With regard to the current state of the economy and the Way Ahead, I would like to recall the speech I made in the House on the 05th of November 2015.
We can once again become the resplendent nation we were under
Manawamma and Parakramabahu. But it is a path that must be pursued with
determination, commitment and patience. Only then can we create the
country that we can confidently pass on to the future generations.
At the time I made the statement last year, I affirmed that our
collective economic journey requires revolutionary thinking, bold
policies and initiatives that would transform Sri Lanka into a vibrant
and prosperous nation. The National Government started work on a sound
footing – by increasing the actual wages of the public sector including
those of general workers. This process stimulated domestic demand and
addressed the imbalance in income levels, the economic legacy inherited
from the previous regime.
However, we acknowledge that much more needs to be done. We aim to
enhance the income potential of Sri Lankans on a faster trajectory.
During the last 60 years, Sri Lanka has not kept pace with the
South-east Asian nations and has been only barely ahead of our South
Asian neighbours. Doubling our current level of per capita national
income from USD 4000 to USD is no magic trick – rather, it is setting in
motion a planned effort to grow at a faster rate. If we continue to
grow at our current rate of 5% per annum we will only double our
personal income levels by 2033.
We can double our personal income levels by 2025 if we set in motion a
growth rate of 7% per annum. This rate was achieved in the aftermath of
the war in 2009 but the momentum brought on as a dividend of peace did
not last.
In 2012, it went down below 5% per annum. Private businesses were
nationalised while local and foreign investment dried up. Heavy state
borrowing for economically non-viable state sponsored projects did not
leave any funds for private investors to borrow from the banks.
In 2015, we have addressed the inequality in income distribution at a
national level. Consequently, we have been able to uplift the income
levels of low income earners and public officials. At the same time, tax
levies are being imposed on affluent groups to fund higher wages and
minimize government borrowing.
Along with The IMF, The World Bank and The Asian Development Bank,
lending institutions of the US, Europe and Japan have expressed their
willingness to lend Sri Lanka funds at considerably low rates of
interest ; these funds would enhance and strengthen the economy. The
last time such funds were made available was between 2001- 2004, when I
was the Prime Minister. Today,
President Maithripala Sirisena and I have been able to successfully revive such funding sources towards assisting Sri Lanka.
For centuries, Sri Lanka’s location in the heart of the Indian Ocean
between Western and Eastern Asia has made us active partners of
inter-regional trade. The strategic importance of Sri Lanka as an Indian
Ocean hub in the realm of global logistics and commercial activities
has been widely acknowledged.
In this context, the foundation for a more sustainable economic model
has been laid already, enabling us to recover from the inward looking
economic policies of the past. Our exports with a value of USD 11
billion are contracting while garment exports remain static at USD 5
billion per annum. The garment industry will see a revival when GSP+
returns – we have already set in motion the process towards it being
obtained once again.
Agricultural exports have declined as a result of prices for tea and
rubber slowing down. It must be noted that in the plantations sector,
some of the companies are being run well while others not so.
The Government plans to restructure the regional plantations
companies by infusing new capital and introducing efficient enterprises.
Our export base has remained the same for over 30 years and is
dependant on a narrow export base of garments, tea, rubber, gemstones
and tourism. The economy cannot experience growth based on such limited
exports.
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.
As the global economy struggles to recover, Sri Lanka has been able
to successfully navigate amidst changing economic dynamics, maintaining a
prudent domestic economic level of growth.
The Government has encouraged the people living abroad and in Sri
Lanka to invest in construction, which has resulted in a construction
boom.
Sri Lanka is seeing a staggering growth in tourist arrivals as our
image as a safe and a friendly tourist destination is growing rapidly.
In the aftermath of a decade of neglecting markets, major international
airlines and hotel chains are once more entering a vibrant Sri Lankan
market.
We are now ready to enter the next and the most important phase of
economic activity, that of creating new and productive jobs and
livelihood for the young people. The creation of 1 million jobs will
empower the youth and enhance their standard of living.
We need to sustain a higher rate of growth for the plans to succeed ,
one that will result in higher exports and a greater domestic demand.
