The recent budget proposal on reclaiming 37,000 hectares of plantations coming hot on the heels of the expropriation bill doesn’t project the right message, according to corporate leaders.
"The proposal to reclaim these lands should've been avoided as it’s just after the expropriation bill," Suresh Shah, Vice Chairman of the Ceylon Chamber of Commerce (CCC) noted at the panel discussion which followed the KPMG Sri Lanka budget seminar titled “A Growth Agenda” recently. He told the Business Times on the sidelines of the seminar that this proposal didn't send the right message to the public. The 2012 budget proposes taking back of 37,000 hectares of unutilized lands by plantation companies and to redistribute it amongst smallholders to a maximum of two acres each on a 30-year lease basis.
Well-known management consultant, Ranel Wijesinhe commenting on the land issue, however noted that the 37,000 hectares from 27 regional plantation companies were unused lands. He added that this move will not make much of an (business) impact.
He also called for the CCC to make representations to the government as to whom these lands should be given to. Mr. Shah also pointed out that while focus on import substitution is there in the 2012 budget, there’s no export (enhancing) focus. “Trading within (the country) makes it difficult to create wealth. (This) budget doesn't give a feel of a commitment to build on exports," he explained.
Some business leaders at this seminar also told the Business Times that the government intervention coupled with the controversial expropriation bill will create a grim outlook for the country’s investment climate in the economy while exhibiting wrong signals to the more anticipated and essential Foreign Direct Investments (FDI). “This is something that the government has to address immediately by being more informative about its intentions towards the investment climate to make the development plans a reality,” a corporate leader noted.
Rajan Brito, Deputy Chairman and Managing Director of Aitken Spence PLC noted that the 3% rupee depreciation may see some firms losing in the short term, but in the longer they will make their money. He said the online visa system will affect tourists esecially from India. Sri Lankan visa fees have also been revised as SAARC countries - US$ 10 and others countries - US$ 20.
Indrajith Coomaraswamy, former Deputy Director Commonwealth Secretariat-UK, noted that it’s rather unorthodox to announce the exchange rate depreciation through the budget when it’s more the call of the Central Bank which sets the monetary policy.
Presenting an analysis of the fiscal proposals, Premila Perera, Partner – Head of Tax of KPMG in Sri Lanka, noted that the budget has shown more clarity on its incentive framework. Profits and income from the redemption of a Unit of a Unit Trust or Mutual Fund is clarified to be exempt from income tax, she said, adding that with this the conduit nature of a unit trust is recognised.