By Damien

The Secretary to the treasury Dr. P.B Jayasundara recently made statement that the country is wasting the foreign currency on things that can be made in this country. I would like to add to this by stating that as a ƒÆ’-¡ƒ”š‚ country we should have clear targets and policies that are aimed at both saving and earning foreign currency if we ever hope to repay the foreign currency debts that have been accumulated over the years. We know that there are two things one can do to get out of debt. One is spending less and other is earning more.

If a concerted effort is made as a country as a whole we can get out of the problem. We have to close even the smallest loop hole in spending or wasting dollars whilst exploiting every opportunity available to earn them. While there could be many more ways of doing this listed below are some areas that are more obvious.

Spending fewer dollars

1. To abolish the permits issued to government employees to import vehicles and provide them with an interest free loan to purchase a vehicle in Sri Lanka. It is common knowledge that majority of the state employees either sell the permit or sell the vehicle they import. The issue of permits only increases the number of vehicles imported. The cost of an average vehicle that is imported on permits is most times cost the dollars earned by 8 housemaids in a year. The only beneficiaries of such permits are the vehicle importers who make a killing while the country loses foreign exchange.ƒÆ’-¡ƒ”š‚ 
2. Ban import of fuel guzzling vehicles that also cost large sums of foreign exchange to import. No foreigner will believe that we are a poor country if they see the number of Porches, Hummers, Aston Martins, and other fuel inefficient cars that ply on our roads.ƒÆ’-¡ƒ”š‚  As a country that imports 100% of its fuel requirement we cannot continue to import these high cost and fuel inefficient vehicles.
3. Stop the duty free allowance given to the arriving passengers at the ports. Scrupulous traders are using the allowances of returning expat workers to siphon liquor and electronic equipment to the country. They are lured to this racket by offering a premium to the dollar value for the items they help to take out of the duty free shops.The best inducement is to provide them with a preferential conversion rate for the foreign currency they bring in to the country. A system that lets a premium for a certain amount of dollars per year worked overseas will benefit them rather than them been part of a racket to earn few extra bucks. In the alternate a subsidized piece of land to build a house or gift vouchers to a value linked to the dollars converted etc. are better incentives rather than duty free imported goods that find their way to the electronic and liquor shops in the country.ƒÆ’-¡ƒ”š‚  Duty free liquor allowance should also be limited to the foreign passport holders as the current allowances deprive the country of excise duty and also dollars spent on importing the liquor that are generally are channeled ƒÆ’-¡ƒ”š‚ to the wine shops via the intermediaries that operate in the air port. Sri Lankan passport holders should be allowed to purchase locally manufactured liquorƒÆ’-¡ƒ”š‚  at a lower price at the duty free, as such liquor do not end up incurring at least $50 a piece to the country.
4. ƒÆ’-¡ƒ”š‚  Instead of the current system of duty free liquor & cigarettes allowed for foreign embassies and missions implement a system of payment of a reasonable amount in rupees to compensate for the duty portion of the liquor purchased by them. ƒÆ’-¡ƒ”š‚ This will put a stop to massive racket by persons linked to the embassies that abuses the duty free concessions given to the embassies.
5. Consistently reasonably high duty on imported food items will not only save foreign exchange but also will make growing such items locally. Reducing duty on potatoes etc. during festive seasons only deprives the farmers of the opportunity to make some additional income during such times. If reasonably high duty rates are maintained throughout the year many farmers will invest their time and money in farming knowing very well that the prices will not crash due to flood of imports. If the increase in the prices during the off season etc push the price up the demand will shift to supplementary products. While the current push for the banks to do more lending to agri sector is extremely good there should also be a pull for the farmers big and small to get in to the industry and there is no better incentive than consistency of state polices such as duty on imports etc. ƒÆ’-¡ƒ”š‚  Government too could be able to build a buffer stock to face any unexpected situation by buying locally produced rice etc than having the buffer stocks of imported rice.
