Budget 2012: Aims for long-term development
Text of budget speech by President Mahinda
Rajapaksa
Introduction
Hon. Speaker, I am indeed happy to deliver the 7th consecutive Budget
Speech of our Government. I am also inspired to see you in the chair on
this occasion.
You would recall our young days when our father - late D A Rajapaksa,
with other late leaders such as S W R D Bandaranaike, Philip Gunawardena
and S A Wickramasinghe were in the forefront to make a decisive change
in our society. What they infused into our hearts as young children was
a new vision, with aspirations for Sri Lankan values, traditions, equal
opportunities for all, rural agriculture as well as an entrepreneurial
economy. The vision of these leaders in fact became a formidable force
that nurtured a people centric approach as opposed to the urban elitist
and feudalistic political and economic ideologies that prevailed.
This transformation was subsequently taken forward by several
progressive leaders such as late Mrs. Sirimavo Bandaranaike, late Dr. N
M Perera and late Dr. Colvin R De Silva.
I recall watching with amusement as a young Member of Parliament at
that time, how opposing forces got together to destruct this progressive
path. I am sure that the Hon. Senior Members of this august Assembly
would recall how this path was reversed in 1977.
This nation was placed on to a very destructive path from 1977. This
path was overshadowed by neo liberal economic policies on the one hand
and separatist terrorist activities, on the other. This caused
tremendous hardships to the general public. The whole nation became a
victim of terrorism. Democratic values got eroded. A revengeful culture
came into being. Many wrongful activities such as international money
laundering, drug trafficking, smuggling and arms dealing were carried
out on the pretext of terrorism.
Separatist terrorist activities got aggregated to such a dangerous
level, and plans were virtually drawn up to recognize a divided
administration. Many internal issues were internationalized by
terrorists, thereby threatening the sovereignty of the country. In
short, all hopes of our people to live in a unitary state were virtually
shattered.
It is in this backdrop, that I came forward in 2005, seeking
leadership to see an end to this destructive path. I wish to place on
record my appreciation, and I wish to remember with honour, all parties
and organizations that encouraged me to face this formidable task with
strength.
All of us were convinced of the need to find an alternative mechanism
to end terrorism and restore peace. We were also aware that we could not
revert back to the policies of the 1960s and 70s. Further, we had also
realized the need to rectify the detrimental policies of the 80s and 90s
that had an adverse impact on the nation. Although our country remained
to be poor, many countries that were poor had by then emerged to be
strong economies. The world had witnessed a change.
Through these experiences, there was a realization that over reliance
on market forces is as bad as excessive state intervention.
Hon. Speaker, it is in this backdrop that ‘Mahinda Chintana - Towards
a New Sri Lanka’ - my first election manifesto, was presented in 2005.
Our vision was to ensure a rural centric development strategy in which
all citizens would get equal opportunities to be engaged in economic and
social development. Broad responsibilities were shouldered by us to
ensure that national aspirations are protected within a market economy
and global trends. Thereafter in 2010, my second election manifesto
‘Mahinda Chintana - Vision for the Future’ was presented to place the
country on a path of rapid economic development.
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President Mahinda Rajapaksa entering the House to deliver
the 2012 budget speech yesterday. Picture by Sudath Silva |
Within the last 6 years, we have been successful in changing the
living condition of our people in all spheres of life by freeing the
nation from the grips of brutal terrorist, by correcting illconceived
economic policies of the past and by promoting a well committed
infrastructure network required to create a modern economy.
However, it is unlikely that through these measures alone, the
effects of the destructive violent culture that prevailed over the last
30 years could be eliminated. Many more changes need to be done in this
regard.
We also need to give some time for the world to realize that the
preconceived views that they have consequent to the distorted facts
spread by the global network of the LTTE, are 3 wrong. However, I am
extremely happy to note that countries that respect democracy are
gradually accepting the position being explained by us, having given due
consideration to hard facts.
The opposition should also work with us to find solutions to the
problems faced by our people and also to find such solutions while
ensuring unity.
We need to understand that forced solutions cannot be imposed to
resolve our internal issues by getting trapped to external forces. We
need to realize all this if we are to sustain the hard won peace and to
create national unity and economic development.
Hon. Speaker, I am humbly proud of several aspects which provide the
backdrop to this Budget Speech. We were able to create a mine free
North, within a short time span of about 2 years, having put an end to
LTTE terrorism in May 2009. We have by now demined 1,412 square
kilometres out of the 2,046 square kilometres that were contaminated
with landmines. We have resettled around 295,000 persons who were
displaced.
The greatest achievement is being able to rehabilitate around 15,000
persons who formed part of the LTTE cadres at that time and being able
to handover them to their respective families. People have no fear any
more, that their children will be grabbed by the LTTE.
Despite global uncertainties, our country has been able to sustain an
8 percent growth momentum gathered in 2010, and in 2011 as well.
Inflation has been moderated at 5 percent underscoring the success of
rural centric development initiatives such as Divi Neguma, while
resolving long standing food security challenges faced by our country.
Our vision Nilla Pathiruna Ratak - Atu Kotu Pirunu Hetak has become a
reality by reaching self-sufficiency in rice.
Above all, I am encouraged to note that the income avenues of the low
income segment have improved with unemployment being reduced from 8
percent to 5 percent and poverty, from 15.6 percent to 8.9 percent.
Development and national unity
Hon. Speaker, today our country enjoys a per capita income of US$
2,800. However, we should not forget that until recently it was below
US$ 1,000 and that 4 too was only confined to few urban areas.
Another fact that we should also not forget is that several districts
were lagging behind in development, until very recently. In fact, people
did not have even access to some of the districts. Those people who were
in the grips of terrorists for over 3 decades are now enjoying their
new-found freedom.
The reconciliation efforts to bring about unity among all communities
have made good progress. A dialogue has commenced to address the
political concerns of the minority. Representations by the minority
community in the Provincial Councils and in Parliament have paved a
solid platform to this dialogue. Such people now have access to
electricity, roads, water, housing, schools, and hospitals.
Their farmlands have been rehabilitated to improve living standards.
Facilities associated with fisheries, livestock and tourism industries
have been restored.
The access roads, bridges, culverts, ports, railways, airports, water
supply schemes and irrigation facilities which were destroyed by the
LTTE with the intention of separating the people of the North from the
rest of the country, are now being expeditiously rebuilt.
Loans to the tune of around US$ 5 million have been directed towards
rebuilding these areas, on a priority basis. It is due to these factors
that the North has been able to register a high growth of 23 percent,
exceeding the national average growth of 8 percent. Such a high growth
momentum is necessary to ensure reconciliation and national integration
as well as to regain lost prosperity in those districts.
Social integration
Hon. Speaker, since normalcy has returned to the areas that were
under threats of terrorism, measures are being taken to merge to the
society, the refugees returning from India and those who then belonged
to the LTTE cadres. It is also necessary to restore a peaceful
surrounding to enable the Sinhalese and the Muslims who were compelled
to leave, to resettle in such areas.
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President Mahinda Rajapaksa entering the House to deliver
the 2012 budget speech yesterday. Picture by Sudath Silva |
Those Indian Tamils who are living in the plantation areas need to
have greater access to education, health and other state services. We
need to transform in to a trilingual society, if we are to ensure
success in all spheres. Hence, the Government is duty bound to ensure 5
the language rights of all people.
An initial step that is required to be taken to guarantee that state
services are provided to all citizens on an equal basis is to ensure
bilingual knowledge among public servants. Budgetary provisions have
been made to upgrade training facilities of teachers so that all school
children could be taught Sinhala and Tamil, in addition to English.
I propose to allocate an additional Rs. 100 million to launch mobile
language labs, to introduce new types of telecommunication facilities
and to popularize language skills clinics through social service
activities.
A caring society
If not for the fact that our security forces were able to rescue
innocent civilians who were in the grips of terror for the last 30
years, democracy, development and social reconciliation would not have
been a reality. Hence, it is our duty to give priority to address the
economic and social needs of our security forces. I therefore, propose
to extend the application of the proposal that I announced in the last
Budget to grant Rs. 100,000 at the birth of the third child of any
member of the security forces, to those who are serving in the Police
force as well. I also propose to grant a monthly allowance of Rs. 750 to
each of the parents of members of the security forces including the
parents of those brave soldiers who sacrificed their lives to liberate
the country from terrorists, who are faced with economic difficulties. I
also propose to introduce a special loan scheme ‘Ranaviru Divi Neguma’
for the benefit of disabled soldiers, to be engaged in self employment.
I propose to allocate Rs. 1,700 million to the Ranaviru Authority on
account of these measures. A sum of Rs. 14,000 million has been
allocated in this Budget to meet the monthly allowance paid to all
disabled soldiers.
