Former Sri Lanka President Mahinda Rajapaksa has opposed the 2016 budget, presented by the “Unity government” of the United National Party (UNP) and the Sri Lanka Freedom Party (SLFP), for having proposed a “sweeping programme of privatisation.”
Referring to certain plans such as the establishment of a special purpose vehicle to run the country’s largest coal-fired power plant in Norochcholai and bring water and petroleum utilities under a regulatory mechanism, Mr. Rajapaksa, who also held the portfolio of Finance during his presidency, said public utilities including water, electricity and transport “should not be run as profit making businesses, but as services to the people. Charges for these services should be fixed with the wellbeing of the public in mind.”
Questioning the proposed divestment of the government’s equity in many enterprises, the former President termed the enterprises as profitable, contributing to the non-tax revenue of the government. He also opposed the move to remove taxes on leasing of lands to foreign investors. “This kind of policy may bring in some foreign exchange in the short term, but will have serious long term implications,” he contended.
He described as “unacceptable and potentially catastrophic” the proposal to liberalise the import of tea to be blended and re-exported. “This will cause an immediate decline in the demand for locally produced tea,” Mr. Rajapaksa argued, opposing the decision to replace the provision of fertiliser subsidy and free school uniforms to students with cash grant and vouchers.
Industry’s reaction
Meanwhile, the Ceylon Chamber of Commerce has welcomed the budget for its measures to boost private investment and promote inclusive economic growth. The budget had “shown a commitment” to enhancing private sector participation in the economy through PPPs and marked a beginning to rationalise state expenditure; undertake some much needed reforms in pensions, subsidies and welfare, and provide the renewed focus on the competitiveness of agriculture and small enterprises.
However, the Chamber suggested that greater focus be paid to expand access to markets through forging trade agreements and broaden the product base through technology advancement. The government should go beyond its proposal of allowing private management of Export Processing Zones by allowing private investors to develop zones within other existing industrial estates.
On the move to issue 50 licenses for duty free importation of gold, the Chamber urged the government to auction the licenses to “prevent corruption and discretion.” It termed “too ambitious” the timeline for setting up the Colombo International Finance Centre by April 1, 2016.
“While the direction of the Budget is broadly positive, it needs a focussed implementation strategy with specific milestones,” the Chamber said, calling upon the government to consult with the private sector in drafting new laws and structuring new trade and investment institutions.
