By Channa fernandopulle
The Sri Lankan government through its latest budget should place more emphasis on the country’s agriculture sector with a view of gaining self-sufficiency, according to N. R Gajendran, Partner, Gajma Co.
“We may have to survive on our own as it might not be possible to trade the way we used to do. Five years ago it would have been considered preposterous for us to speak about import substitution, but now I think it might be a good idea, considering the global economic climate as well as the impact of international relations issues concerning the country,” said Gajendran who was speaking at ‘Pre-budget 2012’, a seminar by the Organization of Professional Associations.
The call for import substitution, particularly with regard to agricultural produce, was also echoed by Sarath De Silva, President of the National Chamber of Exporters.
“Sri Lanka traditionally imports almost 90% of the potato and onion requirement, almost 100% of garlic, 95% of chilies, the total requirement of coriander, cumin, fennel, fenugreek, ginger and ginger extracts and tomato pulp for local consumption and industry.”
“Is it not time we identify specific local entrepreneurs with projects to grow those products to save valuable foreign exchange? The government should provide them with leased land and encourage them by taking over some of the land preparation costs.”
De Silva stated that it is vital that the government works towards improving the yields of crops grown in the country by guiding the agricultural sector towards best practices whilst at the same time streamlining processes by which local private companies can gain approval to begin agricultural projects as a necessary pre-requisite to effective import substitution.
M R Shah, Chairman, Merchant Bank of Sri Lanka PLC, speaking at the event stressed the need for the government to ensure that development in the country moves forward on a more equitable basis.
Shah stressed on incentives to banks to make them involve in micro-credit schemes in rural areas which, according to Shah, would eventually yield a significant contribution towards GDP. Shah cited the potential for cattle farming in rural areas which could eventually lead to import substitution of milk products which would in turn preserve the country’s foreign currency reserves. Aside from matters regarding import substitution, many other recommendations were made by the speakers as to what they would like to see in the upcoming budget.
Gajendran spoke about the current tax regime in the country and advocated more consistent regulations which are tailored to the needs of the country. The current system with regards to the Appeals Commission which has a period of 6 months to review a case is inadequate, according to Gajendran. The 2 year period in place during the time of the Board of Review is in his opinion a more suitable time period. Gajendranalso stated that the rule which requires applicants to pay 25% of tax in order to appeal a decision, requires consideration as it amounts to interference with the right of appeal.
With regard to the penal offense of ‘deliberate misinterpretation of law’ by auditors, Gajendran stated that such a law ought to be altered. “Nowhere else in the world does such an offense exist. All laws are there to be interpreted and that is the reason why you have a dissenting judgment in courts.” With regard to debt servicing Gajendran said that it is vital that the government continue to roll over more expensive debt to cheaper debt as done in recent past. Gajendran also recommended a change in focus on the types of taxes being levied at present.
“The most stable route for the government to take in the long term is to focus more on progressive taxes such as income tax whilst reducing consumption taxes such as VAT.” He also stressed the importance of providing incentives to the IT sector of the country which at present, in his opinion insufficient. Recommendations concerning the construction industry of the country were also made by Dakshitha Thalagodapitiya, CEO/Secretary General of the Chamber of Construction Industries Sri Lanka.
“We find that the Sri Lankan construction industry is not ready to respond to the levels of demand from the construction boom that is currently taking place. The budget should address these issues, the most important of which is connected to capacity development of the local construction industry.” Thalagodapitiya also said that the government needs to look at providing incentives to seek alternative construction material such as bamboo over timber and offshore dredging for sand instead of river sand. “In order to sustain this industry, we must also look to the future. The construction boom is not going to last forever and once it stops, we must look at exporting construction services to other countries,” said Thalagodapitiya. Gayathri Gunaruwan, Chief Economist-Economic Unit, Ceylon Chamber of Commerce also spoke at the event on macro-economic perspectives of the country in which she outlined some of the economic trends leading up to the current year.