Welfare of the elderly
The economic development that we are talking of would not have any
meaning, if we are not able to address various facets of poverty. The
society should be sensitive to the helplessness of the disabled, the
sick and the elderly. As of now such segments are paid a monthly 6
allowance ranging from Rs. 100 to Rs. 300. I am of the view that these
allowances should be revisited. Hence, I propose to increase the monthly
allowance paid to the elders over 70 years from Rs. 300 to Rs.1,000 and
from Rs. 100 to Rs. 500 in relation to others. An allocation of Rs. 900
million will be made in this regard. I propose to expand the nursing
care extended at household level, to cover elderly health care, in
parallel to family health services. Further, I propose an additional
allocation of Rs. 200 million to expand residential facilities and
improve dedicated wards for the elderly, in base hospitals and ayurvedic
hospitals. The Social Service Department and Provincial Councils need to
ensure taking required action to coordinate these welfare measures in
line with related national policies. I propose that all social service
and welfare centres be under the close scrutiny of District Secretaries.
Support for the low income families
Hon. Speaker, I intend to make a change to the Samurdhi allowance
that is paid in 8 slabs, ranging from Rs. 210 to Rs. 1,500. Accordingly,
the Rs. 210 to Rs.615 allowance being paid to low income small families
will be increased to Rs. 750, while the Rs. 900 allowance paid to low
income general families will be increased to Rs. 1,200. Lactating
mothers and infants of these families will be targeted for the Thriposha
and such other nutritional programs as well as for other development
activities through which the welfare of women and children will be taken
care of. I also propose to extend these facilities to those living in
the North and East from next year, who could not avail themselves of
such facilities due to the terrorist activities that prevailed in such
areas. Along with the setting up of the Divi Neguma Integrated Rural
Development Department in next year, all those serving as Samurdhi
Officers will become pensionable public servants. I propose to
simultaneously expand these services to the North as well. Accordingly,
these officers will be given special training to master bilingual
abilities and on rural development, so that they will be able to better
serve to improve the social needs and livelihood income generation
activities of the low income families. Hence, I propose to make an
allocation of Rs. 3,000 million in 7 addition to the Rs. 9,300 million,
already allocated in this regard.
Child and women protection
We need to pay special attention to the welfare of children and
women. There have been many shortcomings in relation to child welfare
due to lack of emergency medical attention and nutrition aid to the poor
families living in difficult areas, due to there being children whose
parents have been imprisoned and since pre schools do not meet even
minimum standards.
Parents as well as teachers should pay greater attention to ensure
that children are protected from child abuse, molesting and other
antisocial activities that take place with the aid of the internet,
mobile telephones and computers. We need to extend aid to religious
places at Divisional Secretariat level to broaden religious education.
Hence, I propose to allocate Rs. 150 million to strengthen and expand
educational programs being conducted by such institutions for the
benefit of children and women and to assist preschools and Daham
Schools, under the close scrutiny of the District Secretaries.
Development of Most Difficult Villages and Religious Places Hon.
Speaker, I visited Kebithigollewa village, where the LTTE massacred over
75 innocent people. There are many such villages that lagged behind
during the past years.
The attention being given to the historically significant religious
places and the adjoining areas of these most difficult villages is
grossly insufficient. We should not forget the historical bond between
the temple and the village.
Hence, I propose to allocate Rs. 300 million to provide schools,
maternity centres, drinking water and access roads, centred around such
ancient religious temples to ensure rapid development of such areas.
With a view to attract the private sector towards engaging in such
activities, any expenditure incurred by the private sector to improve
preliminary facilities of such villages will be permitted to be deducted
when paying income tax.
Empowering artists and journalists
Fulltime artists, journalists and writers very often face economic 8
difficulties. Even the funerals of such artists, journalists and writers
are held amidst heavy financial constraints. Hence, I propose to setup a
special fund through which assistance could be extended to elderly
artists, journalist and writers by appreciating the contributions made
by them from time to time and by extending assistance to families
towards meeting their funeral expenses etc.
I propose to allocate a seed capital of Rs. 50 million in this
regard. Further, I also propose to introduce an interest free car loan
scheme to enable senior artists, writers and journalists who have made
an uninterrupted contribution of over 25 years, to purchase a motor car.
Laws delays
I also wish to draw the attention of this House, to the economic
difficulties that are being faced by the people consequent to laws
delays and pending legal cases. There are about 650,000 cases pending in
court houses pending administration of justice. The number of land
related cases pending for a prolong period of time is over 150,000. I
made necessary allocations in my last Budget to ensure quick
dispensation of such cases.
I wish to assure that the Government is committed to provide all
necessary provisions to the Supreme Court and the judicial service to
facilitate this process as this will provide relief to those affected,
particularly the poor. I am pleased to note that steps are being taken
to monitor with the aid of computer technology the number of new cases
being filed and the number of cases being concluded so as to ensure
effective monitoring. In addition emphasis is being given to popularize
arbitration as an alternate method of dispute resolution. The Legal Aid
Commission also conducts legal clinics at village level with the
objective of providing legal aid to the low income earners. I propose to
allocate Rs.100 million in this regard.
Prison reforms
Hon. Speaker, statistics reveal that around 125,000 people go to
prisons each year, for minor offences. Around half of this number is in
remand prisons. Most of them are in remand prisons consequent to not
being able to pay the fines imposed on them. Hence, I propose to provide
9 financial assistance to the families of such detainees so that they
could pay the fines and on condition that they will be required to carry
out public work, to compensate for the offences committed.
Based on the experience we have had by successfully rehabilitating of
around 15,000 LTTE combatants, I feel that what our society needs are
not prisons but rehabilitation centres. Hence, I propose to reduce the
number of existing prisons and convert them as rehabilitation centres
and open air camps. Through these measures, I propose to attract such
people towards sports, vocational and skills development.
Vocational education opportunities can be given to those who show
reasonable success. I propose to allocate an additional Rs. 50 million
to expedite the relocation of Bogambara, Matara and Tangalle prisons.
Uruma Aruna
Hon. Speaker, we need to preserve our ancient buildings, furniture
and equipment. We have a number of buildings with archaic value,
including the Hambantota Kachcheri, buildings of the Jaffna Fort, the
old Colombo Post Office Headquarters, Mumtaz Mahal, and the old
Ratnapura Kachcheri building. I propose to allocate Rs. 100 million to
set up a fund by the name ‘Uruma Aruna Conservation Fund’ to conserve
such buildings and maintain them as divisional museums. I also propose
to allocate a further, Rs. 100 million to rehabilitate the ‘Wayamba
Square’ connecting the old kingdoms of Dambadeinya, Panduwasnuwara,
Kurunegala and Yapahuwa, and archeological sites at, Ruhunu Magampura in
order to conserve archeological sites and develop related facilities.
Steps will be taken to restructure the activities of the Central
Cultural Fund.
Development of traditional craft villages
By strengthening traditional craft villages, not only that people in
such villages get economically stronger but there will also be a
cultural revival in our country. Hence, I propose to allocate Rs. 100
million to develop traditional craft 10 villages at Matara, Matale and
Kandy, engaged in the making of traditional musical instruments and
crafts.
Promotion of arts and crafts
The various exhibitions recently held demonstrate that the society is
keenly interested in artwork and crafts. The up and coming artists and
craftsmen brought to my attention that they do not have an attractive
centre to exhibit and sell their artwork and crafts. Hence, I propose to
allocate Rs. 100 million to set up a new art gallery in Colombo as a
place that would attract the attention of tourists. It is proposed to
promote setting up high standard art galleries in an around famous
hotels and city-centres in which tourists move around. I propose to
introduce a special loan scheme through the Lankaputhra Development Bank
to extend financial assistance to artists and craftsmen to improve their
products. I also propose to exempt artwork and crafts and related
transactions of artists and craftsmen, from taxes.
Self sufficiency in food production
Hon. Speaker, the surest way to consolidate food security is to
expand our self sufficiency goal. This goal should expand beyond rice,
to include peanuts, green gram, undu, sesame, and maize. We will
maintain a high CESS to discourage such imports. We need to introduce
special programs to expand related agriculture and also provide high
quality seed material, since these are mostly grown by small scale
farmers. Special loan schemes will be made available by the Samurdhi
banking societies and regional development banks to promote related
activities.
The task of making the respective districts self-sufficient through
specialized food products will be entrusted to District Secretaries,
consolidating the progress achieved by District Secretaries and other
government officials in their respective districts in recent times.
Action will be taken to recruit 750 new agricultural extension officers
to be deployed in areas where their services are in high demand. Steps
will be taken to maintain a high CESS on the importation of products
such as chili 11 powder and curry powder, and to promote de-hydrated
process food and to make value addition while keeping taxes on related
raw material, machinery and equipment at a low level.
A rice exporting economy
Hon. Speaker, our next aim should be to become a rice exporting
country. This will contribute to improve farmer income. I propose to
develop four rice exporting zones in the South, East, Rajarata and
North. I propose to allocate an initial seed capital of Rs. 200 million
to facilitate required research, seed development and expansion
services. I also propose to extend tax concessions to those who are
willing to setup modern rice processing mills in these export zones.
With a view to improve agricultural productivity in the country, I
propose to allocate Rs. 100 million towards the production of seed
material, improvement of extension services and related technical
know-how, in seed production. Last year I exempted income, derived from
the cultivation of certified seed and planting material in order to
encourage private sector engagement in such activities.
