By : A.A.M.NIZAM – MATARA.
Unlike the olden days the modern budgets need to
concentrate more on the development of digital and the distance learning
facilities and only by which our future generations will be capable to be
competitive to stand shoulder to shoulder with the people of other
countries. Fotnnately we have elected a
President who has a wide knowledge on this subject and his vision is to enhance
IT and digital facilities to cover all aspects of life in this country. Accordingly the Prime Minister has performed
his task very well in presenting his budget giving more preference to the development of the IT sector, which
has received much accolades from all those in the modern IT world. Their views and opinions continue:
Indirect boost to IT/BPM
The Budget aims to create
digital governance using Information Technology and the establishment of an
international e-commerce and e-payment systems, the high-speed data exchange
system and the related mobile network systems are investment priorities”. This
would offer many opportunities for the IT/BPM industry to be partners.
The proposed techno parks could
be a boost to the electronics industry as well as businesses engaged in the
Internet of Things (IoT).
It is proposed to provide loans
of Rs. 500,000 at an interest rate of 4% as start-up capital to support the
young men and women, who start their own businesses on the successful
completion of vocational education. This loan scheme will have a grace period
of one year for both principal and interest, with a further four years to
settle the loan. This will help encourage entrepreneurship which will benefit
the IT/BPM industry as well any business today has some level of IT/BPM
involvement.
Summary
This appears to be a dream budget for the IT/BPM industry.
BOI to target more strategic investments with tremendous
opportunities provided by Budget
The Board of Investment of Sri
Lanka (BOI) said it will target more strategic investments following the
tremendous opportunities provided by 2021 Budget.
BOI trusts that incentives are part of the landscape of the investment strategy
to attract sustainable investments, as they are often a decisive factor in
investment decision-making.
Combined with the more obvious hard infrastructure offerings, locational
benefits, sound legal framework and access to talent pools, investment
incentives are another important piece of the puzzle to attract investments,
which could also open doors to other economic benefits including technology
clusters, skills development and linkage to global value chains,” BOI Director
General Sanjaya Mohottala said. He emphasized With the incentives offered to
investors by the 2021 Budget along with the endorsement by the Government for a
consistent policy environment, has fulfilled the aspirations of BOI as the
national investment promotion agency,”
He said Now BOI has much to play with when it comes to enticing investors with
discretionary dollars and much to gain by attracting top-notch investors to
establish in the country, which would provide anticipated economic and social
benefits,”
He has pointed out that some of
the new openings for investments introduced in the 2021 Budget include five
fully-fledged plug and play Techno Parks in Galle, Kurunegala, Anuradhapura,
Kandy and Batticaloa districts; investments in the pharmaceutical sector
(products and medical devices) in the dedicated state-of-the-art investment
zone in Hambantota; investments in textile manufacturing in the textile zone in
Eravur; Investments in floating solar plants and Investment opportunities under
the SDP Act.
Apart from those, Mohottala said
an array of benefits, including exemptions from Customs Duty, VAT, PAL, CESS,
etc., are available for the right investment, depending on the sector of
investment and its market orientation.
Furthermore, benefits continued
under the Inland Revenue Act No.24 of 2017: CIT exemptions for farming
including agriculture, livestock and fish farming with effect from 1 April
2019; CIT exemption for Information Technology and enabling services, with
effect from 1 January; CIT exemption for income earned from services rendered to
persons outside Sri Lanka including foreign sourced earnings in foreign
currency; Dividend Tax exemption for dividends paid by a resident company to
any non-resident person and dividends distributed by Commercial hub Enterprises
with effect from 1 January; and CIT exemption for Income derived by any
non-resident person from laboratory services or standards certification
services, with effect from 1 January.
