The dilemma of starting a project within a year after obtaining land from the state was raised at a panel discussion last week on the budget organised by the Sunday Times Business Club.
President Mahinda Rajapaksa, in his 2012 budget speech said: “Provisions will be made in lease documentations to enable the Government to cancel such leases, if any such land is not put into productive use for the purpose for which it was given, within a period of one year.”
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| N.R. Gajendran |
Raising a pertinent point and practical difficulties in starting a project within a year given the level of state regulation, N.R. Gajendran, Senior Partner, Gajma and Co and one of Sri Lanka’s leading tax specialists, told members of the club that under this environment, the private sector would be reluctant to invest.
He explained that for various development projects land has to be obtained from the state to put up hotels or other business by multinationals and others, and it would take two years or more to commence the project given the time taken to register the land and other compulsory procedures.
Earlier, in her presentation, Dr (Ms) Anila Dias Bandaranaike, former Assistant Governor, Central Bank, said a perennial problem in the budgets is that there is no comparison of the actual performances and the proposed estimates and, the 2012 budget is a continuation of the policy directions of the landmark 2011 budget which was a forward thinking progressive one that emphasized the need to get the country’s macro economy in place.
She said with the return of tax holidays and incentives it was an indication of the need to attract investment.
She said that to achieve the growth there should also be parallel investment adding that instead of a 5% budget deficit the government was expecting to lower it to 4% and inflation to be maintained at 6.5%.
The 3% devaluation of the rupee is a courageous decision which is a clear acknowledgement of the actual situation taking into consideration imports, cost of living, etc. Dr Bandaranaike said that all these years the revenue is much lower than the estimated, high expenditure and they always cut down capital expenditure. She said that, however it is the right direction, to lower the budget deficit and keep the inflation at a reasonably stable level. Dr Bandaranaike said that in the last two years the government managed to keep to the target on the capital investment. “They actually managed to maintain 27% investment which is very good,” she added.
There is higher economic activity by the government and the Expropriation Bill, 30,000 hectares would be brought back but noted that the way foreign employment is pursued all the skilled labour would emigrate and there would be a dearth in the local labour market to involve in the development work etc. She then questioned, “How are we going to achieve our target of 8% growth if we are sending all our (professional) labour into other countries?” She said that while basically the concept has not changed, the conceptual framework of how they get to where they want to get is not clear.
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| Dr (Ms) Anila Dias Bandaranaike |
She said that there could be some such inconsistencies in the implementation of the budget and in the implementation some of these inconsistencies have to be addressed. She said the government’s consultative process is very good and there were discussion with 3,000 stakeholders and when there is discussion with the stakeholders they would have to be kept happy with tax incentives, etc. It is very good that the government is to modify the market economy as the whole free market model is failing.
Mr Gajendran, in his presentation, said in Sri Lanka only women are working and pointed out that women are involved in the FTZs, foreign employment and in the plantation industry such as tea rubber and coconut and contributes a bigger margin to the national wealth. He said that Sri Lanka cannot be taken out of context from the world order and with the US and Europe facing huge problems, it is a matter of time when this hits Sri Lanka.
He said that people want freedom and democracy. In China there are huge transparency problems and a growing middle class whose aspirations are different and leading to a situation where China will have immense power in the world which needs to be understod.
He said that there are no revenue proposals at all in the budget. It has some incentives and there is no difference between foreign investment and local investment. He said that from the returnees from foreign employment the country receives around half a billion rupees and this money is spent and goes waste. They should not be wasted but should be put to some productive use.
Mr Gajendran said that the greatest challenge is to sustain GDP growth at 8% and to maintain that growth there should be investment at 32 to 40%. The question is whether the country could achieve 40% investment ratio and then raise another three billion US dollars.
To get to 6 to 7% growth there should be at least another two billion additional dollars. He said the core of the economy of the country is investment. He said that some people are questioning the correctness of the figures in the budget though there cannot be major variations and the gaps have to be cross checked. The Sunday Times Business Club is sponsored by Taj Samudra Hotel and co-sponsored by Hameedias. |
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