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By Shirajiv Sirimane

"The building blocks needed to shape a stable economy have been laid down by the budget proposals," said the President of the National Chamber of Commerce of Sri Lanka (NCCSL) Chandra Embuldeniya.

He said that the Chamber commended most of the proposals put forward by the government but said that there were some areas which need re- thinking. He said that the government had followed from the point they stopped at the last budget.

When the last budget was forwarded the country recorded a negative growth. But that budget had very good proposals and today the country is witnessing a positive economic growth. Inflation has come down from 14 % to almost 10 to 11% and if this trend can continue inflation would come down to a single digit."

The President said that the economy is expected to grow from the present 3% to 5 1/2 % by the end of 2003 bringing down inflation further to 8%.

"The proposal to provide a subsidised line of reference to provide low cost fund for a low and middle class groups is a very timely suggestion. This will specially help the rural and estate sector in their housing needs and we estimate that this proposal will account for over 10,000 new houses."

Embuldeniya said that measures taken to enhance human resources development should pave the way to reduce unemployment while the proposed Corporate Restructuring fund would enhance greater investments in infrastructure and restructuring companies in distress.

He said that there were many other timely proposals in areas such as reduction in personal tax, encouragement on venture capital companies, the introduction of a road fund and the increase given in the duty free allowance.

However, he said that some proposals will have adverse effects on the economy and would create chaos in some sectors specially in the retail sector with the proposed introduction of VAT. Co-Chairman Insurance Finance Taxation Committee, S. R. Balachandran said that the retailers in the country were not ready to deal in VAT.

"Even today VAT is creating a controversy among some of the so-called educated business sector. So how can a common trader maintain a VAT file, issue invoices and most of all convince the customer on the new introduction of VAT." He said that the government would have to spend much to educate the public in this regard.

"This will create chaos and we strongly recommend the government to reconsider this decision."

He said that the introduction of VAT to the retail sector will have a severe effect on the 'small time supplier' and the cottage industry. "In short the country is not ready for this."

He said that the government had made a very adverse decision by introducing a tax on the earnings from foreign employees. "This negative proposal will result in the creation of black money."

The foreign employees will simply go the money changer and encash their salary and remit it to Sri Lanka in an illegal manner."

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