Exemptions continued under VAT (Amendments to VAT Act No.14 of 2002) include:
sale of condominium housing units from VAT with effect from 1 December 2019; IT
and enabling services with effect from 1 January; reduced VAT of 8% other than
financial services with effect from 1 December 2019; quantities
supplied/donated of health protective equipment and similar products by
export-oriented BOI companies to the Ministry of Health and Indigenous Medical
Services, Department of Health Services, Tri-Forces and Police on their
request; and reduction of piece-based VAT rate applicable on domestic sale of
certain garments by the export-oriented BOI companies from Rs. 100 to Rs. 25,
he said.
CSE
welcomes Budget 2021 directed at developing the capital market
The Colombo Stock Exchange
(CSE) welcomed the progressive capital market related proposals presented in
the 2021 Budget Proposals.
It said long-term sustainable measures have been
proposed to encourage companies to list on the CSE, encourage savings and
investments among Sri Lankan citizens and improve the attractiveness of Real
Estate Investment Trust (REITs) through tax concessions.
As a measure of promoting
new listings on CSE a 50% tax concession for the years 2021/2022 has been
proposed to be granted for companies listing on the CSE before 31 December 2021
and to maintain a corporate tax rate of 14 percent for the subsequent three
years upon listing.
Stock market investment
will continue to be exempted from Capital Gains Tax and as an additional
measure to encourage stock market investment, the Government has proposed to
include investments made in shares of listed companies incurred up to
Rs.100,000 per month as deductible expenditures in the calculation of personal
income tax.
In a measure that would
largely improve the attractiveness of REITs investment, the government has
proposed to exempt such investments from capital gains tax and dividends free
from income tax. The proposal further seeks to reduce the Stamp Duty applicable
to real estate transaction associated with REITs to 0.75 percent (from the
currently applicable 4% for property transactions). The CSE, working with the
Securities and Exchange Commission of Sri Lanka, introduced REITs as a new
investment product on the CSE earlier this year.
CSE Chairman
Dumith Fernando commenting on the proposals stated CSE is pleased to learn of
these progressive proposals and we applaud the commitment of the Sri Lankan
government to promote capital market development in the country. The tax
concessions proposed to draw in stock market investments and encourage
companies to explore a public listing will most certainly complement our
efforts to develop a larger listed company base.
CSE CEO Rajeeva
Bandaranaike stated The tax concession offered to companies listing on CSE by
2021 will offer financial benefits to companies and extra impetus to pursue a
listing. This proposal offers vital policy support to expedite new listings in
the market and greatly complements measures taken by CSE to expand listing
rules to attract more companies and streamline the listing process. We believe
CSE as a result is well-placed to attract new listings in 2021.”
Apparel industry hailed the Budget expressing confidence of
recovery from 2021
The Joint Apparel Association
Forum (JAAF) expressed confidence in revival of the country’s biggest export
sector next year onwards aided by policy direction and support outlined in the
Budget 2021 as well as recovery in key markets post-COVID-19.
We made submissions to the
Government and most of our proposals have been incorporated in the Budget 2021.
We are pleased to see such policy direction at this critical time for the
export oriented industries,” JAAF Secretary General Tuli Cooray told the Daily
FT.
Although the industry took a
harsh blow from COVID-19 which wiped out close to $ 1 billion in turnover,
Cooray said resilience has always been the cornerstone for the apparel
industry.
History has amply proved that
Sri Lanka is a resilient nation and the apparel industry remains to be a major
contributor. At the moment we are not thinking of revisiting our targets, but
we all know that it has been a very challenging year for the entire world. In
that context, we will probably see a decline in our total exports by 25% to 30%
this year just over $ 4 billion. But it is with great confidence I say the
apparel sector will come out of this crisis stronger than before,” he said.
Sri Lanka last year earned $ 5.3 billion from apparel exports, an increase of
5.1% from 2018. Prior to the COVID-19 pandemic the industry originally expected
a 6% increase in exports for 2020.
Export earnings from apparel and textiles in October declined by 18.93 % to $
356.52 million and by 21% to $ 3.6 billion in the first 10 months of 2020 from
a year earlier. Despite the decline in the sector, earnings from exports of
other textiles increased by 43.92% in October 2020 in comparison to October
2019,vthe JAAF spokesman said.