Such growth will also increase state revenue. As I mentioned last year, a
drop in government revenue and an increase in commercial debt to its
upper limits can have a drag effect on the economic development.
Achieving a high level of growth in exports need major capital
infusion and greater investments. New technological innovations, better
management of data systems and up-to-date market information systems are
needed to achieve better results.
During the Eighties, having decided that outsourcing was a better
option, Japan was reviewing moving operations to Thailand and Sri Lanka.
The Japanese delegation to Sri Lanka arrived at the height of July 1983
riots and needless to say, we lost the opportunity to Thailand which
obtained investments to the value of 50 Billion USD. There was a
spillover of US Dollars 13 Billion into Malaysia as well.
As the then Minister of Industries I focused on promoting
industrialisation. At the time, Vietnam has opened up as a market
economy model and came to Sri Lanka for advise. Unfortunately, as the
war progressed, we stopped pursuing industrialisation in 1997. Vietnam
continued to engage in industrialisation.
Sri Lanka’s total export stood at US Dollars 1.9 Billion in 1990.
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+ , subsequently concluded by President Chandrika
Kumaratunga. 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.
We must understand that in order to grow out of being a poor,
backward country, we need to focus on large scale FDIs and accelerate
growth.
Towards this direction, the Government plans to create a positive
investment climate that will generate jobs. Hurdles that stand in the
way of achieving growth for business start-ups will be removed. The
processes of starting a business, getting construction permits,
electricity connections and bank credit, registering property,
protecting minority investors, the payment of taxes, trading across
borders, the enforcement of contracts, the resolution of insolvency, and
regulations governing labour market will be efficient mechanisms that
will facilitate business growth. Additionally, the Government will also
prepare legislations to establish a single window for investment
approval. Further, we will hold discussions with the Trade Unions and
relevant stakeholders. The targeted outcome is to bring Sri Lanka within
the top 70 nations of the Doing Business Index by 2020.
We plan to build on these strengths and initiate plans for a
logistical and business centre in the Indian Ocean. With this in mind,
we have started developmental work on 3 international ports and
airports, providing efficient connectivity within the region.
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
We plan 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.
Current domestic market enterprises also have a greater role to strengthen the economy – in addition to expected Direct Investments of local and foreign origin. They too can add to export volume.
Current domestic market enterprises also have a greater role to strengthen the economy – in addition to expected Direct Investments of local and foreign origin. They too can add to export volume.
The Government will assist them to connect to the Global Value Chain
by introducing a Trade Adjustment Package which will include Capital
Allowance for new equipment.
Concurrently, we are reviewing the growing interest of local and
foreign business concerns towards solving the twin problems of low
private investment and the accumulation of vast debts by the Government.
As you are aware, during the last year, HE the President Maithripala
Sirisena and I have travelled to key destinations with an objective of
reviving the interest in Sri Lanka. We have met with success.
During my recent visit to Brussels, the officials of the European
Commission expressed their confidence that the GSP Plus trade concession
would be given favourable consideration. The Japanese Prime Minister
has also appointed a senior official to especially coordinate Japanese
Sri Lanka Joint Comprehensive Partnership Programme.
Towards creating newer markets for our exports, we are also
negotiating three trade agreements; ETCA with India, and two FTAs with
China and Singapore.
These are significant developments even as these two large economic
regions struggle to maintain economic momentum in their domestic
markets, which have been traditional export destinations for our
businesses.
Most of us thought that our next generations would have to pay the
debts incurred for Hambantota port and Mattala airport. Now, we have
entered into a debt to equity swap. Chinese investors have made
significant commitments to invest equity in the debt strapped Hambantota
Port and the Mattala Airport as PPP ventures.
The Government plans to receive sufficient funds to offset these
debts. You can now be assured that your children will not have to pay
these debts but can reap the benefits of a dynamic, international
air-sea hub.
Strong interest in utilizing these zones along with other such zones
in the western province have been noted by investors from China, Korea
and Japan. They plan to create an export market focused on Europe,
China, Japan and USA and 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.
Going forward, our development strategy will be aimed at capturing
trading opportunities within these identified Indian Ocean markets via
pursuing trade liberalisation agreements with their governments.
