Keen on attracting greater foreign investment to upgrade Sri Lanka’s economy, Finance Minister Ravi Karunanayake has offered a number of concessions to investors.
Tabling the first full-fledged budget of the present government in Parliament on Friday, Mr. Karunanayake, in his speech in Sinhala, said his government identified eight thrust areas including oil refinery, renewable energy, integrated car manufacturing and sugar industry, having a potential for investment over $two billion.
To accomplish the goal, the government, formed by the country’s two principal parties — United National Party (UNP) and the Sri Lanka Freedom Party (SLFP) — in August, would remove tax on leasing of land to foreigners. Restrictions on land ownership would also be lifted in respect of identified investments. The present “archaic and draconian” Exchange Controls Act would be repealed.
An “investor-friendly” legislation on foreign exchange management would be in place to help attract foreign flows from countries of the South Asian Association of Regional Cooperation (SAARC) and others. The income from dividends on investment made by non-citizens and foreign companies in listed shares through inward remittances would be exempted from income tax.
As Prime Minister Ranil Wickremesinghe and Leader of Opposition R. Sampanthan watched, the Minister assured the House that applications for foreign investment would be processed to enable the commencement of business in 50 days. This would be ensured by the proposed Agency for Development, which would replace the Board of Investment.
No criminal action on inward remittances
The investors would be allowed to bring in money to Sri Lanka through any bank account existing in the formal banking system. “The government shall not take criminal action against any person making inward remittances of such monies held overseas through the banking channel except in instances where the proceeds are the result of terrorism, drugs, human trafficking and corruption,” Mr. Karunanayake said, adding that the present Securities Investment Account would be abolished.
As part of streamlining visa regulations, a fee of $2.5 lakh would be levied on foreigners for residence visa of three years. In the case of permanent residence visa, it would be $five million.
International financial centre soon
Colombo would soon have an international financial centre on D.R. Wijewardena Mawatha with a three-lakh square feet facility for domestic and international banks to operate. This would be modelled on the lines of the Dubai International Financial Centre.
The Minister mooted the idea of tapping non-traditional bond markets including the Chinese Yuan and Sukuk bonds for reducing the cost of borrowings. At present, only U.S. dollar-denominated bonds were raised.
Mr. Karunanayake, who discussed the budget with President Maithripala Sirisena on Thursday, said the government would exit partially or fully from “non-strategic investments” in entities such as Lanka Hospitals, Hotel Developers PLC (Colombo Hilton), Hyatt Residencies, Waters Edge, Grand Oriental Hotel, Ceylinco Hospital and Mobitel by listing them in the Colombo Stock Exchange. The monies generated through such listings would be used to “retire high cost debt accrued by the [previous] Rajapaksa regime,” he added.
Package for North & East
Describing his government as one devoid of racial, religious or social barriers, Mr. Karunanayake has announced that the government planned to hold a donor conference next year to generate support from bilateral and multilateral agencies to enhance the rehabilitation of the Northern and the Eastern provinces.
Conscious of the devastating impact of the civil war on the economy and people of the two provinces that account for over 70 per cent of the population of Sri Lankan Tamils in the country, the Minister said “a rapid large scale resettlement programme” would be initiated for internally displaced people, apart from providing livelihood opportunities. Twenty thousand houses would be built in Mannar and Mullaitivu districts of the Northern Province.
[Of 42,950 houses to be built in the Northern Province under an ongoing housing programme of the Indian government, 36,500 houses have been completed.]
Central Expressway to be expanded
The Central Expressway, linking Colombo with Kandy, would be expanded to connect Dambulla, Polonnaruwa, Mullaitivu and Jaffna under a public private partnership (PPP) venture, Infrastructure Development Authority. Of three cancer hospitals to be set up in the country, Nallur in Jaffna would have one.
The government planned to establish an agro livestock and fish processing park connecting the districts of Anuradhapura, Vavuniya and Kilinochchi (the last two falling under the Northern Province). Batticaloa district in the Eastern Province would have an aquaculture park under the PPP mode while Trincomalee, also in the East, had been chosen for an industrial development zone.
Houses for hill country Tamils
As for hill country Tamils who continue to live in age-old line rooms on plantations, Mr. Karunanayake said housing programmes would be executed to build low-cost houses and amenities for the plantation community. (Recently, the Sri Lankan Cabinet decided to hike the allocation for each house under a scheme from SLR 5.15 lakh to SLR 6.5 lakh, by which SLR 3.1 lakh would be given as grant and the rest loan).