- Liberalisation, promoting entrepreneurship, attracting FDI, boosting exports, helping SMEs
- Excise, Customs, Rent, Paddy Lands, Shop and Office acts and bankruptcy laws to be revamped
- Aims for 5% growth, 6% inflation, 4.5% deficit
- Electrical vehicle prices slashed by Rs.1 million, fuel vehicles to be phased out by 2040, carbon tax
- Development Bank for SMEs, angel fund for IT, 1,200 para-tariffs to be phased out
- Restrictions of foreign ownership in shipping to be removed, online travel agents to be charged 1% on commissions, VAT refunds for tourists, rationalisation of liquor licenses and taxes
- PPP guidelines to be issued soon, housing, roads and education go rural, urban hub for Colombo.
Delivering on his promise to keep the Budget speech concise, Finance Minister Mangala Samaraweera yesterday unveiled a slew of proposals to liberalise restrictive laws, promote exports, expand tourism, maintain fiscal consolidation, foster start-ups and open Sri Lanka to investment to achieve 5% growth in 2018.
The Budget also aimed to achieve medium-term targets such as per capita income of $ 5,000, one million new jobs, FDI inflows of $ 5 billion and doubling exports to $ 20 billion, as outlined in V2025. The Excise and Customs Ordinance, Rent Act, Paddy Lands Act, Agriculture Lands Act, Shop and Office Employees Act and bankruptcy laws were among the list of laws the Government plans to either repeal or amend.
“In 2018, we envisage GDP growth of 5%, inflation of around 6%, and we hope to achieve for the first time in almost six decades primary surplus of 1% of GDP and a Budget deficit of 4.5% of GDP,” Samaraweera said before launching into proposals for a “Blue-Green” economy that plans to introduce environmental safeguards.
On vehicle imports the Budget proposed to phase out all fossil fuel vehicles by 2040, encourage imports of electric buses and three-wheelers, slash prices on electric vehicles by at least Rs. 1 million, establish charging stations, introduce a carbon tax, excise duty of Rs. 10 per kilo of plastic and Rs. 3 billion to fast track the Aruwakkalu waste disposal site.
An allocation of Rs. 3 billion was proposed to set up an insurance scheme for farmers. During a natural disaster a minimum of Rs. 40,000 per acre for six crops including, paddy, maize, soya, big onion, potato, and chilli, will be paid under the propose scheme. This will be a contributory scheme with the premium being borne by both the farmer and the Government.
Credit and capital for Small and Medium Enterprises (SMEs) will be provided by the establishment of a Development Bank at a cost of Rs. 10 billion with an “EXIM window”. Eight new credit schemes are to be introduced to disburse a total of Rs. 15 billion with all existing and new schemes to be gathered under the “Enterprise Sri Lanka Credit Scheme”. As much as Rs. 2.2 billion will also be spent under the Grama Shakthi initiative to provide capital to small businesses and reduce poverty.
“IT and the IT related sectors have the potential to reach $ 5 billion in export earnings in the next five years. As such, to support this industry, specially the SME IT companies, we will launch, the ‘IT Initiative’, which is in effect the Government’s angel fund for the IT industry. This initiative will be operated through the EDB and we will invest Rs. 3 billion.”
At the outset the IT Initiative will finance 50% of the rent expenditure for 24 months on the Hatch Incubator and similar support to any private ventures, Colombo, Moratuwa and SLIIT universities will conduct training courses in Artificial Intelligence, Robotics, Data Science, Machine Learning and Python Development in collaboration with the industry.
A proposed SME Guarantee Fund will enable SME Exporters who are in the CRIB but have the potential to export, yet have no access to finance its operations, to access financing from banks utilising the SME guarantees.
Moving on to tourism, the Finance Minister said Online Travel Agents (OTAs), both resident and non-resident, which derive their commission from the businesses carried out in Sri Lanka, will face a tax of 1% on the commission derived from local reservations.
In keeping with the vision to make Sri Lanka a shopping hub, a VAT refund scheme for foreign passport holders will be implemented at the Airports and Sea Ports with effect from 1 May 2018.
The Board of Investment, the relevant line agencies and the newly-established Public-Private Partnership (PPP) Unit will collaborate in facilitating such ventures with an allocation of Rs. 2.5 billion. PPP guidelines are to be issued shortly, the Minister assured.