Earnings from export of Personal
Protective Equipment (PPE) related products increased by 46 % to $ 731.63
million in January to October. The strong performance was mainly due to the
increased exports of other made-up articles (HS 630790) and articles of apparel
and clothing accessories of plastics (HS 392620).
Cooray said it was very
challenging as the industry markets remain closed, with the world still
continuing to battle the impact of the virus. Many countries such as India,
China, Russia and the US are having very protective policies and not open for
trade,” he added.
Noting that the apparel industry
is continuously looking for access to new markets, he highlighted that they
were exploring opportunities to open up trade dialogue with all existing and
emerging markets. The UK, Japan and the US are currently reviewing unilateral
trade agreements and we are open to explore such opportunities given the
current circumstances,” he said.
Boost for fabric manufacturing
Cooray also commended the timely
move to establish fabric processing park in Eravur, noting that it is a
reflection of the Government’s confidence in the apparel industry.
The 2021 Budget announced tax
concessions up to a maximum of 10 years under the Strategic Development Law for
over $ 10 million investment in setting up fabric plants.
We stand firm even in the
current climate that it is our intention to continue to be a strong player in
the global apparel sourcing world. The establishment of the Eravur Fabric
Processing Park will help reduce the imports of fabric as apparel manufacturers
would be able to replace a part of their imported fabrics with fabric sourced
locally,” he said.
According to him, there are
currently seven textile mills manufacturing fabric for the export-oriented
sector and these mills are capable of producing the finest quality of fabrics
where the daily output is around 175 MT.
This is a vital component in the
building the industry value addition to over 52% even after accounting for the
yarn imports of the local mills. Sales from these seven fabric mills to the BOI
registered apparel exporting companies amounted $ 499 million last year. In
2019, Sri Lanka imported 255,437 MT of fabric both for the export-oriented
apparel manufacturers and for consumption in the local market. The import bill
for this fabric came to $ 2.2 billion.
Worker saety
With regards to work at apparel
factories, he said operations continue with strict health guidelines as the
industry remains a critical contributor to the sustainability of the economy.
We are a part of the society.
Our workers’ health and safety
is our prime focus, as all our businesses rely on them. Despite the heavy
losses the industry incurred due to COVID-19, we have not neglected the welfare
and job security of our workforce. We now incur an additional heavy cost for
the regular PCR tests, lodging facilities, transport because their lives
matter. Apparel industry largest overall employer,” he said.
Entirely privately owned and
operated, the apparel industry have successfully utilised the opportunities in
the international market to evolve beyond traditional exports and tailoring
designs to provide sophisticated and creative solutions through fashion BPO
services, research, development and innovation centres. Around 300 garment
factories employ 990,000 and over one million people are indirectly dependent
or employed.
Budget
endorses our Vision – ICTA
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Multiple proposals of ‘Vision
2024 for ICTA: A digitally transformed Sri Lanka’ were echoed in the Budget
2021 proposals, the maiden of the present Government, it was observed BT icta.
In January 2021, the current
administration has charged the Information and Communication Technology Agency
of Sri Lanka (ICTA) with implementing a detailed roadmap in line with President
Gotabaya Rajapaksa’s vision to establish a digitally inclusive Sri Lanka, with
a citizen-centric digital Government for the convenience of every Sri Lankan.
The Budget 2021 proposals further endorses the initiatives within their road
map.
Tech-based society
and a smart nation
President Gotabaya Rajapaksa has
given special attention to enhance digital governance using Information
Technology as a tool to simplify Government mechanisms as well as market
structures and processes ensuring efficient and people-focused service delivery
and exchange of knowledge, says the Budget 2021 proposals.
Establishment of an
international e-commerce and e-payment systems, the high speed data exchange
system and the related mobile network systems are investment priorities. It
also emphasised the establishment of new laws and organisational structures in
relation to data protection, cyber security and intellectual property
rights.