Coconut production
In addition to the coconut production being a household income source
the Government has ventured on to making it an export oriented industry
targeted to produce a variety of food and other industrial products. It
is planned to improve the present coconut harvest of 2,700 million
fruits to 3,650 million by the year 2016. While 4 million young coconut
plants have been distributed in 2011 to popularize the growing of
coconut alongside the Divi Neguma initiative, nurseries have been set up
for the distribution of 6 million more in 2012. The Kapruka Program
targets to plant at least one coconut tree in the gardens of every low
income family. A high CESS has been imposed on vegetable and other
edible oils to protect coconut cultivation and other related industries
Taxes imposed on food produced from coconut, Palmira and Kitul will be
removed with a view to improve related production.
Fisheries and livestock development
In order to ensure food security we have taken steps to increase
production of grain, fruits and vegetables as well as fish, meat, egg
and milk. Assistance is given to grow alternate fish and expensive water
plants in abandoned prawn farms. Steps will be taken to expand prawn
farming in the selected lagoons in the East.
Oyster production projects are being encouraged for the export
market. Provisions have been made to extend loans to improve fish
production targeting species of fish naturally growing in lagoons, tanks
and rivers, to conserve such places, and to promote the growing of fish
in tanks and ponds.
Provisions have been made to improve the inland fishery industry by
expanding the project presently being carried out by the Ministry of
Fisheries and Aquatic Resources to supply ornamental fish.
I propose to allocate Rs. 50 million to set up an ornamental fish
exchange in order to attract tourists, to promote ornamental fish
exports and to make it a high earning self employment activity.
Assistance extended through the Divi Neguma initiative to expand the
livestock industry at household level has enabled the large scale
producers to explore export markets. Therefore, I propose to extend
financial assistance to those engaged in the livestock industry to reach
international markets. VAT on modern machinery and equipment required
for livestock production will be exempted. Tax concessions are being
provided to Government and private entities to promote milk production.
Steps have been taken to import 3,000 cows to be distributed among dairy
farmers. High duty on imported milk powder will be maintained in order
to enable dairy farmers to secure better prices.
Divi Neguma
Hon. Speaker, in my last Budget, I proposed to promote one million
home gardens to develop a backyard economy. This program named Divi
Neguma has produced encouraging results. All line ministries connected
with rural development have embraced this program. Food and vegetable 13
production has increased considerably. Prices of most of the essential
food items have dropped by approximately 50 percent. This program
enabled to retain inflation of food at around 3 percent. It is planned
to expand this program to cover up to 2.5 million households by 2012,
including the participation of all low income families. It is also
intended to include small home gardens of around two and a half acres of
land into this program to expand the growing of selected vegetables,
fruits and flowers.
I also propose to setup Divi Neguma Enterprise Villages, under this
program. Such villages will consist of approximately 200 families, and
will have a small livestock farm, storage facilities for dairy products,
meat and vegetables, an organic fertilizer processing centre, small rice
mills and food processing centres, a Divi Neguma bank branch, and access
to the nearest township. As a wide is witnessed in home gardening, in
addition to the agricultural activities, I propose simplify taxes on
mamoties and such other agricultural implements to reduce expenses
related with such material. In addition to promoting agricultural
activities, special villages will be selected to promote home based
industries through the Divi Neguma program. It is proposed to implement
the Divi Neguma Enterprise Credit Scheme in 2012, with the support of
state and private banks to promote such small industrial villages to
supply their products to be exported and for the tourism industry. In
order to connect the required designers for small industries from
reputed designing agencies, amendments will be introduced to enable them
to deduct related transport and field expenditure from income tax.
Wildlife conservation
The development of the 21 sanctuaries and wildlife parks located all
over the island, will attract tourists and provide a main stream of
income. Provision has been made to develop 4 elephant conservatories at
Lunugamvehera, Maduru Oya, Horowpathana, and Galgamuwa, to rehabilitate
water reservoirs situated in such locations as well as to develop 14
forestry and trees that would be fodder for animals to improve wildlife
conservation. As requested by the respective Members of Parliament
representing such areas, I propose to allocate Rs. 100 million to build
electric fences and dredge drains to minimize damages caused by
elephants to the farmers of such villages. I also propose to introduce
an insurance to compensate lost life and property, due to destructions
caused by elephants.
Pura Neguma
We have formulated a strategy to modernize small townships located
within 100 Local Authorities, with Rs. 7,000 million mobilized from the
Asian Development Bank to consolidate our rural centric development
model. Key development initiatives under this program will include the
modernization of water supply and sanitation facilities, access roads,
maternity and health centres, children’s parks and playgrounds and
market places. Provisions have been included to provide waste disposal
equipment and tractors to maintain cleanliness. Assistance will be
extended to simplify the rates and taxes at the local authority level to
create a client friendly organizational structure in such localities.
Development of urban and semi urban areas
There is an imminent threat of flooding in the Colombo and Gampaha
districts, since sufficient funds have not been invested for the
conservation of marshy lands and rivers. Hence we have already commenced
such conservation activities in Kesbewa, Maharagama, Kaduwela, Kotte,
Kollonnawa, Moratuwa, Gampaha, Wattala, Kelaniya local authority areas.
This project will contribute towards minimizing the flood risk in such
areas, help to transform such areas as healthy and eco-friendly cities
and will also result in attracting more private investments into such
areas. I propose to allocate Rs. 800 million in 2012, to accelerate
these conservation activities. We have also planned to invest Rs. 20,000
million over the next 3 years with World Bank loan assistance, to 15
execute urban and semi urban development activities in a balanced
manner.
Provincial council activities
Hon. Speaker, Rs. 130 billion has been allocated in this Budget for
development activities in the education, health, social service and
provincial economic activities that are devolved on Provincial Councils.
To broaden the sources of income of the Provincial Councils, it is
expected to allocate Rs. 32 billion from the income derived through
Nation Building Tax, Stamp Duty and Motor Vehicle Registration. As such,
it has been ensured that the Provincial Councils could spend around Rs.
162 billion in 2012. The provincial tax system has been simplified with
the removal of Turnover Tax as proposed in the 2011 Budget. A
consolidated program has been launched to ensure that rates and charges
of Provincial Councils and local government institutions are simplified
so as to ease doing business in such areas. I propose to consolidate the
Withholding Tax on motor vehicle registration to simplify these
applications of such levy and also revise the registration levy as well
as the luxury vehicle tax as a measure of relief to the operators of
busses, lorries and tractors. The registration fee will remain
unchanged. A sum of Rs. 1,000 million is expected from this measure to
the Provincial Councils.
In addition, allocations have been made virtually under all
ministries to launch national programs that cover all provinces and
inter provincial development activities. The 6,000 schools - education
project, proposed 1,000 hospitals - health project, elderly welfare
programs, provincial roads, water supply, irrigation, electricity have
been given high priority. This Budget has also provided a broad access
to national ministries and Provincial Councils to work jointly in
relation to agriculture, fishery, livestock and sports.
Coast conservation
The sea erosion that is occurring particularly in the Southern and
North 16 Western coastal areas should be a matter of serious concern to
us. Although many temporary measures have been taken in this regard, it
is proposed to allocate Rs. 500 million in 2012 as an initial capital to
conserve the coast using the sand filling method, by planting suitable
trees and through other coast nutritional management methods.
Development of the road network
Hon. Speaker, if wider opportunities are to be created to promote
development, the road network needs to be broaden. In this background Rs.
5,000 million has been provided in 2012 under the Ministry Ports and of
Highways, to link 100 villages to provide connectivity to over 20,000
families. Rs. 500 million has been allocated under the Ministry of Local
Government and Provincial Councils for the rehabilitation of access
roads in selected Local Authority areas. Rs. 12,300 million has been
allocated to Provincial Councils for the renovation and maintenance of
roads. Rs. 30,000 million has been allocated to the Ministry of Economic
Development to improve the rural and agricultural road network as well
as the provincial and inter-district road network. Rs. 123 billion has
been allocated under the Ministry of Ports and Highways to improve the
national road network.
The A-15 road that has large bridges, was completed last month
connecting Trincomalee, Batticaloa and Ampara townships. Our country’s
first expressway that connects the South and the West will be opened in
a few days time. Super highways connecting main cities such as KKS,
Anuradhapura, Kurunegala, Puttlam, Trincomalee, Batticaloa, Kandy and
Nuwara Eliya are also presently being built. Rs. 170 billion is expected
to be spent within the next 5 years to build a road network that will
connect villages and cities across the country.
Drinking water
The budget estimates of the Ministry of Water Supply and Drainage
show that Rs. 164 billion has been allocated for 2011 to 2014 for
investments to improve water supplies. Priority has been given for water
supply projects in major towns such as Jaffna, Ruhunupura, Ratnapura,
Kurunegala and Trincomalee, as well as for water supply projects in
secondary townships such as Kolonne, Balangoda, Polonnaruwa,
Anuradhapura, Dambulla, Katana, Nuwara Eliya and Angunakolapelessa.