Concurrently, we are focusing on defining the two development corridors
across the country – this will be a focal area for investment by the
public and the private sector.
The logistical and infrastructural facilities that provide faster,
secure links to the global value chain empowering viable business
ventures, will be spearheaded for the first time in Sri Lanka, in these
development corridors.
The two development corridors will correspond to the two distinct
halves of the country irrigated by the two monsoons. 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 harbour. This
project envisages creating a Megapolis Development Authority to develop
the entirety of the Western Megapolis an urban area of over 8 ½ million
people.
A brand new financial city centre that will be based at the new
reclaimed land development project alongside the Port of Colombo.
A sub-corridor that will stretch along the central highlands from
Kandy via Nuwara Eliya to Badulla and linked to the Kandy-Colombo
highway. This will connect the revitalized plantations economy and
modernized agricultural pursuits and will also lay emphasis on tourism
and service delivery initiatives.
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. The completion of the
Moragahakanda and the Malwatu Oya reservoirs will create new vistas for
the country and will result in the region gaining more land for
agriculture. It will further result in the historic cities of
Polonnaruwa and Anuradhapura emerging as modern urban centres.
Trincomalee will be urbanized and transformed into a world-class Port
City.
Reconstruction of housing and civic infrastructure will be given
highest priority within the previously war-affected areas around Jaffna,
Mullaitivu and Kilinochchi.
SUSTAINABLE DEVELOPMENT
While the priority remains economic stimulation and the improvement
of individual finances, the plan also focuses on establishing a society
in which every citizen has access to equal opportunities and individual
rights are safeguarded – this includes the right to shelter. The Rural
Housing Loan Programme, Urban Regeneration Housing Programme, Estate
Housing Programme and Resettlement Programme are being implemented with
focus on vulnerable groups. Plans are underway to construct 500,000
housing facilities for the middle-class to meet the rising demand for
housing in urban and suburban areas, 65,000 houses for the urban
underserved population, 65,000 houses for internally-displaced people in
areas previously affected by conflict, and to fulfill 65% of the estate
housing requirement by 2020.
I must emphasise at this juncture that we are committed to the
sustainable development goals adopted by the UN General Assembly in
September 2015. Our development of industry, services and agriculture
will be guided by these principles. For instance, when we develop 15,000
acres of free trade zones in the South, we will undertake reforestation
of unutilised lands in other parts of the country. Similarly, we are
finding solutions to the overwhelming problem of solid waste disposal in
our major cities. This is a hazardous situation affecting the lives of
thousands of people , one left unchecked by the last government.
We are going ahead with schemes that provide safe drinking water to
the communities in need of such projects around the island ; we are also
seeking to improve treatment of waste water. The pristine status of our
natural environment remains our most precious resource and has been
praised by visitors throughout the centuries. We pledge to take utmost
care to preserve our natural resources and our heritage within all our
development efforts. The economic vision of the National Government will
yield prosperity for all Sri Lankans. It is an economy that will share
the benefits of development among all. One that will be friendly to all,
beneficial to all, keeping its focus on including sustainable
development as well.
What we are hoping for is a lawful economic environment that will set
the stage for sustainable development. We will incorporate a
sustainable development entity that will provide the necessary framework
and initiate mechanisms required. I called this the third generation of
economic reforms. The first generation was introduced by President
Jayewardene, the second by President Premadasa. What is now envisioned
by us here, is based on multifaceted economic linkages to global supply
chains and the planned increase in trade development. Many qualified
people prefer well-paying jobs that are given based on professional
capabilities. It is not viable to maintain a low paying production based
economy.
These developments will result in the creation of one million jobs
and the expansion of the middle-class; a nation in which the farmers
prosper and every child has access to education. Our end goal is
prosperity for everyone. Every citizen must enjoy the benefits of living
in a wealthier nation. This also includes the realization of the basic
rights of every citizen – principally, housing. We view this as the
first step towards ensuring total social inclusion, followed by measures
to promote inclusive involvement in the economy, especially for women,
while improving facilities for differently-abled persons to integrate
into society and pursue their life goals with normalcy.
