1.1 Honourable Speaker, I am pleased to present the 9th Budget of the United People’s Freedom Alliance Government having made use of the previous 8 Budgets to bring about national security, peace and economic progress to our nation. Our nation is proud today that our Government has converted the once mined lands of the North and East into lands that harvest the dividend of peace and prosperity. The consolidation of the democratization process of the 30 year terrorist trapped North, having institutionalized a Provincial Council and Local Authorities in the province through free and fair elections, has further enriched the pride of our nation.
1.2 Almost 2 months ago, elections were held in 3 provinces that represent around one third of the population. All political parties participated actively and demonstrated how well the longstanding democratic process has advanced in our country. Out of the 2.7 million votes total polled in three distinctly different provinces, 1.5 million, which is 56 percent voted for the People’s Alliance Government. Our Government is encouraged that a substantial majority of our people continue to place their confidence in "Mahinda Chintana- Vision for the Future" which, is designed to create a proud future for their children. We were further encouraged by the fact that in the North, an overwhelming majority of people have placed their confidence in the democratic process which was denied to them by the LTTE for 25 long years, and proceeded to use the opportunity to elect its Provincial Council for the first time.
Opposition Leader Ranil Wickremesinghe is leaving parliament before the presentation of Budget 2014.
(pix by Nimal Dayaratne and Kamal Bogoda)
13 Honourable Speaker, this Budget is also presented soon after hosting the 23rd and the first ever Commonwealth Heads of Government Meeting held in South Asia. It is also the first ever global event that was held in our country since the Non- Aligned Conference held in 1976. We ought to be proud that we were able to restore the prestige of our motherland by being able to mobilize 53 countries and giving them an opportunity to see for themselves the turnaround we have made. The conference also gave ample opportunities to the leaders who attended to witness the economic progress we have made and the stable democracy that prevails, which will convince them that the fabricated viewpoints being aired by those who are campaigning against us are grossly wrong. The rare opportunity we secured by hosting this summit to promote investment opportunities for our country aiming both the vast external markets in the Commonwealth countries as well as the connected global markets, is our main economic benefit from this summit. By hosting this summit 20 years after it was last held in an Asian country, Sri Lanka while brining pride to the whole of Asia was also able to attract global attention to our economy as one of the leading economies in emerging Asia. This will also pave way to increase investments and create employment opportunities. The successful conclusion of this summit with the transfer of leadership of the Commonwealth to our nation is a clear reflection of international recognition of our Government’s foreign policy.
1.4 Despite the predictions of dooms and glooms about the economy, we are humbly proud to note that the poverty level has steadily declined to 6.4 percent in 2013 from 15.2 percent in 2006. This did not happen by accident. We took electricity, which was available only to urban areas to almost the entire population. We no longer remember the days of power- cuts. Electricity for all and at all times, is now a reality. Other facilities such as access to water, quality roads, irrigation systems for lands in the dry zone, better schools, hospitals, housing, sanitation and environment preservation have improved considerably and -continue to expand all over the country. "Mahinda Chintana towards a new Sri Lanka" our Government’s mandate recognizes that these are basic needs of the people.
1.5 None of this could have been possible if our security forces did not bring about peace and national security. Our committed farmers brought about food security. Our people who work overseas brought valuable foreign exchange to their motherland. Our teachers were committed to provide quality education to our students and our health workers were committed to improve health standards of our people. Our rural based public servants worked hard to revive the rural economy. Our religious leaders worked towards religious harmony. Reviving creative initiatives, our artists brought back the values of our culture and arts. Our labour force ensured a higher national income through industrial peace and continued productivity improvements. Global financial institutions and entrepreneurs placed confidence in our economy. They all deserve a heartfelt appreciation for their uncompromising commitment to promote peace, national reconciliation and economic progress.
2.0 The Economy
2.1 Honourable Speaker, our economy continues to progress steadily. The economic growth of 6.4 per cent registered last year amidst adjustments made due to global instabilities and high oil prices and further challenges due to the severe drought that was experienced, has increased to 7.8 percent in the third quarter of this year. There is confidence that the economic growth will exceed 7 percent this year and move towards 7.5 - 8 percent during the medium term of 2014 - 16 maintaining a growth in the real economy well in excess of the expected 5 - 6 percent inflation.
2.2 Agriculture, the backbone of the livelihood of our rural community has bounced back from the setback faced during the last two years due to unfavourable climatic conditions. The 2013 Yala season has given us a paddy harvest of 2 million MT, which is the highest in recent years. The production of maize, soya, black gram, green gram, big onion, potatoes, fruits, and vegetables has also .Strengthened the food supply. The production of milk, dairy, poultry, meat, fish and eggs has also shown a similar improvement. Rice, maize and poultry production is generating surplus exports.
2.3 Increased paddy, maize and soya bean production has boosted rice processing, flour milling and vegetable oil production. The coconut production which, severely suffered due to the prolonged drought in the coconut triangle, is recovering with a favourable production trend. The production of tea, rubber, cinnamon and other export crops has also shown an improvement Remunerative farm gate prices, the fertilizer subsidy, price stabilizing tax structure at the point of imports, provision of quality seeds and planting material and better storage and marketing facilities have helped our farmers to increase production through diversified crop cultivation.
2.4 The tourism industry has sustained its growth momentum with foreign tourist arrivals reaching 1.5 million and domestic tourism expanding to 3.5 million. Foreign earnings from the industry during this year is expected to be around US$ 1.5 billion and investments have expanded well over US $ 3 billion to create new capacity in this sector to be able to accommodate 2.5 million foreign tourists and 5 million domestic tourists by 2015. The use of local food, fabrics, furniture and equipment in the tourism industry must be expanded to further enhance the economic contribution of this industry.
2.5 The contribution of the country’s construction industry now accounts for 10 percent of GDR. This sector is growing at around 17 percent due to expanded investments in infrastructure as well as higher private investments in urban property development, housing construction, tourism facilities, new factories and other logistics. This industry also contributes for the development of a wide range of engineering and technical fields as well as the building materials industry.
