Malik commends Budget 2019, says it strengthens Vision 2025 ambition

• Following is the Budget 2019 speech by Minister of Development Strategies and International Trade Malik Samarawickrama

Mr. Speaker, the 2019 National Budget has outlined a progressive agenda for action to place the economy on a stronger growth path, with a twin focus on growing enterprises and nurturing the poor. 

The Budget has also ensured that the macroeconomy is placed on a solid footing as well, despite the challenging circumstances that were brought about as a result of the constitutional crisis late last year. For a third consecutive year we forecast achieving a primary surplus on the Budget, which should serve as a strong indication to all bond investors and ratings agencies that we remain committed to the ongoing fiscal consolidation efforts and effective debt management.

The prudent macroeconomic management outlined in the 2019 Budget will prove to be a cornerstone in foreign investors’ confidence in the economy and ensure that the necessary macro indicators remain stable to provide a conducive environment for the enterprise sector to thrive.

I wish to particularly make mention of some important proposals in this year’s Budget that relate to my Ministry’s agenda of trade, investment, competitiveness and economic transformation. 

The 2019 Budget has continued the support to programs initiated in the 2018 Budget – this includes the Export Market Access scheme and the National Export Strategy.

The Export Market Access program has an allocation of Rs. 400 million in the appropriation bill. This program will support companies seeking to establish an export presence, expand exports, and break into new markets. The National Export Strategy (NES) has an allocation of Rs. 250 million as per the Budget proposal. These resources will support sectors including electronics, spices and concentrates, boat building, ICT, wellness tourism, processed foods, and logistics, and help to diversify our export basket. I also welcome the support to the improvement of the National Quality Infrastructure, provided through the Budget allocation for the NES. 

The Budget also supports the seafood exports sector through investments in higher end fishing vessels that are compliant with EU requirements to access GSP+. This includes vessels with chilling facilities, safety and monitoring features, and the government will bear 50% of the cost of these investments. This comes at a welcome juncture, when our exports to Europe and other destinations are on the rise, and there is a continuing need to upgrade.

The solid tyre sector has become a major export for Sri Lanka and I welcome the proposal where the government will facilitate the private sector to invest in testing and prototyping facilities for product innovation to enable the industry to remain at the helm of global markets. Support is also being given to improve latex production by doubling incentives for rubber planting.

Sri Lanka is also the world’s major producer of Ceylon Cinnamon, and the Budget will support the ongoing initiative to secure Geographic Indicator for this product, which will add to its export competitiveness. 

I welcome the proposal to expand the ‘IT initiative’ - which we began under the 2018 Budget – to train 1,000 non-technical graduates through internship programs where the government will bear 50% of the salary. Moreover, the Budget has made an important step in changing the incentives for IT firms - the hitherto applicable minimum employment requirement of 50 employees to benefit from the 35% additional deduction for the IT sector has been removed. This is a very welcome move. 

The Government remains committed to the strategy of building a network of trade agreements to link into regional value chains and expand our presence in the growing markets of East and South East Asia. After reviewing the Singapore FTA, the Government will build on progress made in negotiations with India, China, Thailand and Bangladesh. 

We are very conscious that signing the FTAs alone would not be enough to ensure that our enterprises succeed in the large markets of India and China. Which is why our proposal to support the ‘Break into India Strategy’ and ‘China Market Entry Strategy’ is so important, and I welcome the Budget’s support of it. Firms establishing in these and other key markets will be supported by proposed Trading Houses for priority sectors which will help Sri Lankan firms secure distribution networks, buyer linkages and other requisite support in market penetration. 

The Government intends to continue its effort of removing remaining para-tariffs, to reduce the anti-export bias, the anti-trade orientation and improve overall competitiveness of the tradable sector. Yet, we are conscious of the need to help enterprises and workers adjust to the new market conditions brought on by para-tariff removal and trade liberalisation. Which is why we are introducing the trade adjustment program this year. I welcome the Budget 2019 allocation of Rs. 250 million in 2019 to commence implementation of the Trade Adjustment Program, including setting up of the Trade and Productivity Commission.

The Economic Service Charge of 0.5% has been reduced to 0.25% for export companies (including IT and tourism). This will support cash flows of these companies. 

I welcome the proposal to continue with reforming the Customs Ordinance, to make it more contemporary and more facilitative of international trade, anchored to the objectives of enhancing transparency, improving risk management, and strengthening the appeals processes. Meanwhile, the proposed launching of an ‘Authorised Economic Operators’ program in 2019 will greatly improve risk management of high risk cargo while making it easier for compliant traders. The implementation of the National Single Window will be kicked off this year, having already completed the blue print for it in 2018. I welcome the allocation of Rs. 30 million for this purpose.

With regard to strengthening the investment climate for FDI, I welcome the 2019 Budget’s proposed package for high value investments. This entails removing of upfront investment costs (like NBT and PAL) for investments over $ 50 million, and additional capital allowances ranging from 100% to 150%. For investments over $ 1 billion, additional benefits are being proposed, including exemptions from dividend tax and PAYE are also proposed. These will now go through the process of amendments to the IR Act. To further attract FDI, new industrial zones in Bingiriya and Wegawatte will be supported with Rs. 500 million proposed investment. 

To enhance competitiveness and focus on innovation, I welcome the proposal to allocate funds for the ‘Enterprise Innovation Program’, anchored to the Innovation and Entrepreneurship Strategy 2018-2022 that was approved by the Cabinet. This will support the development of new innovative projects and technology by Sri Lankan firms. The program will provide matching grants for proof of concept, prototyping, R&D, and technology adoption. 

I welcome the allocation of Rs. 40 million through the appropriations bill and a further Rs. 50 million through the Budget. The EIP was developed in close collaboration and consultation with the private sector, and technical input from the World Bank, and is set to be the most unique and impactful scheme of support for enterprise innovation that Sri Lanka has seen. 

I also welcome the continuation of the ‘Enterprise Sri Lanka Loan Schemes’ that are providing a major boost to enterprise and innovation in Sri Lanka. The proposed guarantee fund for SMEs will support the implementation of innovative business ideas whose owners lack the relevant capital or collateral, and help banks move towards risk and cash flow based lending. I also welcome the new initiative to connect ‘Enterprise Sri Lanka’ loan recipients with institutions such as ITI, ICTA, EDB, and the universities to ensure that we build an effective ecosystem for startups and small business. 

It is also noteworthy that the Budget 2019 has proposed that Government procurement will be made more startup and SME friendly. I welcome the proposal to ensure that at least 10% of the value of Government procurement is ear marked for Sri Lankan startups and SMEs.

Mr. Speaker, these are just some of the many elements contained in the 2019 Budget that provide a fillip to our country’s entrepreneurs, who have been yearning for new and innovative programs of support. 

This Budget strengthens the Vision 2025 ambition of making Sri Lanka a high growth economy that is driven by private enterprise but also ensures inclusiveness. I congratulate the Finance Minister and his team, and look forward to working closely on the implementation of these proposals. 

This Budget strengthens the Vision 2025 ambition of making Sri Lanka a high growth economy that is driven by private enterprise but also ensures inclusiveness