«Budget 2016 has shown a commitment to enhancing private sector participation in the economy through PPPs, begin to rationalise state expenditure, undertake some much needed reforms in pensions, subsidies and welfare and renew focus on the competitiveness of agriculture and small enterprises,» the Ceylon Chamber said. It sees reasonable congruence between the policy statement by the Prime Minister on 5 November and this Budget, indicating a consistent economic vision for the country. The Chamber also observes that the revenue targets contained in this Budget are ambitious, and achieving them will be critical to building confidence in the fiscal consolidation effort.
The Ceylon Chamber listed the following observations.
The Chamber acknowledges that many of the areas that the Chamber has advocated for through its recently launched ‘10 Principles’ are indicated in this Budget. One of the key features of Budget 2016, which the Chamber sees as a positive step, is the greater involvement of the private sector across a range of economic activities. This includes, inviting private sector participation in railway services for goods and tourism; a role for private investment in infrastructure projects; private management of Export Processing Zones (EPZs); and private investment in tertiary education and vocational training.
These will open up new spaces for firms and bring in greater efficiencies to the economy, without burdening the state.
Some critical areas impacting the investment climate, which the Chamber had been advocating for some time, have also been resolved in this Budget. Most notably, the removal of the tax on land leases by foreign nationals and allowing freehold if certain investment criteria are met will encourage FDI. On the latter, however, careful attention must be paid to not allow discretion in granting of the freehold rights as discretion on the part of public officials on the size and type of investment could open up opportunities for rent-seeking.
Meanwhile, the opening up of unused and underutilised state land for private investment is a welcome move as access to land has been consistently cited as a constraint in Sri Lanka’s investment climate. The easing of regulations on inward remittances and proposed reforms to make exchange management more practical are also positive for investment.
The Chamber also welcomes the principle of the state exiting its shareholdings in certain non-strategic SOEs and listing them on the CSE; this can bring in much needed accountability and improve business-orientation.
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