2.6 Honourable Speaker, we have offered many incentives to encourage imports competing industries such as cement, steel, tyres/rubber based products, agricultural/ tea industry machinery, equipment/ spare parts, power generation/ transmission machinery and equipment, building material, furniture and boat/ship building. Similar encouragements have been extended to increase new investments in food processing, sugar and vegetable oil manufacturing, dairy and pharmaceutical products and to increase the production of renewable energy and coal power. Many of these activities have a potential to graduate to export markets in the medium term. The Customs tariffs that will come into force tonight will facilitate the expansion of such value creating and import competing industries. Quality standards will be enforced on imports and exports.
2.7 Export industries which were confronted by depressed global markets, have picked up showing a 2 percent growth. The apparel industry has shown a 6 percent growth and is expected to generate US$ 4,000 million export earnings this year. Value added tea, rubber and cinnamon products adds around US$ 3,000 million to export earnings showing how plantation crops could be translated into being high value manufactured exports. Software, gem and jewelery, handlooms and confectionary industries have gained momentum. Export earnings are expected to generate US$. 10,000 million this year. The earnings from foreign employment are expected to be around US$ 7,000 million.
3.0 Priorities of the External Trade Policy
President Mahinda Rajapaksa delivers the budget proposals for the financial year 2014
3.1 Our endeavor is to encourage our products to reach large markets such as India, Japan, China, Australia, Saudi Arabia, United Arab Emirates, Qatar, Russia, South Africa and Brazil in addition to American and European markets, to create a new wave in export growth. We have shifted our education system to equip our youth with the required skills for these export industries and to improve their employment prospects with high income and productivity. We also incentivize our producers to develop skills of their employees so that the overall productivity of our workforce will thereby improve. The Government has arranged Euro 90 million low cost funds to provide credit facilities at an interest rate not exceeding 8 percent for manufacturing and SME industries to modernize their factories with energy efficient technology to improve international competitiveness.
3.2 Our banking and financial institutions need to focus its lending towards production and value creation industries and move away from traditional import biasness in their operations. To further facilitate the export industry growth, online facilities are in place with regard to port and customs operations. Such facilities will be extended to cover imports as well. We have already declared free ports and bonding facilities to promote the value addition process and expand exports from our country. We have set our exports target to be US$ 20 billion in 2020. Towards this end the improvement in productivity is as important as maintaining a flexible exchange rate regime.
3.3 Honourable Speaker, our export economy need not be confined to goods. This country has proved its potentials in exporting services such as business & knowledge processing services, professional services, ports & aviation services and banking & financial services. These services too have grown remarkably during the last 5 years and are expected to generate over US$ 5 billion earnings. As skilled and technical categories are encouraged towards foreign employment, earnings from such sources are projected to be around US$ 10 billion in 2016.
3.4 Our country is now well integrated with international financial markets. The Government and banks have mobilized funds with 5 - 10 year maturities through internationally traded bonds. This has improved availability of foreign funds required for the financing of both Government and private development expenditure. This has also provided a good opportunity for our exporters, high income earning overseas employees, commercial banks and local funds to put their investments and diversify their earnings sources.
4.0 State Enterprises
4.1 Honourable Speaker, our Government will not privatize state enterprises or state banks. I firmly believe that state enterprises should have their presence in the economy for there to be a fair balance between the public sector and the private sector to ensure economic and social progress in our country. Similarly, we have formulated laws to protect our land resources from outright transfers to foreign ownership. From this year, foreigners can have access to state and private land only through long-term lease arrangements. As infrastructure development has improved the value of all lands, it is necessary to implement a land lease tax structure to protect long-term value of lands. Hence a 15 percent upfront tax will be imposed in the event of lease of state or private lands to foreigners.
4.2 It is in this spirit that our Government has strengthened State Owned Business Enterprises. The Government budget through its public investment program has built up the asset base of Ceylon Electricity Board (CEB), National Water Supply & Drainage Board, Airport & Aviation Services and Sri Lanka Ports Authority to increase their long term earning capacity. I propose to convert all previous loans granted to them by the Treasury, to Government equity in order to further strengthen their balance sheets, while also enabling them to pay annual dividend to the Treasury.
4.3 The results from our policies are now visible. The power generation capacity of hydro power plants has improved considerably to 1,357 MW. This has also been blessed with the addition of 300 MW from the first coal power plant, thereby enabling the reduction of the use of expensive fuel based power to 294 MW. Renewable energy generation has increased up to 422 MW. Transmission losses of the CEB have reduced to 11 percent. This together with the cost recovery pricing strategy that has been put in place has helped the CEB to eliminate its last year’s loss of Rs. 61 billion. CEB has also commenced the reduction of its liabilities to banks and the Ceylon Petroleum Corporation (CPC). The completion of two other coal power plants with a further 600 MW of new generation capacity by the end of this year, will further strengthen the balance sheet of the CEB.
4.4 Public investments in new water schemes in almost all provinces have made a stronger revenue base for the National Water Supply & Drainage Board. An investment of US$ 300 million has also been made to reduce revenue water to 20 percent by 2016. The completion of water supply schemes such as Ruhunapura, Aththanagalle, Kurunegala, Matale, Hambantota, Ampara, Anuradhapura, Jaffna, Batticaloa, Dambulla, Mahiyanganaya, Hali Ela, Moneragala, Ratnapura to provide water connections to 1 million households by 2016 will make National Water Supply & Drainage Board stronger in its performance. I propose to establish a National Community Water Supply Department to regulate and develop community water supply schemes in order to ensure water quality standards and proper maintenance of such projects. I propose to allocate Rs. 300 Killion for community water supply initiatives under this Department.
4.5 In terms of the ongoing capitalization to strengthen the two airlines, a further US$ 150 million will be provided to Sri Lankan Airlines and US$ 50 million to Mihin Lanka in 2014. The Treasury has made arrangements to take over the shares acquired in SriLankan by the state banks from the foreign shareholder so that state banks could be relieved of this burden. In order to strengthen the bus fleet of Sri Lanka Transport Board (SLTB) with a further 2,000 buses, Rs.1,000 million has been provided to SLTB in support of its capital investments. In addition, I propose to provide Rs. 500 Killion to bridge its revenue shortfall.