Rs.33 billion has been allocated to complete ongoing projects as well as
to commence new projects. Rs. 3,200 million has been allocated for 55
water supply projects covering all provinces, for the benefits of
emerging small towns. An investment of Rs. 680 million will be made in
2012 to save around 48 percent of non revenue water in Colombo due to
leakages and waste. I also propose to encourage investment to use sea
water for tourism and industrial activities.
Irrigation
There is massive investment that is taking place in the irrigation
sector. Rs. 35,835 million will be spent on account of same in the year
2012 which is three times the amount spent in 2010. Rs. 177 billion has
been allocated for irrigation projects due to be completed before 2014.
We have witnessed a strong progress in irrigation development activities
associated with Uma Oya, Deduru Oya, Yan Oya, Moragahakanda, Iranamadu,
Yoda Wewa and Mora Wewa. Rs. 2,400 million has been allocated to
commence 12 new irrigation development projects including Kalugal Oya,
Kumbukkan Oya, Pahala Uwa and Mahagona Wewa. Rs. 5,521 million has been
allocated to renovate the irrigation system associated with the Mahaweli
irrigation project. The allocations earmarked for minor irrigation
activities are around Rs. 6,300 million. Provisions have also been made
to commence feasibility studies to develop Gin Ganga, Kalu Ganga,
Nilwala Ganga and North Central waterway up to Irnamadu and Weli Oya.
Electricity for all
An allocation of Rs. 34,187 million has been made in the year 2012
under the ongoing investment program to improve the generation and 18
distribution of electricity. This includes Rs. 15,635 million allocated
under 11 projects to conclude 2,600 ongoing rural electrification
schemes, covering areas to which electricity is so far not available. In
keeping with our target to provide electricity for all, around 800,000
families will be privileged to consume electricity by the end of next
year.
Railways and transportation services
Hon. Speaker, an allocation of Rs. 37,000 million has been made to
construct the Northern railway line, to renovate the coastal railway
line, to construct a new Matara - Beliatta railway line and to purchase
railway engines and power sets. Rs. 3,170 million has been allocated to
the Central Transport Board on account of providing school bus services,
state services and for being engaged in operating non-profit oriented
routes. In addition to the buses purchased by the Central Transport
Board on lease arrangements, Rs. 880 million has been allocated to
purchase new bus engines in support of the operations of the Sri Lanka
Transport Board. In order to improve transport facilities in rural areas
a further Rs. 500 million will be allocated to provide 200 buses. VAT on
the importation on buses will be removed to promote the purchase of new
buses to ensure high standards in general and tourist transportation. I
also propose to remove VAT and Custom Duty on the importation of
lorries, trucks and new lorry engines to support goods transportation.
It is proposed that import duties on tyres used for buses and lorries
will be reduced by 50 percent.
Domestic airports
Parallel with the expansion of the Bandaranaike International Airport
and the development of the Mattala International Airport, Palali and
Ratmalana domestic airports, I propose to construct domestic air ports
in Kandy, Nuwara Eliya, Batticaloa, Trincomalee, Hingurakgoda, Sigiriya,
Anuradhapura and Iranamadu, to facilitate domestic air travel. Rs. 750
million will be allocated in the next year to commence the construction
of 19 airports in Iranamadu, Nuwara Eliya and Kandy.
Electronic visa facilities
Hon. Speaker, Government has implemented online visa facilities,
enabling travellers to obtain visas electronically from any part of the
world. It has been decided that the visa fee for this facility will be
US$ 10 for travellers from SAARC countries and US$ 20 for others.
However, a visa fee will not be levied on travellers who are travelling
from countries that not charge a visa fee from Sri Lankans.
It has been also decided that there will be no visa fees charged from
children in order to promote family travel. There will also be no visa
fee charged from a tourist who spends less than 48 hours within the
island. A sum of Rs. 2,000 million is expected from the provision of
this new service.
Transportation facilities to airports
A high quality transportation service needs to be provided to those
who are travelling to and from airports, in order to ensure safe travel.
I propose to reduce taxes at the point of import by 50 per cent for
those who are operating transport services to and from airports so that
it would promote the use of new vehicles for such services. However,
such vehicles made available would have to confirm with quality
standards to be prescribed by the Airport and the Airport and Aviation
Authority.
Legal reforms and international arbitration centre
Hon. Speaker, considering the professional standards prevalent in the
legal services, there is great potential to develop our country as a
regional hub in relation to allied services. Hence, I propose to set up
an international arbitration centre in Sri Lanka. The Government has
decided to allocate 3 acres of land in the close proximity to the
Superior Court Complex, to develop a new complex which will house the
new arbitration centre, the court facilities and the Attorney General’s
Department. Rs. 100 million will be allocated for a legal reforms
project that 20 will facilitate law reforms, professional development
and strengthening the lower court system.
Infrastructure facilities for government agencies
Many government officers do not have sufficient facilities and access
to transport facilities causing many hardships. The Government has
commenced the construction of new buildings for district and divisional
secretariats and several other government agencies. Action has already
being initiated to relocate the Ministry of Defence and the Headquarters
of the 3 forces outside Colombo. I propose to allocate Rs.
15,000 million over the next 4 years to also relocate the Ministry of
Foreign Affairs, Inland Revenue Department, Ministry of Irrigation,
Ministry of Power and Energy and the Ministry of Economic Development. I
propose that they will be relocated outside Colombo with easy access to
the outer circular expressway. All these projects will be reserved for
the domestic construction industry which has shown a commendable
capacity during the last 6 years.
Hon. Speaker, we need to provide required residential facilities and
concentrate on human resource development of our security forces. Out of
the Rs. 230 billion allocated to security forces in the Budget, Rs. 203
billion is on account of expenses on salaries, uniforms, food, fuel and
transport. Hence, I propose to make an additional allocation of Rs.
3,000 million to construct permanent quarters for security
establishments and to improve human resource development of the forces.
It should be noted that even after restoring peace the security forces
have been engaged in demining, rehabilitation of affected areas and
urban development related work to the value of around Rs. 5,400 million.
Information Technology
Many Government offices are using information technology successfully
in discharging their duties. The Inland Revenue Department is being
automated to introduce a new 21 Revenue Management Information System
with the assistance of the Asian Development Bank to be completed in
2013. The coordination and implementation of information technology to
other institutions of government is entrusted to the Information and
Communication Technology Agency (ICTA). Hence, all allocations made to
different institutions towards introducing such measures should be done
with the approval of ICTA.
Steps are being taken to provide information technology education to
all schools in the district of Anuradhapura under the 2012 Deyata Kirula
program. This will be extended to other districts as well within the
next 3 years. I hope that the knowledge extended through the IT labs
setup under this program along with the Nanasala centres will enhance
the computer literacy to 75 percent, by 2015. Hence, I propose to
allocate Rs. 500 million to broad base this program. My request to all
school children and teachers is to make maximum use of the information
technology facilities provided to them and acquire universal knowledge,
for the benefit of our society and the future.
Plans have been drawn to setup a technology city at Hambantota in
order to attract investment on information technology and related
industries which will be conducive to make this a billion dollar
industry by 2015. The Board of Investment will provide necessary
incentives to attract required investments to this city which will have
dedicated infrastructure required for investment technology.
Sri Lanka Telecom as well as private companies have undertaken large
investments for the development of telecommunication facilities. The
Telecommunication Regulatory Commission will implement policies and
strategies to encourage telecommunication companies to give priority for
the development of broad-band network facilities. In keeping with
development priorities, telecommunication charges on incoming and
outgoing calls will be revised suitably.
Housing facilities
Hon. Speaker, the hose is the most essential asset that every family
should have. Although we have made substantial progress in relation to
housing, still there are families those living in basic shelters. Hence,
I propose to build one million houses within 6 years. Accordingly, many
projects are in progress to renovate housings schemes, build new flats
for those residing in urban shanties, improve housing facilities of
those who were resettled and also to improve substandard shelters in the
villages, fishing and plantation areas.
An allocation has been made to build multistoried flats containing
50,000 housing units, to resolve housing problems of urban shanty
dwellers. Action is being taken under the Deyata Kirula program to
ensure that all cadjan roofed houses in the Anuradhapura district, will
be transformed to be tiled roofed houses. This has also caused an
impetus to the local roof tile industry. I also propose to exempt local
roof tile manufacturers and clay related products manufactures from
Nation Building Tax, Economic Service Charge and VAT to further
encourage this business. I propose to allocate Rs. 500 million to launch
a special program in 2012 for the benefit of those who are less
interested in availing housing facilities.
A healthy society
Hon. Speaker, the fact that our health indicators are on par with
those of developed countries is a major accomplishment that we have been
able to achieve through our free health services. We have been
successful in resolving many disease and health related problems usually
faced by lessdeveloped countries. However, our nation is becoming
increasingly vulnerable to non-communicable diseases such as diabetes
and cancer. There are heath problems faced by the elderly since their
life expectancy has improved. There is also an undue demand in urban
hospitals due to various shortcomings that are prevalent in rural
hospitals. Hence, the Government has planned to make a substantial
investment to improve the 23 health sector within the next 5 years, with
financial assistance from the World Bank and through other bilateral
funding.
The allocation on health at national and provincial level in 2012,
through western and indigenous medical services is Rs. 105 billion. A Rs.