BUSINESS AND SECTORIAL PRIORITIES
Sri Lanka has evolved a variety of distinct economic sectors, which
are capable of further integrating the country’s economy into the Global
Value Chain. The digital economy, tourism and commercial agriculture
are coming of age concerning their potential to offer high-value skills
and remuneration to young job seekers in the country. With the new
economic orientation that will include fewer opportunities with the
government and more exposure and opportunities for entrepreneurs and
skilled professionals, we aim to accelerate the broad basing of
opportunities in these segments – the digital economy, tourism and
commercial agriculture.
THE DIGITAL ECONOMY
The digital economy will empower our nation – through providing
affordable and secure Internet connectivity to every citizen in any part
of Sri Lanka, removing barriers for cross-border international trade. A
platform for cashless payments will also be created. Digital technology
will be included as a new subject in the school curriculum. We plan to
foster entrepreneurship opportunities in digital commerce while
providing training in cyber security monitoring and response.
MODERN MANUFACTURING ECONOMY
We shall strive to attain the status of a modern manufacturing economy that will include state-of-the-art equipment.
We plan to overcome the bottleneck of being a middle-income country
with low wages in our pursuit towards greater prosperity for our people.
STATE-OWNED ENTERPRISE (SOE) REFORMS
We will establish a Public Commercial Enterprise Board by law an
organization that will manage SOEs 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.
FINANCIAL INCLUSION
With the passage of the Microfinance legislation in Parliament early
this year, rural microfinance is now a legitimate activity. Urgent
measures are being undertaken to link foreign microfinance providers
with local communities to promote greater credit penetration in rural
areas. The Ministry has already allocated five billion Rupees for a
special SME financing scheme to empower business formation and
development. A National Financial Inclusion Policy will be evolved by
the Central Bank to set quantitative targets for opening of accounts,
disbursement of SME loans etc. To enable this, we will be consolidating
rural development banks (RDBs). Rural Development Banks have become the
main channel for concessional lending to Small and Medium Enterprises.
Their decentralized management structure is reinforced with the Central
Bank of Sri Lanka, through its newly created regional departments. We
seek to initiate a nationwide campaign to encourage banking and endow a
spirit of entrepreneurship among all.
TOURISM
The plan to make Sri Lanka a high value destination is on the cards.
It will herald in prosperity that will showcase our cultural pursuits,
wild life and the environment via provinces developed as unique tourist
hot spots. We believe that Sri Lanka will be one of the finest travel
experiences for the global traveller.
MODERNIZING AGRICULTURE AND FISHERIES
It takes over a decade to modernize the sectors of agriculture and
fisheries. We plan to establish a Rural Modernization Board, which will
include all stakeholders. Fisheries and Poultry will be the first
categories to be promoted for exports.
The difficulties faced in the tea and rubber industry will be
reviewed. The Government will restructure the plantations sector to
invite new capital and eliminate inefficiency.
NATIONAL AGRICULTURAL MARKETING AUTHORITY
Marketing of agricultural products is the most important link between
the producer and consumers. We will establish a fully empowered
National Agricultural Marketing Authority to coordinate the marketing of
agricultural products, and develop existing markets, transport and
storage facilities. In addition, new infrastructure facilities such as
cool storage will be added at a divisional and regional level, for
preservation of food before or after purchase. Providing large storage
facilities for purchasing and storage during the harvesting season is an
essential pre-requisite for implementing a guaranteed purchase price.
It is planned to create 250 ‘polas’, farmer markets island-wide for
farmers to bring their produce to local markets.
UPDGRADING HUMAN CAPITAL
The country’s current education system, particularly the higher
education system, is being recalibrated to produce graduates who will
meet the skill and knowledge requirements of the corporate sector. We
will ensure a culture where job-oriented skill development will take
precedence over the passing of exams, while introducing more real-life
vocational situations and simulations to the curriculum.
INCREASING FEMALE PARTICIPATION IN THE ECONOMY AND GOVERNANCE
The Government is committed to creating good and safe working
conditions through sufficient investments and promoting entrepreneurship
to create quality and high paid jobs in the country while targeting to
increase the female labour force participation rate to 40% by 2020. It
is also acknowledged that female-operated Small and Medium Enterprises
(SMEs) could well cater to the demands of the rising middle class, which
is important to Sri Lanka now given the country’s move towards an upper
middle-income economy. The Act has reserved 25% of representation for
women in local authorities.