6. Implement a duty structure that is minimum 50% of the CIF price and per unit whichever is higher should be introduced for items that can be produced in Sri Lanka. For example floor and wall Tiles, paints, bath and toilet ware, finished garments, shoes, furniture, timber, plastic ware, toys, and other such products that the country has the knowhow to produce high quality stuff. While this will in the short term increase the profit margins of the local manufacturers, such profits will also induce new manufacturers to come to the industries and the competition will reduce the prices in the medium term. The savings in foreign exchange will also be supplemented by additional jobs created by the industrie
7. Put a stop to dollar flow on foreign education. Dollars earned by 6 to 8 housemaids is required to finance the overseas education of one student. Backed with a comprehensive awareness campaign the private university bills should be passed without delay.ƒÆ’-¡ƒ”š‚  Establishing branches of foreign universities will not provide the total solution as the dollars will go out anyway with expatriate salaries, technical fees, tax free repatriation of profits etc. The model should be investors establishing universities with technical support of local or foreign institutes, with limitations on technical fees, number of expatriate faculty etc. As a start the local universities could on borrowed funds could double the capacity for each stream and admit local and foreign fee paying students. The ever irritating ƒÆ’‚¢ƒ¢-¡‚¬ƒ”¹…”protecting free educationƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢ cry can be managed by EPF providing student loans for local paid degrees. Once the student obtains employment the contribution to EPF by the employer and the employee can be considered as loan repayments until the loan is paid in full. The EPF too would benefit as this will increase the future remittances to the fund due to employment of higher salaried graduates in Sri Lanka as more high tech industries will invest in Sri Lanka if the supply of qualified manpower is made available. ƒÆ’-¡ƒ”š‚ State sector employers could be made to deduct a certain sum from the salary and remit as loan repayment. If graduates find overseas employment cumulative remittance of US$ 50,000 and conversion can be considered full payment of the liability of the loan. The existence of an unpaid loan will have to be shown in the passports of the students so that evaders of the loans can be identified when they return to the country. (A similar system is operational in New Zealand). This will also have two other benefits. One is rather than sending drivers and house maids the country would be sending nurses, doctors, and engineers for overseas jobs and like India does, substantially increase the expatriate remittances. The other benefit is as such a loan system will also be equitable as paid education will also be available to students from poor families. The current foreign education system is only available to the children of the middle and higher segments of the society while the dollars are earned by the lower segments such as house maids and garment workers. This backed with a 25% premium for dollars purchased to pay overseas education will naturally encourage patronization of local universities. The academic staff of Sri Lankan universities too depending on their capabilities would be able to obtain higher salaries etc. in these private universities. With time and accreditation etc. fee paying students from Sri Lanka expatriate parents and others will make the net flow of foreign exchange on education positive.
8. Restrict local borrowings by overseas investors. The current BOI incentives regime does not have a restriction on overseas investors borrowing from local banks. In India if a foreigner invests he is not allowed to borrow from local banks. For example when the Apollo Hospital (now Lanka Hospital) was built more than Rs.2 billion was borrowed from local banks. If we are to provide tax concessions and expatriation of profits in foreign currency the investment should arrive in foreign currency.
9. Earning more dollars Make Sri LankaƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢s airports a hub to foreign carriers and stop protecting the unprofitable national carrier. ƒÆ’-¡ƒ”š‚ Allow the charter flights to land in Sri Lanka without any restrictions. This will increase the flights to the country that will bring foreign exchange by way of landing charges, fuel sales, additional tourists, transit passengers spending couple of days in the country etc.
10. Duty Free (reduced duty) permits for remittances. Rather than doling out car import permits to the state sector such permits could be used to encourage dollar remittances to the country. For example a permit for a dollar value that is not more than 10% of the currency remitted and converted would be an incentive to remit and also convert the foreign currency that would benefit the country. Similarly for companies or individuals who could prove net dollar inflow (dollars earned minus the dollars spent on inputs) from exports should be given such duty free permits for 10% of the net dollars brought to the country and converted to rupees. This will also give an incentive to the import industries to use more local inputs as that will increase their net dollar inflow.
    