4.6 Ceylon Petroleum Corporation (CPC) has also made a significant turnaround. It has contained its losses and has also reduced its debt to banks. A Government Guarantee will be provided to the CPC to enable the raising of long term capital to restore its depleted pipeline network, storage facilities and the refinery. I am pleased to inform this august Assembly that, out of the 54 State Owned Business Enterprises, 47 have been turned around to be profitable entities. I value the contribution made by the Committee on Public Enterprises (COPE) through its Parliamentary oversight functions towards the improvement of governance and accountability of these enterprises.
5.0 State of the Budget
5.1 Honourable Speaker, I wish to remind our fiscal experts in the opposition that our fiscal policy framework has performed better than those followed by them prior to 2005. All post 1977 Governments prior to us operated higher budget deficits than the deficits that, prevailed during our time. The Government during 2002 - 2004 removed pension rights of public servants and also imposed a recruitment freeze to the public sector. At that time, no alternative to privatization was considered and public investments were reduced, while keeping a deficit in excess of 8 percent and debt over 100 percent of GDP. This is the reality associated with our fiscal legacy.
5.2 Our Government, in fact got back some of the already privatized enterprises and certain others that failed after privatization to rescue them and put back in business. Gas Company, Sri Lankan, Sri Lanka Telecom, Pelwatte and Sevanagala Sugar companies, Colombo Hilton etc. are now government owned and many of them have already paid dividend income to the Treasury. Our budgetary policy enabled us to accommodate expenditure on high public investments, increased salaries and pension payments, Samurdhi benefits, fertilizer and seed subsidies. Budgetary allocations were made for the recruitment of teachers, doctors, nurses, other public sector employees and around 100,000 unemployed graduates to various positions in the public service.
5.3 Further, funds were also provided for the liberation of the country from terrorists, to demine a large area of 1,557 sq km of land, resettle nearly 300,000 displaced persons and to develop livelihood avenues for them. The budgetary provisions were also used for the restoration of security, peace and development. Provisions were increased to implement the recommendations of Lessons Leant and Reconciliation Commission and to popularize the usage of bilingual practices to promote national reconciliation. We have also been able to provide a Living Allowance to all parents of our three forces, disabled soldiers and those who unfairly lost their livelihood simply because they rose against the labour repression in 1980 July. The development expenditure for rural development is unprecedented.
5.4 Honourable Speaker, with all these, the budget deficit has been reduced to 5.8 percent of GDP this year. We target a budget deficit of 5.2 percent of GDP in 2014 and 4.5 percent in 2015. We are determined to bring down the budget deficit to 3.8 percent by 2016 and reduce our Debt /GDP ratio to 65 percent. That is the legacy we propose to leave behind for our future generations.
6.0 Government Revenue
6.1 The Government revenue this year is likely to be around Rs. 1,100 billion. Revenue from Income tax, VAT and NBT on domestic activities has increased by 14 percent and is on a buoyant growth path.
Revenue from taxes imposed at the point of Customs remained sluggish due to the reduction in motor vehicle imports. Revenue from Excise taxes on liquor and cigarettes has moderated.
6.2 Honourable Speaker, we need to strengthen the Government revenue efforts in view of high commitments of the Government to provide a wide range of public services, welfare programs and public investments. The Government has introduced several measures to prevent leakages associated with tax on liquor, motor vehicle imports under concessionary duty schemes, under invoicing in the importation of used motor vehicles, steel, tyres and motor spare parts. Accordingly motor vehicle deprecation schedule applied at the point of import for the calculation of Customs based taxes will be revised to prevent under valuation.
6.3 It is proposed to extend the 2 percent NBT applicable to the banking sector to all banks and financial institutions to provide equal treatment to the banking and non-banking sectors and to expand the tax base. It is also proposed to fix the tax-free threshold applicable for VAT on supermarket scale retail trade at Rs. 250 million per quarter. In order to prevent manipulations on the computation of turnover through exempted items, I propose to fix a limit of 25 percent of the total turnover as exempted value from VAT in relation to such business. Telecommunication Levy will be fixed at 25 percent
6.4 The Inland Revenue Department (IRD) is being computerized to make tax administration efficient and tax payment simple. A new Revenue Administration Management Information System (RAMIS) is being introduced to automate the processes of IRD and eventually link the IRD with Sri Lanka Customs, Department of the Registrar of Companies, Department of Motor Traffic, the Land Commissioner General’s Department and the Ministry of Finance and Planning. The new system will enable the use of a Personal Identification Number to coordinate all transactions and will also to facilitate online tax payments etc.
7.0 The Current Expenditure
7.1 The Government current expenditure at around Rs. 1,200 billion remains higher than Government Revenue. The payments of salaries and allowances to public servants for the provision of education, health, rural development, administrative and extension services and national security total Rs. 390 billion. A further Rs. 125 billion is spent on pensions. Fertilizer subsidy, pharmaceutical drugs and a wide range of welfare expenditure takes another Rs. 100 billion. These expenditures must be secured. The total interest cost of Rs. 445 billion of which, domestic interest payments amount to Rs. 360 billion needs to be managed. However, the reduction of interest rates must be done gradually in order to protect both the savers as well as borrowers. Further, it is necessary to maintain development expenditure at the same scale of 6 percent of GDP to be able to expand economic activities.
7.2 The proper coordination of development programs in each sector in terms of economic priorities is necessary to maximize benefits from public expenditure when foreign loans and grants are utilized in addition to taxes and domestic borrowings. Therefore, I recommend that all grant-aided projects should also to be channeled only through the Consolidated Fund and the National Budget, like foreign loan funded projects having to follow the applicable planning procedure. To ensure consistency and to avoid duplicity in the implementation of the national development process, all expenditure of the private sector and Development Partners that will qualify for social responsibility related tax exemptions, will be implemented having aligned with national development programs. Since grants do not create a debt and hence has no bearing on the deficit, I propose to create additional provisions in the Budget, on account of such grant assistance.