RECREATIONAL INFRASTRUCTURE
In addition to the recreational parks developed around the country,
life enrichment projects are underway to introduce recreational spaces
in every province, complete with synthetic athletic tracks and
Olympic-sized swimming pools.
EDUCATION
13 YEARS OF COMPULSORY EDUCATION
A fresh policy initiative for making 13 years of education mandatory is now in place.
A pilot project on providing 13 years of mandatory education will
commence next year. Those who do not pursue higher education after O/Ls
will be trained under an upper Secondary Vocational Education system. We
will recruit teachers and instructors required for this purpose as well
as enhance the additional number of teachers needed to fill the cadre
requirements for the next three years. Our focus will be on ensuring
that there will be no teacher shortages by 2019 and ensure all schools
will have complete cadre. We will bring in a law for providing separate
cadre for every school.
We will also commence school inspectorate to ensure that high quality
levels are maintained in teaching. School boards consisting of parents,
staff and past pupils will work towards maintaining high standards.
We will also commence a pilot programme to provide tablet PCs to all post O/L students.
Development of school infrastructure will be given to those needing to build capacity for new intake of students.
PROMOTION OF PRE-SCHOOLS AND DAY-CARE CENTRES
A five-year programme focusing on early child development (ECD) has
been launched for improvement of systems and quality, to enhance the
overall effectiveness and increase the enrolment of children for ECD
programs. Early childhood development is not only meant for pre-school
education, but includes interrelated segments such as health, nutrition,
psychological condition, child care, probation and protection which are
also essential components that will be considered in ECD.
EMPLOYMENT
In order to overcome the mismatch between skills acquisition and
employment, we plan to empower young people without skills needed for
employment, by providing them with additional training opportunities.
We will pool the services of Government and private sectors and
utilize the Government network of state affiliated training institutions
for this purpose. The accelerated Training and Employment programme
will be a Public Private Partnership. The Government will make funds
available both for training as well as supplementing the income of
trainees in the Private Sector. This scheme will start in 2017 and will
be fully operational in 2018.
HOUSING
The Government plans to construct 500,000 housing units for middle
class and the working class, which will give them house ownership at a
subsidized rate. These will be in the form of successful private-public
partnerships and will be private sector driven. These will be based
around vital nerve centres such as emerging cities, while encouraging
the concept of sustainable urbanization; thereby strengthening the
Government’s socio-economic pursuits and sustainable development goals.
The Budget proposal will include detailed information on these initiatives.
Today, what the economy needs is not more governance but to achieve a
goal of prosperity that can happen via the liberation of the economy.
The first generation of economic reforms introduced in 1978 set the
country free from the ill effects of a closed economy. Today before us
is the challenge of introducing the third generation of economic
reforms. We have the potential to become Asia’s next economic success
story if only we can face those challenges successfully.
A booklet that contains detailed information on the planned economic measures will be made available soon.
Mr. Speaker,
In the past, Sri Lanka has missed many opportunities to achieve truly
viable economic success. We cannot let the opportunity before us slip
once again. That’s why we must be able to comprehend the current global
conditions and make the best use of our strengths, utilizing it
successfully towards emerging an economically robust nation.
All of us may have personal opinions and different political
affiliations but we as a nation must be able to rise above it all, to
come together to take our country forward.
We have the best opportunity for that under the National Government.
We cannot hold the past accountable for not going forward into the
future. There’s no use in shedding tears over the wrong economic
pursuits of the past. Instead, we need to focus on the path forward, on
our ability to compete successfully in a dynamic global market place and
carve out our niche among the prosperous nations of the world.
The future generations will depend on us for choosing the right
economic path. As a nation committed to sustainable development and
success, only then can Sri Lankans become the empowered citizens of an
economically sound nation. (Colombo Telegraph)
PRIME MINISTER’S ECONOMIC STATEMENT IN PARLIAMENT ON 27TH OCTOBER 2016
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