11. Introduce a VISITING SRI LANKA card to which the visitors could load dollars at a slight premium before arrival. The visitor should be able to use the card at any ATM machine in the country, any hotel or at any tourist attraction. Also at the time of leaving Sri Lanka swiping the card in a machine should refund any unused amount or refund in cash to be used in the next destination.An ad prompt offering the card on simple application can be introduced at the time them applying for visas. If the visitor does not apply for a card the system could send an automatic email to his email address explaining the benefits of obtaining the government sponsored card. The card with identification photo, name and details would be waiting for the visitor at a counter in the arrival lounge. The visitor should be able to load dollars to the card before arrival and on arrival at the airport.Additional incentives such as local rates for archeological sites, free tickets for few of the visitor attractions, lottery that would deliver a high end car at the resident country or an all expense paid holiday to Sri Lanka etc would also help to induce the visitor. ƒÆ’-¡ƒ”š‚ The card coupled with the incentives to introduce others to visit Sri Lanka and earning a few bucks or for larger users free flights to Sri Lanka etc. will be beneficial as the people once visited are the best promoters of the country. This will substantially increase the dollar earnings of the country from tourism as the dollars will be credited to the state owned bank (that should provide this service) rather than to the money changers who will siphon the cash out of the country. The visitors will get a reliable service and benefit from the higher rate than the money changers offer.
12. Promote individual or family temporary residence for foreigners on conversion of $2,500 a month for the duration of the stay. A temporary (employment prohibited) residence visa for $2,500 a month should be available to any foreign passport holders.ƒÆ’-¡ƒ”š‚  This amount should not be a fee but the visitor would get the equal amount in Sri Lankan rupees. As living in the country will require approximately Rs. 300,000 for rent, food, travelling etc. making a requirement to convert US$2,500 or equal amount in any other foreign currency is reasonable. Due to the year around summer in Sri Lanka there would be many Europeans who want to avoid winters or middle easterners who wants to avoid excessive heat would consider temporary resident option. Whilst this would bring in large sums of dollars to the country, the demand created for accommodation and food etc will also created employment opportunities.
13. Dual citizenship for dollars. Sri Lankan expatriates living overseas have used the free education system and also possibly the dollars of the country to obtain foreign education that is providing them with the employment and living opportunities in their countries. Therefore a system of assisting the country by way of foreign currency must be a pre-requisite to obtain dual citizenship. One method is to provide temporary resident visa (for a month for every US$ 1,000 converted) or a visa for the deposit of US$ 50,000/= at (inter bank rates) in the NRFC account in a state bank. As long as the deposit is in place the residence permit to be valid. However if someone wants the dual citizenship then the applicant should convert at least US$50,000 to Sri Lankan rupees. If the person intends to obtain citizenship then there should be some benefits to the country than mere payment of Rs. 200,000. Also in this method there is no fee for dual citizenship or for temporary residency as the applicant either gets Sri Lankan rupees for the value of dollars converted or gets his dollars back intact when he does not want the residency any longer.
14. Target and earn minimum US$500 million by educating foreign fee paying students. The members of former USSR who introduced Marxism or socialism to the world and great followers of socialism such as India are now earnings dollars by taking foreign students for higher education. ƒÆ’-¡ƒ”š‚ Hence whilst increasing capacity for local fee paying students, if the local state universities with a worldwide reputation (such as Colombo, Peradeniya and Katuedda) can attract at least 25,000 overseas students studying in Sri Lanka, that will earn the country at least US$500 million a year every year.ƒÆ’-¡ƒ”š‚  Income from families of students visiting Sri Lanka and additional creation of employment opportunities in accommodation, food and other sectors will be a bonus.
15. Foreign currency bonds for foreigners and foreign companies, institutions, funds, and trusts. When the country borrows dollars from lenders due to country risk etc we end up paying exorbitant rates such 8% for the borrowings. The banks that accept deposits in those countries pay low rates such as 2-3% to the depositors. If Sri Lankan state banks are allowed to open foreign currency deposits providing rates say 1-1.5% more than the bank rates in these countries there is a likelihood of individuals depositing currency in Sri Lanka. This will cut the ƒÆ’‚¢ƒ¢-¡‚¬ƒ”¹…”middle manƒÆ’‚¢ƒ¢-¡‚¬ƒ¢-¾‚¢ banks out and reduce the debt servicing cost substantially and also assist to ease the pressure on the Sri Lankan rupee.ƒÆ’-¡ƒ”š‚  At least such a product can be marketed among the Sri Lanka expatriates using the radio/TV stations and newspapers that cater to the population of Lankan origin.ƒÆ’-¡ƒ”š‚ 

In general while continuing free market policies the country needs also to have pragmatic policies when it comes to managing its reserves and sectors such as education, food and agriculture if we as a country are to see through the economic crisis. There could be many other ways of saving and earning dollars to the country.ƒÆ’-¡ƒ”š‚  A brains storming with the treasury officers, business people and other interested parties will bring out better proposals than the ones listed above. What is needed is a collective will to reverse the trend of ever increasing foreign debt and reachable target for a surplus that could be used for repayment of debt and mobilizing all resources to get there. This could be one area that all segments and parties work together as it will have an impact on all of us and our children and grandchildren.

(The writer is a management consultant and can be contacted on strategypartnersorg@gmail.com)