Colombo, October 27 (NIA): Sri Lanka is to introduce a new set of investment incentives based on capital allowances and a low tax regime, Prime Minister Ranil Wickremesinghe said in parliament here on Thursday.
This will be a highlight of the country’s annual budget to be presented to parliament in November.
The government also plans to repeal the Export and Import Control Act and bring in new legislation on the lines of Singapore’s (a) Regulation of Imports and Exports Act and (b) Strategic Goods Control Act.
“We will assist investors to connect to the Global Value Chain by introducing a Trade Adjustment Package which will include Capital Allowance for new equipment,” Wickremesinghe added.
Stressing the need for FDIs if Sri Lanka is to grow, he said the targeted outcome is to bring Sri Lanka within the top 70 nations of the Doing Business Index by 2020.
“For this a new set of investment incentives based on Capital Allowances and low tax regime will be introduced; the details will be announced in the Budget to be introduced in November,” he said.
“We will establish a Public Commercial Enterprise Board by law an organization that will manage State Owned Enterprises, enabling them to be more efficiently run on a commercial basis ensuring value for money. We are creating a Public Wealth Trust through which the shares in state-owned entrepreneur enterprises will be held in trust for the people.’
Referring to the Special Economic Zones to be created for foreign investors, the Prime Minister said that strong interest in utilizing these zones have been noted by investors from China, Korea and Japan.
“They plan to create an export market focused on Europe, China, Japan and USAand the crescent of markets around the Indian Ocean. Between the Middle East, Iran, Afghanistan, Pakistan, India, Bangladesh, Myanmar, Thailand, Malaysia, Singapore and Indonesia there exists a fast-growing population currently of over 2 billion people. This combined market has the potential of 3 billion consumers by 2050,” he said.
On the planned economic corridors, he said that the South-Western corridor will have as its major axis, the proposed Kandy-Colombo highway linked to the existing Southern highway.
“This region has the strongest potential to link up with global value chains, because of its close proximity to the Katunayake airport and the Colombo harbor.”
The second North-Eastern development corridor will connect the Eastern Province and the North Central Province to Jaffna linking the Trincomalee Port City to the Rajarata. Trincomalee will be urbanized and transformed into a world-class Port City, he said.
The Prime Minister identified three new growth segments – the digital economy, tourism and commercial agriculture.
He promised to establish a Public Commercial Enterprise Board by law. It will manage State Owned Enterprises which are now inefficient and loss making.Wickremesinghe painted a grim picture of the current economy.
Wickremesinghe painted a grim picture of the current economy.
Sri Lanka exports to the tune of USD 11 billion, but this is contracting. Garment exports remain static at USD 5 billion per annum. However, the garment industry will see a revival when the EU’s GSP Plus concessions are restored, thanks to the government’s efforts, Wickremesinghe said.
Agricultural exports have declined as a result of prices for tea and rubber going down. The government plans to restructure the regional plantations companies by infusing new capital and introducing efficient enterprises, the Prime Minister said.
A key economic contribution in the form of remittances from the Middle East remain volatile as oil prices fall and countries like Saudi Arabia are reducing the salaries of their own citizens. This will pose a new challenge to Sri Lankans employed in the Middle East ,he warned.
How Sri Lanka Lags behind
Sri Lanka started well after independence but soon other countries with better policies took the lead, the Prime Minister pointed out.
In 1990, Sri Lanka’s total export stood at US Dollars 1.9 Billion. Vietnam’s exports were worth US Dollars 2.4 Billion. Today, 25 years later, Sri Lankan exports have climbed to US Dollars 10 Billion while Vietnam retains exports valued at US Dollars 162 Billion, most of it based on manufacturing.
“In 2003, as the then Prime Minister, I set in motion the application process for GSP Plus. While Bangladesh also enjoyed concessional entry into the EU markets, Sri Lanka lost the GSP+ incentive in 2010.”
“In 2003, the Textile and Garment sector in Sri Lanka stood at US Dollars 2.5 Billion, while in Bangladesh, it was US Dollars 5.2 billion. Last year our exports went up to US Dollars 4.8 Billion while Bangladesh stood at US Dollars 26.6 Billion,” he pointed out.
And urgent measures are being undertaken to link foreign micro-finance providers with local communities to promote greater credit penetration in rural areas, he said.