500 billion investment would be made between 2011 - 2014 on health
services. A high allocation had been made to extend, for both curative
measures and health care. Rs. 100 million has been allocated to provide
equipment, ambulances and building facilities required by district and
base hospitals situated throughout the island. We have received
assistance from both World Bank and the Government of Japan to be
invested in health services.
We have made an allocation of Rs. 600 million as the Government
contribution in support of the construction of a modern complex for the
Maharagama Cancer Hospital, at a cost of Rs. 1,400 million that will be
built with the donations from the private sector. It is proposed to
build a multi storied modern hospital complex for the Colombo National
Hospital consolidating all facilities that will consist of 25 floors at
a total cost of around US$ 150 million. We propose to provide hospital
care for public servants within this new complex, under the Agrahara
Insurance scheme. An allocation of Rs. 500 million has been made to
commence the first stage of this development program next year, under
which a modern ambulatory care centre consisting of 18 floors will be
constructed for the National Hospital of Colombo.
A Knowledge Society
Hon. Speaker, we have witnessed a substantial progress in education
in recent years. The number of students who have qualified at the GCE
O/L examination to enter Advance Level has increased from 47.8 percent
in 2005 for 58.8 percent in 2010. The number of students, who have
qualified for university education, has increased from 55.2 percent to
61.2 percent. However, there are some disparities. While there are 1,590
small schools with less than 50 students in 24 each, there are 197
larger schools with over 2,500 students. Out of 2,721 secondary schools,
only 716 schools have facilities to teach science subjects in Advance
Level classes.
Many children and teachers who have visited Temple Trees from rural
schools have told me, that they do not have sufficient drinking water,
toilet and sanitation facilities.
They have also complained to me that they do not have teachers for
essential subjects. Many children do not get access to basic facilities
for extracurricular activities. Children who came from Kyts told me that
this was the first time they engaged in an education tour of the sort. I
could imagine the extent to which the children of such areas would have
been overshadowed by the threats of terror at that time.
The Government proposes to give priority to develop 1,000 high
quality secondary schools that could be improved to meet universal
standards and 5,000 well performing primary schools that could be
connected to such secondary schools. This program will be launched in
collaboration with the Provincial Councils and will include all
Divisional Secretary areas. Accordingly 300 secondary schools and 700
primary schools will be modernized in 2012. Parallel to this program,
priority will be given to recruit new teachers for math, science, IT and
language and also to ensure that all excess teachers will be trained in
such subjects. The policy to recruit teachers directly to the respective
schools that their services are required will also be implemented.
This program also includes improving the quality of school text books
and teaching material. Allocations will be made to include sanitation,
toilets and such other facilities for students. The Asian Development
Bank, the World Bank and the USAID have agreed to cofinance this
program. In order to ensure the success of this schools development
program, I propose to allocate a further Rs, 2,500 million. Accordingly,
Rs.95 billion will be allocated in this Budget towards primary and
secondary education alone.
Skills Education
Hon. Speaker, about 350,000 children enter schools each year. But
only about 25,000 of those get eligible to enter universities. About
175,000 children enter into vocational education provided by both the
private and public sectors. This shows that around 140,000 children do
not get an opportunity to improve their skills. It is also shocking to
note that around 165,000 children fail the GCE Ordinary Level
examination.
My view is that all children should have access to skills
development. An education system cannot create failures. We have to
accept that there is some lacuna in the education system, if we are not
able to accept that failing an examination does not mean failing life.
Hence, I propose to introduce a system through which children will be
selected from GCE Advance Level either to enter university or to pursue
skills development, so as to ensure that all children will get an
opportunity to develop their skills. As a sum of Rs. 8,617 million has
been allocated for vocational education. I expect that relevant
institutions will give priority to introduce standards and skills
development program through required reforms, in order to respond to
emerging skills demands. I also propose to allocate Rs. 500 million to
undertake special accelerated vocational education programs on a
priority basis in the fields of tourism, IT, construction, beauty care
etc. in districts in which unemployment is in excess of 8 percent, to
meet the emerging demands for local and overseas jobs.
Research and technology
We should try to ensure that our farmers, SME entrepreneurs and
students are oriented towards research and technology. Our universities
as well as research and technology institutes have around 4,000
researchers at present. This number should be increased to about 20,000
by the year 2020. A research allowance was granted to university staff
and researchers to incentivize them towards research.
I propose to reduce income tax on research income, from 24 percent to
26 16 percent, to encourage researchers to engage in such work. I also
propose to reduce the Personal Income Tax of all those engaged in
research and technology from 24 percent to 16 percent. I propose that
income tax on all institutions engaged in research and technology will
be reduced to 20 percent and that such institutions will be exempt from
VAT.
I also propose to introduce amendments to tax laws to enable a triple
reduction in relation to research and development expenditure undertaken
by enterprises through Government institutions, to promote private
institutions to use Government research facilities. In order to ensure
that SMEs would benefit from research related knowledge, I propose that
Government institutions would extend research facilities to SMEs at a
nominal fee. I also propose to allocate 50 percent of research related
income earned by Government institutions by carrying out research for
the private sector, to be shared among such researchers as a promotional
allowance. Hon. Speaker, I propose to allocate Rs. 300 million to the
National Research Council to encourage special research that would
facilitate economic development.
A Sports Economy
Our country has already achieved world repute in cricket, and several
other sports. School children and youth should be encouraged towards
pursuing sports. The economy can be fed by projecting our country as a
sports hub in the region providing sports related services and goods.
Hence it is important that we give priority to build infrastructure
required for international sports and events. The international stadiums
already built at Diyagama, Kundasale, Sooriyawewa and Dambulla are a
great strength to this endeavour. I propose to allocate a further Rs.
500 million to build such facilities, including the Doraiappa Stadium in
Jaffna and the Reid Avenue Stadium Sports Complex over the next 2 years,
so as to ensure that the youth of our country would have the opportunity
of being involved in broader sports related opportunities around which a
new economy needs to be expeditiously built.
I propose to extend tax relief and other facilities to promote
contractual arrangements with internationally renowned sports Management
Companies. In order to promote the maintenance and management of sports
facilities, I propose that all related maintenance costs incurred by the
private sector would be permitted to be deducted from their taxable
income and also to exempt from income tax, any income derived from the
management of such facilities.
Since international trainers are required to train our sportsmen, I
propose to exempt them from income tax. Since fitness centres need to be
established in all sports complexes, I propose to exempt related
equipment from customs duty and VAT to promote the private sector to
develop such facilities while protecting the local manufacturers of
sports goods. I propose to introduce a ceiling of 35 percent on tax
imposed at the point of import, on sports-gear and sports-ware so that
school children and the youth could have access to such branded products
at affordable prices.
Skills based foreign employment
Foreign employment has become our highest foreign exchange earner and
also a source of saving of our nation. The Ministry of Foreign
Employment Promotion and Welfare has extended a commendable service
towards the promotion of foreign employment and related employment
generation, having identified countries that are developing and are
paying higher wages. Recognizing the demand for jobs in tourism,
nursing, technical and construction sectors, I propose to improve
identified hotel schools and technical colleges situated at provincial
level as special foreign employment training institutions, in which our
youth can be trained.
It is very important to provide project and enterprise related
management skills to facilitate those who are returning from foreign
employment to invest their savings as capital to commence new
businesses. As a measure to promote such initiatives, I propose that all
new income avenues from such projects will be exempt from all taxes for
a period of 28 5 years. I also propose to permit such projects to
purchase the required machinery and equipment, free from customs duties.
It is proposed to launch a Credit Assurance Scheme to enable such
persons to have easy access to credit, at low interest.
New investment priorities
Hon. Speaker, having achieved an 8 percent growth in 2010, our
economy is poised to register a further 8 percent growth in 2011. This
growth momentum will be conducive to realize our per capita target of
US$ 4,000 by 2016, as envisaged in Mahinda Chintana - Vision for the
Future. This would create a US$ 1,00 billion economy. This growth should
be achieved while narrowing the gap that has prevailed for years between
imports and exports as well as foreign income and expenditure. Annually,
we spend around US$ 3,000 for the importation of cement, steel,
pharmaceutical and textile. Further, we spend around US$ 1,500 for the
importation of food, milk powder, wheat and sugar. There is a
possibility of manufacturing these items within the country and reducing
related import costs. Based on the progress achieved in oil and gas
explorations and in renewable energy, there is hope that over US$ 3,000
million spent on oil imports could well be saved.
We have been exporting tea, rubber, coconut, spices and several other
natural resources as primary raw material, for many years. A higher
growth can be achieved if they can be exported as finished goods. There
are greater opportunities for knowledge based foreign exchange earnings,
targeting information technology that is advancing, as well as education
and health. We could also improve the foreign exchange surplus in the
service account, through port and aviation related industries and
services. Tourism is transforming to be a US$ 1 billion industry. New
opportunities have been created since the foreign employment market that
is presently generating around US$ 5 billion has become a lucrative
foreign exchange earning source.
