9th November 1997

Budget :nice talk and good ideas but...

The question is implementation

Our Special Assignment team comprises Roshan Peiris, M. Ismeth, Dilrukshi Handunetti, S.S. Selvanayagam, Chamintha Tilakeratne and Arshad M. Hadjirin. Pictures by Athula Devap-priya and Lakshman Guna-thileke

Money talk: Former Finance Minister Ronnie de Mel chats with Deputy Finance Minister G.L.Peris at a tea break
The PA Government’s budget for 1998, crowned the ‘People’s Budget’ held out many benefits to the average man.

Among them are incentives to the agricultural sector, fishing community, Tea and coconut smallholders, garment factories in outstations; plans to develop housing for the low income groups, and promotion of the handloom and handicraft industry.

But there were doubts whether it would reach them on time. Accountant cum NDUNLF Parliamentarian Ravi Karunanayake says from the consumers point of view the public will have to wait in hope for the actual implementation of these proposals and to enjoy the benefits. “It is likely that by the time these proposals get off ground it will be time for the next election,” he said.

“There is more show than actual happening. The ‘people’s budget’ has indirect expenditure, while the government will get itself into deeper trouble. Although proposals in relation to agriculture etc. are good, when they will be implemented is a question,” he added.

One of the key elements of the Budget has been to boost investor confidence in a bid to attract larger foreign investment.

Relaxation of foreign direct investment entry, enabling international companies to engage in retail and wholesale trading with a minimum initial investment of US dollars 150,000 and the promise for land and tax holidays for foreign agricultural business are among some of the measures taken to boost foreign investment.

The question as to how long it would take for the public to reap the benefits of the budget proposals remains a question.

Marketing Manager of Pugoda Textiles, Mahinda Jayasena said they would not be able to reduce the prices immediately. “We would take a joint decision with the rest of the local textile industrialists.”

Many of the textile industrialists shared the view that they are unable to reduce the prices due to several reasons, with one of them being that the production cost is too high to implement a reduction. As a result, the public will not be able to enjoy direct benefits of the budget proposals immediately as implied.

The Ceylon Textile Manufacturers’ Association in a statement said this exercise would result in the immediate loss of employment to nearly 30,000 persons in this industry as for direct implications of the budget proposals.

Mr. Karunanayake said the idea behind the programme was to create a shopping paradise where textiles etc. can be bought at cheap rates. “There are no definite dates or periods mentioned in the budget as to when people will actually get to wear clothes for cheaper rates or buy jewellery at lesser prices, or in the case of any other product for that matter. So, all will have to wait and see,” he added.

A jeweller who did not wish to be identified said he did not intend to reduce prices of any jewellery item immediately or for another few months at the least, the final decision is yet to be taken.

Many seem to be displeased with the proposals and are not willing to bring about the requested reductions as soon as possible.

An official of an import and export textile company said the government had taken an excellent and a bold step in relation to the textile industry. “We hope the proposals will come into operation as soon as possible. The sooner the better, although we are not sure as to how long it will take to be implemented in reality and not only in writing,” he said.

Last year the government promised that 40 per cent of the salary increase for public servants would come into effect from January 1997 and remaining 60 per cent from January 1988.

However when the budget proposals were made it was announced that only those drawing salaries less than Rs. 7,500 would be entitled to this 60 per cent increase from January and those drawing above that limit would have to wait until July.

Government servants in the higher grades do not welcome the move.

But the President of the Public Services Trade Union Federation W. H. Piyadasa, said the 60% increase which was promised from the first of January 1998 to public servants getting a salary less than Rs 7500 was fair, although there are no guarantees as to whether and when they will be implemented.

The business community welcomed the introduction of the goods and Services Tax (GST) or the Value Added Tax (VAT).

But an international tax consultant said he feared the introduction of other taxes as the rate of GST was less than what many expected.

Attorney and director of Investment promotion Consultants Ltd., P. Karalasingham described the GST as the most refined of the consumption taxes. “The minister should be congratulated for this,” he said.

Although many were expecting a 16 or 17 percent rate, a moderate 12.5 percent had been fixed, raising fears that other taxes also could be introduced, he said.

He described the budget as investor friendly, development oriented and employment generating and expressed hope that local and foreign investors would make use of the incentives offered.

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