The aim of this is to convert
Sri Lankan economy as a technology-based entrepreneurial economy by expanding
entrepreneurial development, technological infrastructure and related services
to enable enhancement of the contribution of the technology sector for exports
and its contribution for knowledge and professional services of the national
economy.
Digital government, which makes
up a large part of the ICTA’s mandate, would empower citizens of Sri Lanka,
allowing easy access to information that would help them in decision making,
ensure participation in governance at various levels, allow automated services
for public welfare and streamline government functions while ensuring
transparency.
ICTA will also be the catalyst
that drives Sri Lanka’s digital economy, which will facilitate industry
expansion and increased foreign direct investment, while creating opportunity
for startup innovation and entrepreneurship through capacity building and tech
diffusion. Preferred business and employment opportunities would open up for
local companies and the country’s technology industry would move steadily
towards the goal of becoming a $ 3 billion export earner by 2024.
Though not explicitly mentioned
in the Budget proposals, the other important pillar is digital society. The
ultimate goal of digital transformation is achieving a digital society. Both
digital government and digital economy must be citizen focused and citizen
centred – with due recognition given to the public.
ICTA recognises this need in its
design of the ‘Vision 2024 for ICTA: A digitally transformed Sri Lanka’ roadmap
that is entirely built around the citizens of the country, be they rich or
poor, urban or rural and educated or not. The ultimate goal of ICTA’s vision is
to make even the ‘poorest of the poor’ sections of society benefit from ICTs in
uplifting their living standards.
Tech parks
The Budget 2021 also proposes
creating a techno-entrepreneur-led economy that will contribute to increase of
exports and foreign earnings from the technology field and broaden the
knowledge and professional services to the national economy within the coming
two years. It is expected that the establishment of technology-centred
investments and allied service industries will transform into high income
employment opportunities for Sri Lankan youth. It is envisaged to establish
five fully-fledged plug and play techno parks in Galle, Kurunegala,
Anuradhapura, Kandy and Batticaloa Districts. A sum of Rs. 10 billion has been
allocated to develop these techno parks as eco-friendly new cities connected to
the expressway network and other infrastructure facilities.
Distance education
As the first step towards
educational reforms, according to the Budget proposals, there is a requirement
to formalise learning methodologies within schools, and the need to expand the
provision of internet facilities to schools as well. It is also necessary to
update the E-Thaksalawa learning portal, created by Ministry of Education with
inputs from ICTA, along with the strengthening of the provincial IT education
centres.To minimise the difficulties faced by students in rural and non
‘national schools’, due to shortage of teachers, and ensure the provision of
continuous school education in the face of the COVID-19 epidemic, the ‘Guru
Gedara’ education channel should be made available to all students by providing
television sets to schools in difficult areas. It is proposed to allocate Rs. 3
billion to convert the syllabi in line with the contemporary requirements,
regulation of teacher education and training, and examination procedures are
planned to be regulated under a national education policy.
With the inevitable disturbances
to normal life during the COVID-19 situation all over the country, one of the
biggest challenges to educators was to compensate the lost education by the
students. With no means for students to meet their teachers face-to-face, the
only possible solution was through educating them by distant learning modes.
The Ministry of Education came forward with E-Thaksalawa
(http://e-thaksalawa.moe.gov.lk) the official E-learning portal for schools
with learning content from Grade 1 to Grade 13 which has been made accessible
to all students from March 2020, without data charges with the support of all
operators enabling school children to study from.
ICTA also facilitated Ministry
of Education by introducing how distance learning can be adopted with live
video conferencing in teaching and learning process for school children with
its own newly-introduced video conferencing too, meet.gov.lk. What the Budget
proposes is the continuation of the same for future in the ‘Living with
COVID-19’ situation expected for a relatively prolonged period now.
Expanding tech
education opportunities
The Budget has also given
priority to strengthening the island-wide network of new technological
universities, by modernising the technical colleges to be attractive to Sri
Lankan youth, under the ‘one TVET’ concept within a formal regulatory
framework, by converting these institutes into degree awarding entities in
parallel to the expansion of opportunities for university education.