I have just brought to the attention of this august assembly, the 29
extent to which investment potential could be exploited to save foreign
exchange outflows and several investment opportunities through which
foreign exchange could be further raised. While maintaining public
investment at around 6 - 7 percent of GDP during the next 6 years
private investments will be incentivized to reach 26 - 28 percent of GDP
by increasing priority sectors to engage in more export oriented an
import replacement activities. Hence I propose to provide incentives for
manufacturers and new investors to invest in such fields.
Many such investment incentives were announced in my last Budget.
There is good progress shown in that regard. A substantial investment
has been made within a short time-span in cement, steel, tyre and the
garment industry. I am happy to note that few garment factories have
been approved to be setup in the North as well as in the East. Further,
there is investment taking place in the areas of food and dairy
production. Several hotel projects which are bound to make a significant
change in the economic landscape have commenced. Further, several port
infrastructure and production related investments have also been
approved to be setup in Freeport areas in Magampura, Colombo and
Trincomalee.
Hon. Speaker, we must take further steps to expand these sectors so
as to reduce import expenditure and enhance export earnings. I propose
to take several steps in this regard. Firstly, as our country has
experienced the strengthening of the exchange rate, in the backdrop of
those countries that are competing with our country, as well as our
neighbouring countries have depreciated their exchange rates
significantly. Hence, I propose to depreciate our exchange rate by 3
percent with immediate effect, to correct this disadvantageous position
and to encourage our exports. I expect that the Central Bank will adopt
appropriate modifications to the Monetary Policy accordingly.
Secondly, in order to encourage our exporters to explore the markets
in emerging economies in Asia, Africa and South America, I propose to
enter into 30 agreements with such countries on trade, tourism, foreign
employment, and investment. Measures will also be taken to remove any
barriers and strengthen ties with our traditional markets in Europe and
America. So as to strengthen our trade ties, total reforms will be made
with regard to our Foreign Service and those attached to our Foreign
Missions. Thirdly, in order to improve the quality of products such as
leather goods, textiles and jewellery, I propose to extend further
financial support to Universities to commence related degree and diploma
programs. Fourthly, investment incentives to both the exports and import
replacement activities will be expanded.
Investment incentives
The Legal provisions applicable in relation to the grant of tax
concessions to promote private investments, are contained in the Inland
Revenue Act and the Strategic Development Projects Act. I propose to
amend such provisions to encourage SMEs and to provide further clarity
to ensure that such incentives are available to both new and existing
enterprises. Accordingly, I propose to extend a tax holiday of 4-6 years
with regard to investments in the range of Rs. 50-300 million.
The investment required to be made in areas such as agriculture and
information technology will be Rs. 25 million. With a view to encourage
large investment projects, I propose to extend a 6-12 year tax holiday
and other tax incentives to investments in the range of Rs. 300- 2,500
million. Incentives to encourage the expansion of existing enterprises
will also be granted. I propose to make relevant amendments to reduce
the upfront cost incurred on account of importation of related machinery
and equipment. The details of the proposed tax related changes are
contained in the technical note that will be tabled with this Speech.
All large investment proposals that require state land or tax and
other concessions are now examined by a Standing Cabinet Appointed
Review Committee consisting of senior officials, so as to ensure that
credentials and financial standing of proposed investors are sound. All
concessions granted under the Strategic Project Act are subject to 31
Cabinet and parliamentary approval. It is also proposed that all long
term concessions granted by the BOI will also be gazetted in the future.
Trends in employment
Hon Speaker, with the expansion of the economy, unemployment has
dropped to below 5 percent. Many entrepreneurs, who met me during Budget
discussions, expressed that it is difficult to find required employees.
Since unemployment has dropped and several sectors in the economy have
expanded, our entrepreneurs should improve labour skills so as to
enhance productivity. Although custom duties on many machinery and
equipment have been reduced, steps will be taken through this Budget to
further reduce such duties. Provisions have been made to conduct various
programs to ensure productivity improvements. In the meantime, steps
will also be taken to encourage entrepreneurs towards productivity
improvements. It has become necessary for universities and other higher
education institutions to formulate new courses to be able to meet
skills development demands.
Universities could address this medium term need by using a
substantial part of Rs. 24,400 million allocated to them towards
improving new skills development. Priority is given to expand the scope
of Sri Lanka Advance Technical Education Institute and it is planned to
broaden areas of diplomas it offers, with emphasis on engineering, ICT,
nursing, health services and tourism and also to increase the student
intake.
Land utilization
Hon. Speaker, our country has only a very limited extent of land. We
need to use such lands while preserving nature and ensuring bio
diversity. As also agreed by the opposition, it has been decided not to
transfer state land on outright basis to private investors but to give
such lands only on long term leases, subject to a ceiling of 99 years.
We have made it mandatory that related payments must be made on the
basis of the value determined by the Government Chief 32 Valuer.
Provisions will be made in lease documentations to enable the Government
to cancel such leases, if any such land is not put into productive use
for the purpose for which it was given, within a period of 1 year.
In my last Budget Speech I proposed that all land given to the
private sector that are not utilized for the purpose for which lands
were given, will be taken back by the Government. We have identified
around 37,000 hectares of land that are not being used, in the
plantation sector. As these lands have not been put into productive use
since the privatization of plantation land in the year 1992, I propose
to take steps to enter into alternate 30 year lease arrangements, having
demarcated 2 acre blocks from such identified lands to be distributed
among smallholders. Steps will also be taken to extend suitable
financial assistance to such smallholder families to enable them to
develop the lands. In addition, high quality seeds and planting material
will also be provided to them.
The Parliament passed an Act recently, to vest back in the Government
37 enterprises and assets. It is not a statute that is opposed to
private property rights. All such assets were owned by the state. They
were given to the private sector with the intention of putting them into
more productive use in the interest of the national economy. Virtually,
all such entities have also got long term concessions granted by the
Board of Investment. Intended benefits can accrue to the society only if
such investors make use of the assets in a responsible manner. There is
no way that any party can be permitted to disregard this social
responsibility in the guise of private investment. It is the
responsibility of the Government to ensure that these assets are put
into productive use. Steps will be taken to develop such assets with the
involvement of the private sector, while also rectifying the mistakes
made in the past.
Banking and business development
Hon. Speaker, in order to promote long term lending to revive
businesses, the Government introduced considerable incentives through
the 2011 Budget to banking and financial institutions. Debit tax was
removed and VAT was reduced 33 from 20 percent to 12 percent. By
reducing tax on profits from 37 to 28 percent, the banks were
facilitated to retain more funds to increase lending. Steps were taken
to require all banks to maintain an Investment Fund Account through
provisions in the Inland Revenue Act. As of now, the banks have
approximately Rs. 10 billion in such accounts. Certain banks having come
forward to provide funding for road development has resulted in a major
support to the construction industry. I am hopeful that these investment
accounts will become a strong pool of resources that will enable banks
to venture into long term lending during the next 2 years.
The Exchange Control Department has authority to approve commercial
banks to borrow from abroad. This will assist banks to borrow from
outside Sri Lanka and meet the demands of the private sector, which in
turn will facilitate Sri Lanka to become a financial hub in the region.
Dealings with international banking and financial institutions provide
an excellent opportunity to commercial banks to demonstrate their
financial strength. Private businesses that are operating at a very high
corporate level and are financially strong will also be permitted to
borrow abroad. I propose to further simplify taxes applicable to the
credit and interest payments involving such international financial
transactions.
Export development
Annually our country earns around USS 3,000 million through the
export of agricultural produce such as tea, rubber and cinnamon and
through other related businesses. However, we fail to reap the broad
economic benefits since most exports are in the form of primary raw
material. If we are to get a high export earning, we need to aim at
developing best cultivation practices as well as value added products.
If a high yield is to be ensured in tea production, a minimum 2 percent
of new tea plantation needs to be maintained. Hence, I propose to
increase the subsidy given to tea smallholders for re-plantation from Rs.
250,000 to 300,000 and for new plantation from Rs.50,000 to Rs. 150,000.
I also propose to introduce a concessionary loan scheme at 8 percent
annual interest, repayable in 7 years, to assist plantation 34 companies
to plant and re-plant. The Tea Board has been permitted to be engaged in
promoting and popularizing international markets for tea produced in Sri
Lanka using special income earned from the CESS imposed on tea at the
rate of Rs. 3.50 per Kg. We will be able to give a broad publicity to
Sri Lankan tea through the World Tea Summit proposed to be held in Sri
Lanka next year.
Hon. Speaker, I propose to promote joint ventures between tea
producers and export companies to encourage tea exports under trade
names registered in Sri Lanka. I propose to reduce income tax payable by
such joint ventures which will be engaged in tea exports under Sri
Lankan brand names, up to 12 percent. This concession will also apply to
those producers who are parties of the joint ventures to the extent of
the income derived from tea manufactured by them. The 28 percent tax
applicable to traditional tea production and exports will remain at the
same level. In order to further enhance rubber cultivation, I propose to
develop 10,000 hectares of small holder rubber land in the Ampara and
Mahaoya areas. As such, an allocation will be made to provide high
quality plants and improve plant nurseries. I propose to enhance the
allocations made to improve tea and rubber cultivation and develop
related research by a further Rs. 200 million. It has been decided to
continue with the CESS imposed on primary exports, so as to develop and
promote industrial goods produced from rubber and tea.
