Upcoming budget expected to provide R&D concessions
Deputy Minister of National Policies and Economic Affairs, Harsha De Silva revealed that there was a possibility that “generous” concessions may be granted via the forthcoming budget for research and development (R&D) purposes to promote a more competitive economic environment, adding that para-tariffs, cess and other such barriersmay also be removed so that the country’s private sector could contribute to positioning Sri Lanka a logistics hub in the Indian Ocean.
The deputy minister made this statement when addressing the Chartered Institute of Logistics and Transport (CILT) International Conference 2017 titled ‘The Age of Disruption: A Reality Check on Logistics and Transport.’
“I feel that we have finally understood the importance of research and development. In the upcoming Budget you will see some very generous incentives to shift more people towards knowledge-based industries to innovate, invest and productisation. Sri Lanka’s spending on research and development is quite insignificant compared to other economies.People think export is good, import is bad. That is not the way one needs to look at trade. What makes sense is adding net exports to the GDP. You can do only exports if you have gold or oil, but in our case, we need to add value and export,” he said.
De Silva also noted that Sri Lanka’s excessive tariff protection rates were a main contributor limiting imports to the country.
“Total protection rates in most industrial HS codes from 2005-2014 have increased from 10% to 20%, while in agriculture it was even greater. Therefore we must be enlightened enough to be able to appreciate the fact that trade reforms are absolutely essential to integrate the economy with the rest of the world,” he stated.
He also expressed concern over the country’s “Ease of Doing Business” ranking, which had fallen down to the 85th place according to the recently released World Economic Forum Global Competitiveness Index (GCI) from its previously assessed rank of 71.
”However much various people have been attempting to tweak the components of the Ease of Doing Business, we seem to be stuck at a very bad place. This is an area we have not been successful to shift our position from where it was to where we want to take it — to be honest,” he remarked.
De Silva went so far as to provide assurance that the 2018 Budget will provide specific solutions to policy and economic affairs.
He also stressed on the importance of Sri Lanka finding funding sources to embark on infrastructure development projects, adding that the GoSL was considering new investment options such as the Build-Operate-Transfer (BOT) system so that the public sector could be partnered by the private sector in PPP agreements for such projects.
Highlighting the GoSL’s JV with China Merchants Port in Hambantota, De Silva stated that the government’s change of mind-set regarding large infrastructure project funding can be seen through this.
“I did an analysis of the capital expenditure. We only spend about USD 5 billion of Government money on capital expenditure annually and of that education we found out that 60% goes to construct buildings. There are buildings, there are labs, but there is nothing inside those labs. So if you are talking about quality infrastructure I am digressing from ports to school labs, but still that is what it means. We are trying to create a major structural break from the rest of the country’s doing business investment climate. I want it to be a policy lab and I want what works here to permeate to the rest of the country. The strategy is to create a top 10 doing business oasis in the world,” he stated.
He also stated that there was a Noting that Sri Lanka’s position in terms of digitisation was not all that bad, Dr. De Silva said that the removal of data taxes will further help to digitise the economy. He also said there were many other initiatives currently ongoing including authentication platforms that will create a digital ecosystem to ensure the transaction cost of doing business will reduce.
The 2018 Budget appears to be geared towards an investor-friendly trajectory which bodes well for future investors.
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