Capacity building activities like these are the key in achieving the goal of
making a Smart nation. ICTA is taking steps to build an empowered workforce who
can join the industry at multiple levels. ICTA will ensure the competency and
employability of the workforce through programs such as vocational training,
foundation and conversion programs and social education, apart from the
traditional tertiary, higher, professional and postgraduate education. Social
education will also play a key role in developing intelligent citizens with the
skills to use citizen services.
Electronic
identity
The Budget also allocates Rs. 3
billion for the new digital identity project to be spearheaded by ICTA jointly
with Department of Registration of Persons. Internationally governments are
increasingly adopting the strategy of having a unique digital identity for
their citizens with the objective of improving service quality and efficiency.
That also drives financial and social inclusion by providing citizens access to
citizen services and benefits of healthcare, education, and other government programs.
Government of Sri Lanka has given priority to a national level program for the
establishment of a Unique Digital Identity framework for the country.
ICTA has developed its digital government and economy frameworks with this aim
in mind. The objective is to digitise the service delivery from the Government
to citizens, creating nationwide digital service delivery infrastructure that
can be utilised digital public utilities serving and bridging all the sectors
of the economy. UDI together with the National Data and Interoperability
Platform (NDIIP) forms the nucleus of the digital economy and Government
frameworks.
Healthcare
The Budget also allocates Rs.
100 million to introduce electronic medical records at more Government
hospitals. This is an extension to a project ICTA has been engaged in for the
last few years. The Digital Health Project is a collaborative project being
implemented by Ministry of Health and Indigenous Medical Services and ICT
Agency of Sri Lanka. The project supported 49 Government hospitals in
implementing electronic medical records systems.
A National Project Steering
Committee, Provincial Project Steering Committees and Hospital Steering
Committees were formed with the representatives of Ministry of Health,
Provincial Departments of Health Services and ICTA to direct/guide the project
implementation at different levels. The project provided computer hardware,
software, network and training for the selected hospitals to establish
electronic medical records systems.
Nurturing tech
startups
The Budget proposals also
include providing loans of Rs. 500,000 at an interest rate of, as low as, 4% as
start-up capital to support the youth, who start their own businesses on the
successful completion of vocational education. This loan will have a grace
period of one year for both principal and interest, with a further four years
to settle the loan.
Accordingly, these entrepreneurs
will be facilitated to receive the opportunity to pay an instalment together
with interest less than Rs. 12,000. In order to ascertain that the said loans
are invested on the approved business, an annual commitment fee of 0.25% will
be charged for follow up and extension services. It is proposed to give tax
exemptions of five years to these businesses and the cost of funds of funds
provided for such start-up capital, provided by banks and finance agencies as
deductible expenditure in the calculation of taxes.
ICTA, over a long period, has
been working assisting start-ups to establish themselves in the local ecosystem.
Startup Sri Lanka was an initiative by ICTA with the former Ministry and
startup community. Its mission is to transform Sri Lanka through technology and
entrepreneurship. ICTA is working to support the tech community and accelerate
the growth of Sri Lankan startups with the belief that strong home-grown
startups and freelance community is vital to the future growth of Sri Lankan
jobs and wealth.
ICTA’s efforts are focused on
trying to get the big picture right for Sri Lankan startups and freelancers –
improving the regulatory environment, building a case for the right sort of
Government support for a fast-growing sector, and increasing public awareness
of the impact of tech startups and freelancers across the country. ICTA works
with startups, freelancers and investors to help around the country get the
settings right to create successful startup ecosystems.
ICTA recently worked together with Ministry of Finance in establishing
guidelines for State organisations to exclusively procure their software and
hardware requirements less than Rs. 2 million from local startups
We need to end the era of sending our mothers, sisters and daughters as
domestic workers, and sending our brothers and children as unskilled workers,
drivers, room boys and white color workers to foreign countries and enhance our
future generations as highly digitasl/IT knowledge based personalities who can
become a beacon to the future world. The Budget has done its part very well and
it is now the student population to grab the opportunities it has presented.