Our country is the key exporter of high quality natural spices such
as cinnamon. In order to further advance this sector I propose to
enhance the allocation made to the Export Agriculture Department, by a
further Rs. 150 million to provide cultivation aid to promote
intercropping of cinnamon, pepper, cardamoms and cocoa. I also propose
to reduce taxes on equipment required for the promotion of high quality
water management techniques. We need to improve these industries to
ensure that such crops will be exported only after value addition,
instead of being exported as primary goods. Hence, I propose to give tax
concessions to promote the private sector to setup high standard
processing factories. Research and development expenditure will be
permitted to be deducted from taxes, so 35 as to promote the
manufacturing of new products of high quality.
Textile industry
Hon. Speaker, although our country export garments to the value of
US$ 4,000 million, we import material and other related accessories to
the tune of around US$ 2,500 million. We need to target to produce at
least half of such material requirement, in our country within the next
5 years. Therefore, I propose to exempt all taxes imposed at the point
of Customs on the importation of yarn. I propose to remove VAT and
Customs Duty on equipment required to modernize this industry. I propose
to introduce an all inclusive tax of Rs.75 on a kilo of material so
imported, to simplify the tax payable and to enable the industry to face
challenges from imports. I also propose to reduce the income tax burden,
if substantial new investments have been made to modernize existing
textile factories and to extend long term tax holidays for related new
investments.
Many conferences, including the Commonwealth Parliamentary Sessions ,
Commonwealth Heads of State Meeting are scheduled to be held in Sri
Lanka in 2012-2013. Tourist arrivals are expected to exceed the one
million benchmark. The demand of the people, specially from school
children and youth for garments and sportswear is also on the rise.
Hence, it is proposed to permit related export producers to supply of
such goods to the local market while assuring that exports will be
maintained at 75 percent of their total production. I propose to impose
a CESS of Rs. 25 on each item released to the local market by exporters.
High taxes will be imposed on the importation of such garments, so as to
reduce expenditure associated with such imports.
Pharmaceutical manufacturing industry
Despite the fact that we maintain a free health service at an annual
cost of Rs. 100 billion, we have not witnessed any development in
related industries. Saline, pharmaceuticals and other equipment are
imported at an annual cost of around US$ 400 million. We have failed to
produce even sufficient quantities of Thriposha and surgical gauze.
Therefore, it is propose to 36 encourage the private sector to produce
nutritious cereals such as Thriposha and improve such products to export
standards. Procurement procedures will be amended to provide the
necessary protection required by small and medium entrepreneurs who
could manufacture surgical gauze. Upon a request made by the Government,
the Government of Japan has agreed to extend financial and technical
support required to improve the manufacturing of pharmaceuticals by the
State Pharmaceutical Manufacturing Corporation. It is proposed to extend
tax relief to the private sector to promote production of
pharmaceuticals and to enter into contracts to import high quality
pharmaceuticals. Steps are underway to set up a separate investment
promotion zone to promote the private sector towards pharmaceutical
production. I also propose to reduce income tax on health services to 12
per cent to promote private healthcare investments.
Hon. Speaker, although the cost of- living in relation to food has
reduced the prices of clothing and essential pharmaceuticals prevailing
in the country, are not justifiable. We need to control such prices
through price regulations and also ensure that high quality products are
amply available in the market. It is also required to encourage domestic
production of those items to replace imports. Hence, I am hopeful that
the proposals I made in relation to the manufacture of Thriposha,
surgical gauze, textiles and pharmaceuticals within the country will
result in reducing the cost-of-living.
Small and Medium Enterprises (SMEs)
Hon. Speaker, SMEs are the backbone of our economy due to the
recognition given to this sector in the Budgets that I have presented.
Income tax was reduced to 10 percent. Steps were taken to shield the
sector from unfair import competition. Steps were also taken to increase
bank loans and reduce interest rates. In order to further strengthen
this sector, I now propose to amend tax laws to permit SMEs, whose
annual turnover does not exceed Rs. 500 million, to deduct expenditure
of the year prior to the commencement of the enterprise, from the income
of the first year in which tax become payable. Small enterprise engaged
in the collection of fresh milk, 37 green tea leaves, cinnamon, latex,
will be exempted from Nation Building Tax.
In my last Budget, SMEs with a quarterly turnover of less than Rs.100
million was exempted from having to pay the Economic Service Charge. In
order to extend this to a larger category, I propose that SMEs with a
quarterly turnover of less than Rs.500 million to be also exempt from
having to pay Economic Service Charge, up to Rs.100 million. In order to
promote the modernization of such factories, I propose to reduce taxes
on the importation of machinery and equipment, where such items are not
manufactured in Sri Lanka. It will be made mandatory that out of the
funds available in the Investment Fund Accounts in Banking and Financial
Institutions that has been setup to ensure the provision of long term
funds for lending a 10 percent be lent to the agricultural sector and a
further 10 percent be lent to SMEs.
Although access to credit has improved, what the representatives of
the SME sector who met me brought to my attention was that banks and
financial institutions do not pay sufficient attention to the problems
faced by them. Hence, in order to fill this gap, I propose that the Bank
of Ceylon, People’s Bank and Regional Development Bank will each setup a
special SME bank branch in all districts within 2012. I invite all other
banking and financial institutions also to setup such branches in all
districts. I propose to reduce the prevailing income tax rate from 28
percent to 24 percent for the interest income from such banking and
other fee levying activities. A 50 percent Government Guarantee will be
given for those banks providing loans to restructure SMEs to improve
their performance. As a measure of relief to those engaged in small
enterprises, I propose to increase the threshold income of the Economic
Service Charge from Rs. 25 million to Rs. 50 million and thereby
simplify the application of such tax.
Public enterprises
There are many challenges when it comes to strengthening public
enterprises which have been neglected over a long period of time. One
challenge is find competent and professionally qualified persons to
manage such enterprises. Since, the Governments over 38 the last 25
years have been giving priority to privatization strategies, sufficient
capital infusions have also not been made to these enterprises. Since,
Srilankan Airlines, Sri Lanka Insurance Corporation, National
Development Bank, the CWE and Paddy Marketing Board were privatized,
there was no way that the Government could intervene in the interest of
the public in such important areas. Hence, Mihin Lanka Airline, National
Insurance Trust Fund, Lankaputra Development Bank, Laksathosa and the
Paddy Marketing Board had to be setup. Since, many of such enterprises
are now vested with the Government it is possible to merge them
suitably.
Institutions which were earmarked to be privatized such as the
People’s Bank, Ports Authority have shown substantial progress during
the recent past. Several state enterprises including Laksathosa, Sri
Lanka Insurance Corporation and Litro Gas are functioning very
effectively. Although key public enterprises such as Ceylon Electricity
Board, Ceylon Petroleum Corporation, Sri Lanka Transport Board and Water
Resources and Drainage Board are in fact incurring losses, such
enterprises have made substantial investments for economic development
in the country within the last 5 years. Further, one reason for such
enterprises to record losses is the fact that they maintain
concessionary prices in the interest of consumers. Although, the unit
price of electricity charged from a household which consumes less than
125 units is only Rs.4.50, the actual cost is around Rs.15.00. Ceylon
Petroleum Corporation provides kerosene, diesel and furnace oil at
concessionary rates. If the pricing formula that was in operation during
the time of the last Government is used, a liter of diesel, kerosene or
furnace oil would have cost over Rs. 30 more and hence bus fares,
electricity and water charges etc. should have been accordingly raised.
Therefore, losses recorded by these state enterprises correspond to the
economic benefits and subsidies that the general public enjoys.
We have not made any capital infusion to the SriLankan Airline either
during the time it remained as a privatized entity or after it became a
state enterprise. It is planned to strengthen SriLankan, as an airline
with a fleet of 30 39 aircrafts recognizing the needs of the booming
tourism industry. In addition to flying direct to European destinations
countries, it is planned for SriLankan Airline to commence direct
flights to Russia, Africa, Asia, Middle East, Fareast, China, Japan and
Australia. It is also planned that Mihin Lanka will cater to the low
income segment and operate joint services with SriLankan Airlines.
Hence, Rs. 10,000 million has been provided to make necessary capital
infusions to the airlines.
Hon. Speaker, 39 more public enterprises have been transformed as
profit earning entities in the year 2011 in comparison to the year 2005.
Steps will also be taken to merge public enterprises that are carrying
on similar tasks, having restructured them while taking in to
consideration the timely needs. I also propose to introduce the relevant
amendments to the Finance Act No. 38 of 1971 to improve the efficiency
of state corporations and institutions. The assistance given by the
Committee on Public Enterprises by highlighting the shortcomings of
these enterprises is much appreciated.
