With preparations for the 2013 Budget gathering momentum economic analysts and top corporate and business personalities anticipate a business and investor- friendly Budget.
Chevron Lubricants Lanka PLC, CEO and MD Kishu Gomes said that it is imperative to improve Sri Lanka's global competitiveness to attract Foreign Direct Investments which is paramount to to boost economic growth.
"Sri Lanka is making a concerted effort to attract FDIs but it is not at the desired level. Investor friendly, national and consistent policies are vital to woo foreign investors," Gomes said.
The country needs better fiscal management to maintain interests rates at a desirable level. The Ape De Ganne is a good concept but there is an imported component in most of these products which should come at the right price.
Gomes said that steps should be taken to encourage local production of lubricants. Only around 60 percent of the lubricant requirement is manufactured locally. Lanka IOC and Chevron produces lubricants locally.
He said that the current six percent cess on lubricants has discouraged more players entering the market."More players will make mid to long term investments if the cess is removed.
Senior banker and capital market analyst, Mangala Boyagoda said that it is paramount to develop a vibrant equity and debt market to boost capital market growth. The debt market capitalisation in in Sri Lanka is small compared to the equity market capitalisation which is around Rs. 2400 b. The debt market capitalisation is around Rs. 40 b.
In developed economies, the debt market is much higher than the equity market. It is important to develop a vibrant debt market in Sri Lanka. To accelerate economic growth the private sector should be the engine of growth.
Boyagoda said that when it comes to investing the cost of capital is of concern to any investor. In Sri Lanka, the intermediary cost is high. The 2013 Budget should focus on developing a debt market through a dis-intermediary process.
"The 10 percent withholding tax should be removed for a vibrant debt market enabling corporates to borrow long-term capital. The government should focus on developing a mortgaged-backed securities market," he said.
Past chairman of the Chartered Institute of Logistics and Transport, Sri Lanka, Dr. Parakrama Dissanayake said that steps should be taken to modernise the public passenger transport system on selected main routes on a public/private partnership to ease road congestion.
"It is also vital to develop freight transportation by rail through public/private partnership," Dissanayake said.
Head of National Portfolio Development Sri Lanka and the Maldives, Rohantha Athukorala said that Sri Lanka should develop a robust strategy to drive growth in the export sector to reduce trade deficit. This will include radical policy reforms.
Sri Lanka recorded a trade deficit of $ 4.70 b during the first half of this year. While export earnings stood at $ 4.96 b import expenditure rose 4.2 percent to $ 9.66 b during the first six months this year.
The government plans to present its $ 19.5 b budget for 2013 in Parliament on November 8.The Cabinet approved the Appropriation Bill 2013 last week.
President Mahinda Rajapaksa as Minister of Finance and planning submitted the 2013 Appropriation Bill with the estimated government expenditure of Rs 2.52 trillion for 2013 to the Cabinet.
The first reading of the Appropriation Bill will take place on October 9 while the Budget proposal (second reading) will be presented on November 8, according to Government Media Unit sources.
Proposals are being submitted by private and public sector institutions for the 2013 Budget. Sources said that the 2013 Budget will focus on priorities identified under the Medium Term Expenditure Framework 2013-2015 and the completion of on-going development projects in the country.
The Government targets to maintain an economic growth rate of around seven percent while containing the annual inflation rate in the mid single digit rate.