medicare, Construction and Agro processing – 14%

Manufacturing – 18%.

Trading, Banking, Finance, Insurance, etc. (Standard Rate) – 24%. Manufacture and Selling/Import and Selling Liquor, Tobacco, Betting and Gaming – 40%.

Income generated from the supply of Health Protective Equipment to arms of Government and similar products by BOI companies on the request of Ministry of Health and Indigenous Medical Services, Department of Health Services, Tri-Forces and Sri Lanka Police to be considered “Deemed Exports” (Tax rate – 14%).

VAT rates.

Standard rate – 8% (effective from 1 December 2019).

Supply of Financial Services – 15%.

Export of goods and services – Zero Rated.

Exemptions apply for speccified goods and services.

Economic Service Charge (ESC).

ESC was abolished with effect from 1 January.

Nation Building Tax (NBT).

NBT was abolished with effect from 01 December 2019. 

Impact of Budget 2021 on the Sri Lankan IT/BPM industry

The potential for exponential growth 

The National Export Strategy of Sri Lanka aims to generate $ 5 billion of revenue creating 200,000 direct jobs and establish 1,000 IT/BPM startups via the IT/BPM industry. This Budget clearly codified this message through incentivising the IT/BPM industry as a thrust or core industry.

Imran Furjhab, the CEO Tresync stated that thre The IT/BPM industry requires little capital, can grow exponentially very fast and can help prevent brain drain while offering the capacity to grow internationally and boost efficiency of every other industry as well. 

Signals to IT/BPM industry

The Budget proposals signalled that Earnings from both domestic and foreign sources by those engaged in businesses in Information Technology and enabling services and also their earnings when made while being resident or non-resident will also be exempted from income taxes”.

Removing all taxes would influence more people to get in to the industry while also be helping to attract Sri Lankan diaspora to invest in Sri Lankan startups plus physically return to the country to work in this industry.

Additionally, it gives long-term certainty for larger projects as well. Investments exceeding $ 10 million with potential to change the landscape of the economy, in the areas of export industries, dairy, fabric, tourism, agricultural products, processing and information technology will be provided with concessions up to a maximum of 10 years under the Strategic Development Law.”

Therefore, the Budget meets the requirements of the IT/BPM industry in terms of generous tax exemptions. 

Encouraging listings of IT/BPM companies

Many local startups such as PickMe are now ready to list hence the incentives such as to provide a 50% tax concession for the years 2021/2022 for such companies that are listed before 31 December 2021 and to maintain a corporate tax rate of 14% for the subsequent three years” will encourage more listings of IT/BPM companies and let the general public benefit from the growth of the IT/BPM industry. 

Enabling legal framework

The intention to introduce laws relating to data security, cyber security and intellectual property rights, which I have been personally pushing for will protect IT/BPM stakeholders and help establish the country as a favoured investment destination. 

Enabling telecom infrastructure framework

Creating a ‘technology-based society and digitally-inclusive Sri Lanka’ is the Government’s vision. Under this the ‘Gamata Sanniwedanaya’ (Communication for the Village) aims to grow the telecom infrastructure to provide high speed access across the country, which will permit the IT/BPM industry to be located anywhere. 

Continued ………….

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