Tax administration and income and expenditure management
Although the tax system was simplified, there is large scale tax
evasion. Substantial undervaluation is also observed in relation to
taxes imposed at the point of Customs on motor vehicles and spares,
vegetable oil, building material, textiles, food, pharmaceuticals
products etc. Many do not submit correct assessments of their income and
turnover to the Inland Revenue Department. Even the Excise Department
looses substantial revenue because of illicit liquor. In order to build
public confidence in the tax administration, we need to reform related
departments and change their image while ensuring that those who are
paying taxes and engaged in businesses in a justifiable manner are not
harassed. Hence, steps are underway to improve these departments, by
computerizing their administration with the use of management
information technology, within the next two years. I also propose to
take the following measures;
i. I propose that the revenue loss at the point of Customs due to
gross undervaluation to be contained by 40 introducing a mechanism using
accepted norms to determine a minimum value on selected goods and remain
constantly vigilant in that regard. Goods such as fruits, textile etc.
will be made liable to a unit based specific tax, as opposed to ad -
valorem taxes.
ii. I propose that illicit liquor manufacturing places be raided to
minimize the revenue loss caused by such activities. Steps will also be
taken to have a close supervision on the quantum of spirit provided to
the industry as a raw material, and to conduct stringent audits with
regard to molasses and spirit imported as well as supplied by Pelwatte
and Sevenagala Sugar industries.
iii. While creating public awareness on the need to provide accurate
information to the Inland Revenue Department, the assessment methods
used with regard to selected sectors will be rationalized. Steps will be
taken from next year to declare a Tax Week and create greater social
awareness on taxes. Steps will also be taken to obtain assistance of
District Secretaries to strengthen the tax administration at divisional
level and also to create public awareness on the various tax concessions
available to tax payers engaged in various development work. In order to
strengthen tax administration a new service minute that will enable
reforms in administration and in the cadre will be implemented.
iv. There is also a need to target highrisk sectors and expand tax
audits while ensuring that there is close scrutiny on the existing
management systems.
v. Attention is also being given to introduce a mandatory insurance
requirement for importers so as to ensure that only food items with a
quality assurance will be permitted to be imported in the interest of
consumers.
Hon Speaker, estimated revenue of Rs. 14,500 million is expected from
the measures that I was referred to in my 41 proposals. The revenue
expected from profits of the Central Bank, surplus funds of Public
Enterprises and the revisions affected in respect of excise taxes and
custom duty waivers is around Rs. 19,700 million. The Treasury has taken
steps to manage expenditure within limits approved by the Parliament by
using savings from identified expenditure heads towards rehabilitating
infrastructure affected by floods and earth slips in January 2011, to
meet the approved requests of expenditure of various Ministries. A
compulsory saving of 2 percent of recurrent expenditure and 9 percent of
capital expenditure is proposed in 2012, with a view to encourage
Ministries to effectively manage expenditure.
Overseas economic cooperation
I intend to strengthen our foreign economic ties with other friendly
countries with an income level on par with ours or an economic
development lower than ours, by exchanging technical services with them
The experiences we have gained and the advancements we have made in the
areas of alleviating poverty, strengthening the rural economy,
advancements made in education, health and irrigation, construction
activities and banking and accountancy services could be realized for
such assistance. This Budget has planned to provide such services
through technical assistance and small project financing, using
expertise available in several ministries. I hope that around Rs. 2,500
million could be used towards this endeavour. As an initial steps in
this process, around Rs. 1,000 million was offered this year to the
Maldives, and the friendly ties that prevailed between the two countries
were further strengthened.
The public service
Hon. Speaker, public servants and security forces are extending a
commendable service. I take this opportunity to appreciate, all those
engaged in the public service with utmost dedication. Hon. Speaker,
since assuming office, I have resolved many issues faced by public
servants. Their salaries were revised, virtually every year. Housing
facilities and foreign training facilities were enhanced. Medical
insurance 42 scheme was implemented. Salary anomalies which remained
unsettled were removed. Modern office facilities were established. The
acceptability of the public services was improved by having a close
dialogue with them.
During the last Presidential Election, I promised a salary increase
of Rs.2,500 per month to public servants. I made that promise when my
opponents had instead promised Rs.10,000. I made a moderate salary
increase since I was not ready to make a political mileage through such
promises by putting country’s production and the export sector into a
crisis.
Nevertheless, I granted a minimum salary increase of Rs. 1,200 in the
2011 Budget. All anomalies were corrected. Hence, most public servants
enjoyed a salary increase in the range of Rs. 1,700 to Rs. 3,000.
University Lecturers enjoyed a wage increase in the range of Rs. 12,000
to Rs. 38,700. The salary arrears of teachers were settled.
Hon. Speaker, I propose to increase the salaries of public servants
through this Budget as well. Therefore, I propose a wage increase of 10
percent of the basic salary to all public servants. Non staff category
will be given this increase from January 2012. I propose that staff
grade officers to be given a 5 percent salary increase from January and
a further 5 percent salary increase from July 2012. As per the
recommendations of the Salaries and Cadre Commission, an allocation will
be made to remove salary anomalies of academic and non-academic staff of
universities, and to improve service related and transport allowances of
Judges, Engineers, Doctors, Registered Medical Practitioners, Grama
Niladharis and other field officers. I wish to note that every public
servant will get a salary increase of over Rs. 2,500 within 2011/2012.
Hon. Speaker, since field level officers of the Government are making a
wide contribution in carrying out rural development programs, I propose
to reduce the applicable tax by 50 percent, to enable them to purchase
motor bicycles.
I also propose to reduce pension anomalies. Hence, I propose to give
an additional monthly allowance of Rs.1,000 to those who have retired
prior to 2004 and Rs.500 to those who have retired in 2004 - 2006. Half
of this allowance will be given from January 2012 and the other 43 half
will be given from July 2012. It is estimated that the total cost of
salaries, pensions and other allowances will be around Rs.38,000
million. Expenditure in relation to all proposals made by me can be
covered from treasury allocations as provisions have been made.
Conclusion
Hon. Speaker, I wish to draw your attention to a few aspects prior to
concluding this speech. The Budget deficit that has prevailed for a long
period of time due to recurrent expenditure exceeding Government income
has been reduced to Rs.1.8 billion in 2012. This was in the level of Rs.
120 billion in 2010.
This progress has been made, having provided Rs.40 billion for the
fertilizer subsidy, Rs. 32 billion for Samurdhi and other welfare
measures, and a further Rs.40 billion for the benefit of public
servants, pensioners, low income earners, families of armed forces and
various other needy segments of the society. I also proposed a further
Rs.15 billion for development activities in education, health services,
skills development, coast conservation and flood protection and to
uplift most difficult villages. If such expenditure on account of
welfare and development activities and for the salary increase of public
servants were not incurred, there could have been a surplus of around
Rs.59 billion, in place of the deficit of around Rs. 1.8 billion,
referred to above. I did not do so, since I firmly believe that a Budget
deficit or surplus should be looked at while also taking into
consideration the connected social welfare and development expenditure.
As continuously done during the last 6 years, Rs.496 billion has been
allocated in 2012 to take forward the development projects. I was
therefore able to include a considerable number of development proposals
suggested by the Hon. Members of Parliament in various fields such as
highways, irrigation, electricity, water resources, education and
health, in to this Budget speech. Hence, the Budget deficit we have to
mange during the year 2012 is Rs.469 billion. This is 6.8 percent of GDP
where as it was 8 percent of GDP in 2010. Since virtually the entire
Budget deficit is on account of development and welfare expenditure, I
44 believe that it will contribute towards long term development of the
country while addressing many facets of poverty. I propose to bridge
this deficit from domestic savings and foreign borrowings approved by
the development partners who facilitate our development activities.
Hon. Speaker, the Asgiriya temple is commemorating its 700th
anniversary next year. I wish to announce with heartfelt respect that Rs.
100 million has been allocated in this Budget for the work of this
temple in preparation for this historic moment, and to conserve its
historic value. Since, Sri Lanka will be hosting several important
international conferences this year, we must make it an opportunity to
display to the world our rich cultural heritage.
I wish to sum up this speech while noting that despite a very gloomy
global economy and many challenges our country had to face, we have
registered a substantial progress in every sector, within the last 6
years. We need to further strengthen this progress. However, the
economic crises faced by developed nations have brought about many
challenges to us. We have to face the escalating oil prices. We are also
faced with many challenges in the political front. To be able to face
all this, we need to gather strength through unity and by having one
voice. At this moment of presenting my 7th Budget, I wish to assure this
august assembly that I will always stand firm for the unity of our
alliance Government and to ensure unity and security of the people of
our country. The tendency of those in the opposition parties to work in
separate groups, is not healthy for the country. Like us, they should
also should standby together for the political vision of their parties
while setting aside personal differences and being humble and matured
enough to rectify any wrongs of the past. I feel it is their duty to
become a strong opposition to us, having moved away from insulting and
venomous politics, and that they should support the Government when
steps are taken in the interest of the nation.
Hon. Speaker, people have strong expectations to see a united Sri
Lanka and to see the country becoming the emerging economy in Asia, as
envisaged the Mahinda Chintana - Vision for the Future. I wish to
conclude my speech by stating 45 that we should be committed to build a
nation that all of us can be proud of, for the sake of our children and
future generations as that is the sole aspiration of our people and
nothing else.
May the blessings of the Sacred Tooth Relic, be with you all!
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