8.0 Agrarian, Livelihood and Irrigation Development
8.1 Honourable Speaker, we consider that our rural centric development strategy must focus on agriculture for food security, traditional healthy living, bio diversity, a clean environment and a higher income to the rural people. Budget consultations with the farmer community representing all districts in the country, expressed confidence in the Government’s agricultural policy and development strategy. They did not ask for any handouts and wanted the Government to concentrate on improving irrigation, providing quality drinking water and protection from wild animals. Therefore, the 2014 - 16 medium term Budget will give priority to these areas. Accordingly the 2014 Budget has allocated Rs. 1,700 million for downstream and livelihood development activities associated with the recently developed major reservoirs such as Weheragala, Rambaken Oya, Deduru Oya. I propose to increase the irrigation budget by a further Rs. 14,000 million for the early completion of Yan Ova, Uma Oya and Moragahakanda development programs, as they will help to improve irrigation and drinking water facilities to several difficult areas in the south and north and also enable power generation.
8.2 The farmers on their own suggested the need to reduce the usage of chemical fertilizer and pesticides to reduce their harmful effects on food, water quality, health, animals and the soil. Since such a shift would take some time, I propose to continue with the fertilizer subsidy scheme to provide all varieties of fertilizer at Rs. 350/per 50 kg bag for paddy cultivation during both the Yala and Maha seasons. A subsidized price of Rs. 1,250 per 50/kg bag will also be continued for all other crops. I propose to allocate a further Rs. 300 million in 2014 to encourage interested farmers and seeds farms, to produce quality planting and seed material and make them available in the market under a registered trademark recognized by the Agriculture Department. Purchasing centers of Divi Neguma agrarian services linked to Lak Sathosa will be set up so as to ensure that farmers will be able to secure guaranteed producer prices for potato, onion, dried chilies and grain varieties.
8.3 The Government has recruited qualified field level officers to the Agriculture Department and the Agrarian Development Department to strengthen extension services. Funds will be allocated to modernize all 300 Agrarian Development Centers to be able to meet farmer needs. I propose to implement a three-year rehabilitation program to restore abandoned paddy land and put them back to productive use by cultivating paddy, fruits, vegetables and also for floriculture, using organic fertilizer. I propose to allocate Rs. 2,300 million in 2014 for the rehabilitation of tanks, minor irrigation schemes and abandoned paddy lands. I propose to grant a monthly allowance of Rs. 300 to field level officers in agricultural extension services,’ veterinary services, irrigation and wildlife. I propose to provide motorcycles on five-year lease basis, to all such field level officers to improve their regular availability at field level and also to pave way for them to own an asset at the end of the lease term.
9.0 Partnership with the World Food Program
9.1 Honourable Speaker, the United Nations World Food Program has assisted our nation in the past to feed displaced people affected by terrorist attacks, the Tsunami and various other natural disasters. In appreciation of this assistance, our country is now in a position to provide food for the needy people who are faced with similar situations in other countries. Therefore, I propose to donate 50,000 MT of rice to the World Food Program of which 10,000 MT will be given to World Food Program office in Sri Lanka. The Government has requested ‘that Sri Lanka be registered as a supplier nation to the World Food Program so that our farmers can grow rice to be supplied to external markets while also serving a worthy cause. I consider that the revival of agriculture is a reflection of being able to restore the traditional pride of our farmer community. Hence, I propose to setup a Revolving Fund of Rs. 300 Mn. under each District Secretary in the major grain producing districts, to streamline related production and marketing activities.
10.0 Smallholder Plantations
10.1 Honourable Speaker, smallholder plantations also play a significant role in our economy. The Government provides assistance to these cultivations by subsidizing planting material, replanting, new planting and fertilizer. In order to be able to get best results from the prevailing subsidies I propose to grant Rs. 5,000 per acre, once a year subsidy, to all tea smallholders to improve the conditions of their lands through water and soil conservation.
10.2 I also propose to support land preparation towards water retention, soil conservation and to increase the use of organic fertilizer for smallholder coconut cultivation. The prevailing high taxes on edible oil at the point of Customs will be maintained to increase long-term cultivation interests. It is proposed to restrict the importation of coconut oil and palm cornel and remove Nation Building Tax on coconut oil millers for 3 years to strengthen the coconut industry. A new incentive scheme will be implemented to encourage manufacturers of coir products for export in recognition of their value addition in foreign exchange. The CESS applicable on the export of tea, rubber, coconut, cinnamon and pepper in primary form will be further strengthened to channel such revenue to encourage value added exports made out of these primary products.
11.0 Large Scale Plantations
11.1 Large-scale plantations were privatized in 1992 on 50-year lease arrangements. However, some of these plantation companies are lagging behind. I propose to undertake a comprehensive assessment of the under performing plantation companies. Similarly, the best performing plantation companies that have increased their productivity, application of bio fertilizer, and engaged in worker welfare, brand promotion and investments to promote high value tea exports should be encouraged. Therefore each plantation company will be required to submit a report on their performance with development plans and targets, before March 31, 2014 to enable the Golden Shareholder being the Government to make appropriate decisions for the development of plantations under each company. I propose to implement a credit scheme with 8 year maturity and 6 percent interest to every company that has so far performed well, provided they - commit to replant an agreed extent, are committed to ensure social development of its plantation workers and increase the volume of its value added tea exports. I propose that banking institutions will earmark around Rs. 500 million for this development loan scheme in 2014. Provisions of existing leases will be suitably amended incorporating new conditions necessary to ensure the development of this important sector.
