On Wednesday at a special panel discussion on the 2011 budget organized by the Business Times at its auditorium in Colombo, one of the panellists raised a valid point: “This budget has all the right signals for investment and is well-intentioned but does the government have the capacity to handle its implementation and see it through?” asked former Central Bank Assistant Governor Dr Anila Dias Bandaranaike.
A second panellist, Singer Chairman Hemaka Amarasinghe, while also like Dr Bandaranaike praising the budget, paused for a moment to say: “All budgets need to get the support of the people. Otherwise it won’t work.”
Overall the private sector was enthused by the budget saying the plethora of tax breaks, cut in personal taxes and incentives like a simplification of foreign exchange controls would boost investment. “We would have not asked for anything better,” gushed the finance director of a Colombo firm. The Business Times’ now-popular email polls however, drew a different response on the impact of taxes on the private sector and the middle class. In both case, the response was negative.
The government’s message in the budget is clear: invest, invest, invest from the private sector and take Sri Lanka to the next level. Laying the groundwork for this path is a series of tax concessions, tax cuts and incentives while on the other side sharply reducing tax holidays and other benefits for BOI companies.
The measures are also aimed at Sri Lanka achieving double digit growth in the next decade and doubling of per capita income. Says Dr Bandaranaike, “All these measures are intended to drive investment, create wealth with the hope that it would trickle down to the people.”
She raised a unfortunate occurrence in society where there is a ‘for and against’ in every issue but no middle path. “In every issue, either an individual is for or against. There is no middle road which is unfortunate.”
She also pointed out some concerns particularly in the transparency of the government’s actions, citing lack of information in the budget as to the source of revenue and how the budget deficit would be bridged.
Mr Amarasuriya also agreed that the intentions of the government were good but expressed concern over the trade deficit as he saw imports rising by 20% and that would draw on foreign currency draining foreign reserves. “Exports are not going to pick up as fast as imports. Thus we need to be cautious about foreign reserves,” he said in a point endorsed by Dr Bandaranaike as well.
Perhaps the most illuminating and out-of-the-box thought came from the third panellist, attorney-at-law Chrismal Warnasuriya who drew attention to the rights of the citizen to question the government on uneconomic spending. “You challenge the budget in courts … that’s your right, if spending is inconsistent with the purpose,” he argued.
Mr Warnasuriya said the Constitution clearly shows that the executive, legislature and the judiciary are guardians of the people who decide what is right or wrong for the country. Thus the budget and its spending and revenue proposals are being placed ‘on behalf of the people’. “If the people are not happy with how the money is spent, they have a right to challenge it by asking their local representative, other agencies or go to courts for an answer,” he said.
In a new element to the budget debate, the feisty young barrister practises in Sri Lanka and UK says the public should be made aware of their rights and in this case, the role of the citizen in the budget process. “They need to know that they have a right to question the government without fear on whether the money is well spent,” he said.
The budget, most of which was the work of Treasury Secretary Dr P.B. Jayasundera as the case has been for more than a decade now excluding the period when the UNP was in power, while providing relief to middle management wage earners with a salary of Rs 50,000 and below, didn’t provide much relief to the middle class. “It was like doling out Rs 600 per month and squeezing out Rs 1,000,” grumbled one worker, referring to the new allowance and the 8% increase in electricity rates among other increased consumer costs.
There was praise too for the new pension fund which is geared to attract those who are not part of the organized sector and EPF-paying workforce, and tackle an ageing population.
However opposition legislators are accusing the government of creating these funds including the one with a pension plan for migrant workers as a reservoir to borrow at will, an accusation that could be unfair as the proposal is well-intentioned.
Notwithstanding the confusion in the budget where many proposals are unclear, time will tell by this time next year, whether the government’s ‘good’ intentions have worked. With the focus so much on governance and transparency, the role of Senior Minister Ratnasiri Wickramanayake who has been assigned the subject of ‘good governance’ would also be viewed with interest. Is this the real thing? Will the government be transparent in all its actions which is what the new portfolio or subject should be? Or is it another red herring in the making? |
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