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Govt. defends Port City tax concessions

Comments / {{hitsCtrl.values.hits}} Views / Wednesday, 22 February 2017 00:00



  • Malik insists new agreement favourable to SL, defends tax holiday 
  • JVP rejects passing tax incentives until documents are tabled in P’ment  
  • Demands to know contribution of project to Govt. 

Development Strat-egies and International Trade Minister Malik Samarawickrama yesterday assured Parliament the Port City agreement inked during the Rajapaksa regime was amended recently in favour of Sri Lanka. 

According to the Minister, such amendments prevented the Chinese company from freehold to the Port City land, and have increased the land mass share of the Government.

The Minister, responding to Opposition lawmaker Anura Dissanayake’s charges of seeking approval for an agreement yet to be tabled in Parliament, said: “We haven’t given any new concessions to the Port City. All what is there was given by the previous Government. But we have amended the said agreement. We can table it in Parliament if required. I thought this agreement was discussed in the Parliament during the last Government. We have removed controversial matters relating to the previous agreements. The Chinese company has invested $ 1.4 billion. When you invest such a large amount, it is normal to give such concessions to attract investors. We are unable to cancel the agreement, which is already signed in 2014. However, the amended agreement has increased the land mass of the project from 233 hectares to 269 hectares. Out of the increased landmass, the Government will receive 26 hectares and the company 8 hectares. According to the new agreement we have 153 hectares.”

However, Chief Opposition Whip JVP MP Anura Dissanayake, who insisted on rejecting the tax concessions on the Port City and the Slave Island land development projects till proper documents were tabled in Parliament, said: “You are asking tax concession for an unknown project. Please do let this Parliament know the details of this project. You are telling us that there was an agreement which is unknown and you claim to have removed some items on it. We don’t agree to pass concessions over an unknown project. You are also seeking approval to grant tax concessions for 25 years where the Income Tax Act will not be applicable. Along with the period taken to build the Port City you are exempting 32 years. Adding more to it you have exempted the project dividends from tax. It is not fair at all. 

“You have also removed the payee tax on 30 persons. Payee tax is applicable to state as well as private sector employees. You have failed to amend this agreement to be favourable to the country. We shouldn’t pass this today in Parliament. Not only that, we need to know the land distribution percentage between the Government and the Chinese company. Let us know the contribution of these projects to the economy in terms of the GDP and the employment opportunities created. If it is a finance city what are the banks which have agreed to move there? I urge Parliament to refrain from passing the gazette,” he added.

Explaining to the Opposition lawmaker the reasons why the current Government was unable to cancel the Port City agreement signed during the previous Government, State Minister of International Trade Minister Sujeewa Senasinghe said: “The agreement cannot be cancelled. If we cancel it, Sri Lanka will have to pay a massive fine.”


Govt. focuses on fixing export ills 

  • Malik tells P’ment diversifying exports key to growth, wants bigger GDP contribution 

Failing to maintain a favourable edge over exports to traditional markets, Sri Lanka has started to undergo a series of difficulties, which are now being addressed by the current Government, a top Government Minister told Parliament yesterday.  

According to Minister of Development Strategies and International Trade Malik Samarawickrama, diversification of the product portfolio and expanding away from the traditional markets are a few solutions the Government recommends to local manufacturers and exporters.

Moving the motions on orders under the Sri Lanka Export Development Act relating to cess, exemptions granted and exemptions to be granted in respect to some of the proposed projects, the Minister said: “It is necessary to diversify our export market. We have been exporting to our traditional markets such as the United States and the European Union. Now the time has come to look at new markets. We are in the process of negotiating several bilateral trade agreements with countries such as China, Singapore, Japan and Korea and also to enter into a strategic partnership with Thailand. We are also looking at invigorating our FTA with Pakistan and at the same time looking at a comprehensive economic and technology cooperation with India. This is the only way forward for our country.”

From 1990 until 2014, annualised GDP growth has been 5.4% with low volatility, consumption, and investment contributing to growth. “Sri Lanka has very little GDP growth coming from exports compared to several South East and East Asian countries. The export component of growth in Sri Lanka has generally weakened over time. This lack of export growth contributes to pressures in Sri Lanka’s balance of payment, which has constrained the overall economic growth potential. Sri Lanka’s trade deficit, ranging from -6% to -14% of GDP since 1990, drives a persistent current account deficit which has generally not been matched by capital inflows. Sri Lanka depended on international reserves in 2015 to fill the gap in its balance of payments which led to elevated levels of macroeconomic risks and increased borrowing costs for the Government to IMF support agreement was signed in April 2016,” Minister Samarawickrama told the Parliament.

Listing the reasons for the hard time faced by exporters, the Minster blamed low diversification attempts. “While other countries are getting significant growth of new exports, over 90% of Sri Lanka’s goods focused on products that it first began exporting such as products including garments, tea, precious stones and rubber and other agricultural goods. Meanwhile, Thailand, which once had a similar export basket to Sri Lanka, continued to diversify into electronics in 1990s and then into transportation and chemical products after that. Vietnam, which had a very similar export basket to Sri Lanka in 1995, has diversified rapidly over the last 10 years. Sri Lanka remains stuck exporting products, mainly apparel and agricultural products, which creates a vague feeling on these industries. For instance, we compete with Kenya and India for the global market share in tea and compete with India, Bangladesh, Cambodia and Vietnam in garments,” he said.

“Wages paid by exporting industries are lower than most non-tradable industries such as construction or transport and especially lower than public administration work. To maintain internationally competitive prizes several major export industries in Sri Lanka are forced to keep wages low and they therefore struggle to find workers and retain them as incomes increase in the country. Garment exports from Sri Lanka have managed to maintain a global market share through innovation, higher quality products and supplying niche markets through a buyer driven global value chain. However, on the whole export productivity has not kept pace with overall productivity in Sri Lanka,” added Minister Samarawickrama. (AH)



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