12.0 Farmer Pension Scheme and Crop Insurance Scheme
12.1 1 propose to implement a pension scheme to provide a minimum of Rs. 1,250 as a monthly pension for farmers over 63 years of age, from January 2014.1 propose to use the proceeds of the Govi Setha lottery along with a capital contribution of Rs. 1,000 million from the Government to strengthen this contributory Pension Fund. The introduction of a contribution from farmers, who use the fertilizer subsidy scheme as announced in my last Budget, should provide a regular flow of funds in support of payment of compensation for crop failures. I propose to extend this to cover all smallholder farmers engaged in all crops so that they could also be compensated in the event of such causality. The Government is also in the process of securing Standby Funds from the World Bank to compensate losses due to adverse climatic conditions, without creating an unanticipated burden to the Budget.
13.0 Research and Food Technology
13.1 The Government has granted a wide range of incentives for research and development as well as a Research Allowance to university lecturers and other scientists. The Government and private sector partnership in setting up of a science park for the promotion of nanotechnology in manufacturing has confirmed how well the two sectors can work together with mutual trust in furthering advanced technology and research We are encouraged with the research initiatives undertaken by both private and public sector institutions particularly in the field of agriculture. Research initiatives of Sabaragamuwa, and Wayamba universities in food technology and livestock and their active involvement with such industries have produced results. Systems and procedures required to be followed by research institutes will be further simplified to encourage the active involvement of universities and for research institutions to be able to meet market demands. I propose to allocate Rs.500 million for research lab facilities, equipment and research work by agricultural faculties in provincial universities at field level together with successful ventures in dairy, poultry, inland fisheries, animal husbandry and food technology.
14.0 Lead Export Industries
14.1 Sri Lanka’s high value tea, apparel and handlooms and rubber products dominate country’s exports, employment and value chain activities. Our Government’s vision is to raise export earnings of these three industries to US$ 10 billion by 2016. In the case of apparel exports, our vision is to position Sri Lanka among the top ten high quality apparel manufacturing countries in the world by 2020. Therefore, in support of further innovation in this industry, triple deductions will be provided for research and innovation carried out within businesses, while recognizing the cost of purchasing international intellectual property rights and the cost of operations relating to such rights, for tax deduction. Royalty income will be made tax free for a period of 7 years. Higher value added tea exporters securing prices in excess of US$ 12 per kg., having established internationally reputed local brands in packed form having used 75 percent home grown tea, will be permitted to import any specialty tea, free from restrictions to facilitate blending to meet market needs. High value tea and rubber product exports will be encouraged through increased cultivation of these crops and by maintaining a high level of CHESS on primary commodity exports. Market access to Japan, India and China will be explored for these commodities through Bilateral Trade Arrangements, in view of the high trade deficit Sri Lanka runs with the three countries.
15.0 Fisheries Industry
15.1 Honourable Speaker, the development of fisheries harbors, anchorages, landing centers, cold rooms and market facilities have expanded the production capacity of the fisheries industry. During the last five years, 2,524 multi day vessels, 3,743 one day vessels and 4,743 normal vessels have been added to the industry. The fish harvest has doubled in the last 5 years and has reached 500,000 MT. Production of inland fishery has contributed to 20 percent of the total fish production.
15.2 The production of dried fish and sprats, maldive fish, canned fish and fish food has increased, and has resulted in supporting livelihood activities of the people engaged in this industry, while also reducing related imports from 80,000 MT in 2010 to 70,000 MT by 2013. I propose to maintain higher Custom based taxes on related imports to promote local production of these activities. The incentives provided to small and medium enterprises engaged in the exports of fish food and ornamental fish will be further expanded.
15.3 Priority will be given for the rehabilitation of existing harbor facilities, the early completion of Silawathura, Gurunagar, Gandara and Kalametiya fishery harbours, the development of fishery harbours and anchorages at Wennappuwa, Chilaw, Kapparathota, Dodandoowa, Hikkaduwa and Negombo lagoon and also to further increase the number of fishing boats during 2014. I propose to allocate Rs. 1,000 million for these development activities. I propose to maintain a high tax structure on fishing boats at the point of import, to promote the local boat manufacturing industry.
16.0 Dairy, Livestock and Poultry Industries
16.1 Honourable Speaker, in our effort to reach self-sufficiency in milk, the local milk production has increased and supplies 40 percent of local consumption requirements. The importation of 4,500 high yielding cows has contributed to improve the production of Government dairy farms. Private sector dairy farms as well as small and medium enterprises have substantially increased their investments in this sector. Further, the Divi Neguma initiative encourages backyard dairy farm activities. I propose to allocate funds to import a further 20,000 high quality cows to promote small and medium dairy farms in order to increase the annual average yield in excess of 1,500 liters of milk per cow. A special loan scheme at an interest rate of 8 percent will be implemented in support of SMEs in the dairy sector to promote dairy farms, collection centers and equipment, the development of animal feed etc. A high CESS will be maintained on the importation of butter, yoghurt and dairy products, to further support the dairy industry.
16.2 Poultry production in 2013 has exceeded 153,000 MT eliminating the deficit production that prevailed in 2009. Divi Neguma program has contributed to increase the informal market contribution to 34 percent I propose to introduce a pricing formula based on the cost structure in place of a price control on poultry to regulate pricing and to safeguard both the consumer as well as the producer. I also propose to introduce a grant scheme. to neutralize impact on production costs due to taxes payable on inputs to encourage exports. As this industry has witnessed a rapid expansion, I propose to allocate Rs. 200 million to strengthen related veterinary services with modern facilities, recruitment of veterinarians and to grant a monthly allowance of Rs.7,500 for veterinarians.
17.0 Divi Neguma - Gama Neguma
17.1 Honourable Speaker, Divi Neguma initiative has nurtured several backyard economic activities among households since it was first launched in 2010 with the objective of setting up one million backyard economies. It has now entered the 5th round. In this round, Divi Neguma intends to develop 125,000 model home gardens, which will encourage the production of seed and planting material suitable to targeted areas based on climatic conditions. I propose to grant Rs. 10,000 each to the 5 best Divi Neguma backyard economies/ home gardens in each Grama Niladari division to incentivize those who participate in this novel concept of micro enterprise development with the participation of the entire family. I request all banks and financial institutions to grant at least 500 working capital loans of Rs. 25,000 at an interest rate of 6 percent without requiring any collateral to such winners, towards developing greenhouse farms, poultry/ livestock /fish farms or handloom/small industries so that Divi Neguma families could emerge as successful entrepreneurs.
