Economic stability is a sine qua non for a private enterprise led growth model: Mangala

Finance Minister Mangala Samaraweera said that over the years, a lack of economic stability has been a major hindrance to doing business in Sri Lanka where economic growth in the post war years was dominated by debt financed state investments. 

The Minister said that it is in this context that the government has shifted to a private sector, export, and FDI, led model of economic growth where the state will play a key role in smart regulation, setting a robust institutional framework, and targeted interventions to ensure social justice and equity. 

Speaking at the Sri Lanka Investment and Business Conclave 2018, organised by the Ceylon Chamber of Commerce yesterday, Samaraweera said that "economic stability is a sine qua non for a private enterprise led growth model."

The Minister pointed out that while the government was able to introduce several key reforms towards ensuring long term economic stabilization, Sri Lanka also achieved a primary budget surplus for the first time in many decades in 2017.

"The Inland Revenue Act came into force on April 1^st 2018, with the aim of simplifying and rationalizing the tax regime. This legislation creates a transparent and predictable tax regime, shifting away from ad hoc tax changes that hinder investment. Our objective is to establish a level playing field which will encourage competition and contestation which would be of benefit to consumers and a competitive economy," Samaraweera said.

 Investment opportunity

Samaraweera further said that a crucial element of the investment decision is ensuring a competitive business climate.

 "Ensuring smooth processes in starting up and expanding a business has been a major policy objective of this government. As mentioned earlier, the Inland Revenue Act has simplified the processes pertaining to taxation. The business registration process was streamlined and Register of Companies (RoC) now facilitates business registration through a single website allowing company registration within a day," he added.

He said that several other steps relating to ease of access to and registration of land, construction permits, and other elements relevant to the business climate is also being addressed by the government.

 Connecting with the globe

Samaraweera said that Sri Lanka is in the process of implementing comprehensive unilateral trade liberalization that includes the rationalization of para-tariffs which add costs to business and consumers.

 In addition to unilateral trade reforms, the government is in the process of entering into strategic trade agreements with key regional economies.

"We recently signed our very first comprehensive FTA with the Singapore and two other comprehensive FTAs are being negotiated with China, India, and other ASEAN nations. Along with GSP + Sri Lanka will soon have market access to India, China, and Europe, making the country a unique destination for investment. This network of FTAs will enable Sri Lanka to meaningful integrate into regional value chains to drive future trade and economic growth," Samaraweera added.

Reforms ahead

Touching on reforms, Samaraweera said that the government has been working on bringing in key reforms during last two years with Budget 2018 marked as a milestone of reform agenda. A new Foreign Exchange Management Act was introduced last year, easing many restrictions imposed on external sector transactions.

The reform agenda items include, 

1. i)Eliminating para- tariffs on imported inputs and components
2. ii)Removing barriers to trade and FDI in services

iii) A “Single Window” for investment approvals

1. iv)Eliminate Non-Tariff Barriers in exporting as well as importing goods
2. v)Targeted promotion of identified sectors for investment in Sri Lanka
3. vi)Establishment of new export-processing/investment zones

vii)  Improvements to business climate through digitization of key processes such as land registry and integrating government agency approvals.

 The Minister emphasized that the government is committed to further facilitation of the investment climate through a well thought out programme for eliminating barriers in the business environment. 

"With a clear set of comprehensive investment incentives spelled out, Sri Lanka is poised to be a major source of investment for companies looking to use Sri Lanka as a base to tap into the fast growing Indian Ocean region," the Minister said.