17.2 Villages situated in difficult geographic locations are unable to fully benefit from mainstream development activities primarily due to lack of proper transportation. In order to resolve this problem, the Government recently implemented a program to construct bridges in such areas to establish connectivity for transportation. I propose to accelerate this initiative by completing the construction of 1,000 such bridges in 2014. This is expected to connect 500,000 such lagging villages and provide such villages easy access to community water, education, health and livelihood activities through the Gama Neguma initiative for which I propose to allocate Rs. 4,500 million. I propose to allocate Rs. 300 million to provide small buses to these areas to improve transportation. I also propose to grant an allowance of Rs. 15,000 to District Secretaries, Rs. 5,000 to Divisional Secretaries and Rs. 3,000 to Planning Directors and Chief Accountants attached to District Secretariats to incentivize them to coordinate rural centric work and to promote better expenditure management and supervision at district level.
18.0 Child Nutrition
18.1 Honourable Speaker, special initiatives must be undertaken to reduce malnutrition in pregnant and lactating women and in children. I propose to engage family health services to provide greater attention towards promoting breastfeeding, use of nutritious food for children while also ensuring them better health care. Divineguma/Samurdi programs will be used to popularize the consumption of homegrown vegetables, milk and eggs towards promoting better nutrition. I propose to allocate the required funds and employ nutrition specialists in each district, teach the importance of proper nutrition to school children, and carry out community level mobile clinics to promote balanced nutrition. I also propose to impose regulatory restrictions relating to food related advertisement by permitting to advertise only foodstuff with reasonable nutritional values. I propose to work with the World Food Program, UNICEF and Food and Agriculture Organization to collectively implement a nationwide accelerated nutrition initiative to reduce malnutrition and get maximum productivity from annual expenditure of around Rs. 7,000 million incurred by the Government on various programs to increase nutritional levels.
19.0 Women Enterprises
19.1 A large number of women are engaged in successful micro enterprises involving a wide range of high quality products while generating a good source of family income and creating employment opportunities for our people. These entrepreneurs explained to us that their business environment is constraint by a variety of payments imposed on land and buildings, inadequate working capital, complicated title related levies, insistence of traditional securities for small loans, administrative rigidities and lack of sensitivity to their businesses by financial institutions and Government service providers.
19.2 1 propose to implement a Women Micro Enterprise Credit Guarantee Scheme against which Regional Development Banks and SME Banking Units of Commercial Banks will provide working capital loans up to Rs. 250,000 without requiring security. Age limit to be eligible for such loans will be extended up to 68 years. Beyond that age, a designated family member could be nominated to qualify to obtain further facilities. I propose to dedicate 2014 — 2015 for Women Enterprise Development, to be facilitated by Regional Development Banks.
20.0 Small Businesses and the Economy of the Self-employed
20.1 Honourable Speaker, small scale shops, tea shops, repairing stations, restaurants, tailor shops, saloons, small groceries in commercial centers, small trade outlets on pavements and weekly fairs etc. provide self-employment opportunities to a substantial number of people. A large number of consumers also benefit from these widespread service providers. I propose to issue Divi Neguma entitlement cards to small entrepreneurs subject to a payment of Rs. 500 to exempt them from having to pay multiple payments to local authorities. I also propose to reduce the annual lease rental of land leased by state agencies to such cardholders to Rs.1,000 if the extent is less than half an acre. This facility will also be extended to Samurdhi beneficiaries, who are already eligible for several other benefits. I propose to simplify the provisions in long term leases given by state agencies to small entrepreneurs for commercial purposes and in the case of any such lease that has already gone on for over 10 years, the lessee will be given the option to convert the arrangement to a 50 year long term lease. I propose that 50 percent of investment savings of Divi Neguma and Samurdhi beneficiaries and small time traders in banks, be used to give small loans to them at a low rate of interest, on the basis of a group security to be given by such borrowers. I propose to exempt small traders engaged in businesses with a monthly turnover less than Rs.50,000 from all levies imposed by local authorities. Arrangements will be made to provide suitable space to payment hawkers and small traders involved in mobile businesses along new roads, in trade centers and weekly fairs in metropolitan areas.
20.2 I propose to set up a Revolving Fund to provide credit against confirmed supply orders from reputed buyers to promote small craftsmen engaged in the manufacturing of unique artifacts, home decor, designer fabrics, embroidery work, pottery and production of items using precious metals. I propose to restrict the importation of household and office furniture and remove prevailing restrictions on the transportation of furniture within the country to encourage the local furniture industry. Hotel and property developers are encouraged to use locally manufactured furniture to the maximum extent possible.
21.0 Social Services
21.1 The government has expanded welfare support for the elderly, the differently abled and low-income families under various initiatives. In the 2013 Budget, I granted a Rs. 1,000 monthly allowance to the elderly. Almost 221,000 elderly people have benefited from this scheme. A Rs. 3,000 living allowance was extended to differently abled people. Skills development training is given to them through vocational training to empower them to be engaged in livelihood activities. I propose to provide Rs. 100 million to modernize these vocational training schools located all over the country to improve vocational training facilities, including the provision of new equipment and the introduction of new courses.
22.0 Child Abuse and Violence Against Women
22.1 Honourable Speaker, it is disappointing to note that our value-based society nurtured with religion, culture and traditions has to witness child abuse and violence against women. Sri Lanka Women’s Bureau, Child Protection Authority and Sri Lanka Police have expanded many initiatives to prevent these incidents. I propose to allocate Rs.300 million to engage field level officers at Divisional Secretariats to facilitate to prevent such incidents. It is proposed to set up more safe-houses for the benefit of such victims and expand the units set up in police stations to be able to better deal with incidents of child abuse or violence against women. It is important to expand awareness programs in schools through parents - teachers societies and by establishing a network with the involvement of Samurdhi societies and community based organizations to Address these concerns and also to promote volunteers to be engaged in family counseling.
23.0 Empowering Pradeshiya Sabhas
23.1 Community infrastructure facilities associated with Sathi polas, waste management, drainage systems, access roads, children’s parks, public sanitation facilities etc. have not been improved as Pradeshiya Sabhas have not generated adequate income to be able to purchase basic machinery and equipment required to upgrade and maintain them. Hence, I propose to provide capital equipment such as tractors, small construction tools and machinery to every Pradeshiya Sabha in 2014. I also propose to provide Rs. 1 million per month to every Pradeshiya Sabha to supplement their working capital so that community infrastructure facilities could be maintained and rehabilitated in an orderly manner.
24.0 Wildlife Protection and Conservation
24.1 During Budget consultations, it was revealed that the cultivation of animal fodder in reserved areas and the rehabilitation of water tanks and such other facilities are essential to prevent animals from entering villages. I propose an allocation of Rs. 10 million to each relevant Divisional Secretariat to develop Wildlife Conservation and Community Protection Schemes taking into consideration the specific needs of each such Divisional Secretariat area. I propose to allocate Rs. 200 million to the Wildlife Department to purchase required utility vehicles and equipment. I also propose to extend the insurance scheme introduced in the 2013 Budget to compensate losses to human life and property to cover crop damages as well, from 2014.
25.0 Health Services
25.1 Honourable Speaker, as our people are now confronted with new challenges with the increase of non-communicable diseases such as cancer, stroke, heart attacks, kidney failure etc. we need to make a concerted effort to take control of the situation. Work is already in progress to transform Maharagama Cancer Hospital to be able to manage an increased number of indoor and outdoor patients. I also propose to set up radioiodine treatment and radiotherapy units at Jaffna, Kandy, Kurunegala, Badulla, Anuradhapura and Galle hospitals to reduce the waiting list of patients for such treatment at the Maharagama Cancer Hospital from three and a half years to less than six months. These modern centers will have facilities for preventive examinations and early detection as well as cost effective treatment using modern machinery and equipment. National Stroke Center of Sri Lanka will be set up to manage stroke related medicare. Facilities to provide medicare to kidney patients availing sufficient doctors and medicine will also be provided on an accelerated basis. Preventive care against kidney diseases will also be taken through the provision of safe drinking water to all on an urgent basis, through awareness champagnes to prompt farmers to move away from the use of chemical fertilizer and pesticides and by promoting the consumption of unprocessed food more favourable for consumption. I propose to allocate Rs. 900 million to provide Reverse Osmosis (RO) water purification plants to villages in the North Central Province in which access to quality pipe borne water is not available in order to prevent waterborne diseases.
25.2 It has been planned to provide an additional allocation of Rs. 2,000 million in 2014 for the development of cost effective infrastructure facilities to deal with non- communicable diseases during the 2014 -16 Medium Term Budget Framework. I propose to allocate Rs. 1,000 million for the accelerated modernization of the two national children’s hospitals as centers of excellence capable of providing the next 10 year pediatric care needs of our country and the related medical research facilities. Colombo, Kalubovila and Ragama hospitals cater daily to around 10,000 outdoor patients and 7,500 indoor patients. Since a large number of patients from Colombo and the surrounding districts rely on the services of these hospitals, the facilities in them should be expanded and modernized. I am encouraged that the People’s Republic of China has extended an outright grant to develop the OPD treatment and ancillary facilities of these 3 hospitals at a cost of around US$ 180 million. I propose to provide additional provisions in 2014 and 2015 to accommodate this grant aid for the development of health services in the country. I propose to increase the annual Uniform Allowance for nurses, family health workers and other staff by a further Rs. 500 - 1500 and the On-call Duty Allowance for paramedical staff by Rs. 150 per month to encourage health sector employees. I also propose to increase the Risk Allowance by Rs. 50 -100 for those in eligible risk categories. When even the richest nations which charge for healthcare are struggling to finance such services to their people, we all should be proud for not only providing pharmaceutical drugs but also indoor and outdoor health care service throughout the country, completely free of charge.
26.0 Arts and Culture
26.1 Honourable Speaker, with the widespread development witnessed across regions it is necessary that the Government expands modern infrastructure facilities for performing arts and culture currently confined to Colombo. In this context, I have secured a grant aid of around Rs. 3,000 million to set up two performing arts and cultural centers in Kandy and Anuradhapura within the 2014-16 medium term budget framework. Further, steps have been taken to modernize cultural centers in Jaffna, Trincomalee and Galle. The modernization of the Lionel Wendt Art Center, Lumbini Theater, and Galle Municipal Council Theatre will also be commenced in 2014. I propose to channel budgetary provisions to implement special projects to document our heritage, culture and traditions and to popularize them among our new generation.
27.0 Holiday Bungalows for Artists
27.1 1 propose to allocate land blocks and provide seed capital to build 5 holiday bungalows exclusively designed for artists. I request artists to top-up the Government contribution through a fund raising campaign to make them enthusiastic partners of this initiative and rally round Sri Lankan tourism to project country’s performing arts and the film industry. The performance of our multi talented artists at the opening ceremony of the Commonwealth Heads of Government Meeting amply demonstrated their capacity to take the massage of peace and reconciliation through rich performing arts of our country.
28.1 Honourable Speaker, the Budget estimates placed before this august Assembly have provided Rs. 125 billion for general education. Rs. 80 billion is spent on teacher salaries and Rs. 10 billion to provide textbooks, uniforms, mid day meals and transport subsidies. The creation of a child-friendly school system, developing Mahindodaya laboratories, teacher training, quality improvements of text books and teaching material and the introduction of technology streams to advanced classes are given priority in the public investment program in the medium term. The development of 6,000 schools including 1,000 Mahindodaya laboratories and the rehabilitation of rural schools will be completed in 2014. An allocation of Rs. 1,000 million will be provided to upgrade sanitation and other facilities in rural schools. A further Rs. 750 million will be allocated to develop Maharagama Teacher Training College as a well-equipped training center on all subjects, while facilities in all other teacher training colleges in the country will also be upgraded. Furthermore, steps will be taken to implement the recommendations of the committee appointed to resolve the remaining problems of Sri Lanka Teachers Service, Sri Lanka Principals Service, Sri Lanka Educationists Service and Sri Lanka Education Administrative Service and to improve the quality of education.
29.0 Pirivena Education
29.1 The 2014 -16 Medium Term Pirivena Education Strategy aims at raising the student population associated with Pirivena education by 25 percent by 2016. Towards achieving this target, the teacher participation in Pirivena education also needs to be increased by 25 percent. I propose to provide Rs. 500,000 to each Pirivena to improve classrooms, libraries, computer labs, furniture and equipment in order to upgrade Pirivena education facilities. I also propose to extend facilities such as distress loans, property loans, the Agrahara Insurance Scheme benefits and railway warrants to Pirivena teachers. Similarly, I propose to increase the Student Allowance for monks to Rs. 15 per day and other students to Rs. 5 per day.
30.0 Skills Education
30.1 Honourable Speaker, our country needs to implement a fast-track skills development program to meet market demands by gearing our youth to be able to secure high paid jobs and also to improve productivity in industries and services in the next decade. The Government has therefore secured around US$ 350 million budget support from the World Bank and the Asian Development Bank to supplement Government expenditure on skills education. Accordingly, expenditure on skills development and youth affairs has been increased to Rs. 12,105 million in 2014 to be shared with external funding facilities to accelerate skills education in the country in the next 2 years. A diploma awarding Technical College that is affiliated to the Moratuwa University will be setup in Homagama.
30.2 The 2014 - 2020 Vocational Education Strategy consists of rehabilitation and construction of Technical Colleges and Vocational Training Centers, development of training material and the provision of equipment, staff training and professional development. These program will target extending technical competencies in agriculture, IT, accounting, irrigation, construction, ship and boat building, ocean technology, tourism, beauty care and high tech competencies required for overseas skilled employment I propose to increase the allowances given to lecturers and students to incentivize skills education and increase Diploma Holders with National Vocational Qualification (NVQ) Standards. The aim of skills education is to develop 50,000 diploma holders and 50,000 certificate holders in different skills with NVQ Standards by 2015.
31.0 University Housing, Townships & Facilities for Advanced Studies and Research
31.1 Honourable Speaker, our universities have implemented a program to transform our university township environment to facilitate to upgrade the university education of our country. We have given high priority to resolve accommodation constraints of our university students. We have implemented a hostel construction program in 15 universities for 15,000 students at a cost of Rs. 15,000 million. This will completely solve the accommodation problems of first year and final year university students. Incentives will be provided to those who provide further accommodation facilities from the surrounding university township environment. I propose to increase the Academic Allowance of university lecturers by 5 percent of the basic salary in accordance with our commitment to provide attractive remuneration over the medium term.
31.2 The medium term development programs include the establishment of an Engineering and Technology Faculty in the Sri Jayewardenepura University, Information Technology Center in the Kelaniya University, an Advanced Medical Faculty in the Peradeniya University and an Electronics, Petroleum and Aeronautical Engineering Faculty in the Moratuwa University. The capacity expansion of management, food technology, veterinary science and agriculture faculties of Colombo, Wayamba, Jaffna, Rajarata, Eastern, Uvawellassa, Sabaragamuwa and Ruhuna universities and the expansion of advanced degrees in indigenous medicine and Ayurvedic teaching hospitals are also recognized as priorities of the medium term. Along with these, the planned improvements in the quality of higher education are expected to require an estimated additional sum of Rs. 9,000 million over the medium term. I propose to top up the 2014 allocations by 2,000 million to accelerate these initiatives.
32.0 Sri Lanka as a Regional Medical Hub
32.1 Honourable Speaker, we have increased the number of medical specialists to 1,500 through an increase in the number of doctors and medical researchers with postgraduate qualifications. Our strategy is to double the number, so that every 100,000 of the population will have 11 Specialist Doctors. This will provide 15,000 more doctors graduating from medical schools, with postgraduate opportunities. It will also enable a higher number of specialist doctors to be deployed to District Hospitals and to be attached to private hospitals.
32.2 The Ministry of Health has formulated a National Drug Policy Act for the regulation of drug use, clinical trials and research activities in specialized hospitals. Time has also come to recognize the urgent need for a proper Regulatory setup on food quality. Parallel to these developments, we propose to expand the subject areas of the Postgraduate Institute of Medicine, and to double the intake for postgraduate studies in medicine. I propose an allocation of Rs. 2,500 million to build a state-of-the-art Post Graduate Institute of Medicine over the next 3 years. This new Post Graduate Institute will connect neighbouring teaching hospitals, while also extending modern facilities required for their postgraduate research and advanced studies. I also proposed to setup a Centre of Medical Excellence to continue to obtain the services of specialized medical professionals after the completion of their service term and to broaden specialized medical services in our country.
32.3 I propose to give priority to increase medical specialists capable of treating kidney ailments, malnutrition and similar contemporary challenges in our society. The Government will seek international research and technology collaboration for our universities focused towards improving the quality of drinking water, particularly in rural areas. I also propose to grant a monthly Intern Allowance of Rs.750 for medical interns engaged in hospital services and a Research Allowance for medical professionals to encourage them to engage in internationally recognized research and professional development initiatives.
33.0 Professional Services Hub
33.1 Honourable Speaker, our country has made unprecedented progress in the field of accountancy, commerce, finance, law, IT, engineering and architecture. The number of people engaged in these professions has increased considerably. Therefore, I propose to support internationally reputed professional institutes to expand such professional and technical programs at provincial level to increase the number of qualified professionals and technical assistants in our country. I encourage the formation of corporate entities to be engaged in Business Process Outsourcing in human resource management, finance and accounting, law and procurement etc. and deliver high quality services to global customers. A 5-year half tax holiday will be given to promote the formation of such new partnerships or firms to be engaged in international