AmCham welcomes trade and investment positive Budget 2016

AmCham in a statement yesterday said it welcomed Budget 2016, which proposes a number of changes primarily through private sector participation to boost trade and Foreign Direct Investments. 

The statement listed the positive aspects and the challenges foreseen:

This Budget supports private sector participation in infrastructure development, environment conservation, transportation, and management of export processing zones, tertiary education and vocational training among other sectors. Restructuring of unprofitable State-Owned Enterprises and allowing private sector participation by listing some of the entities in the Colombo Stock Exchange is also proposed. We believe these opportunities for private sector participation will spur investment and expedite implementation. 

Special focus on the tourism sector given its ability to have an immediate impact on the economy is encouraging. 

In this regard we believe focus on medical tourism, skills development, mandatory registration of all the hotels in the island, development of a state of the art MICE triangle, related tax holidays and encouragement for private sector participation in the industry is timely. 

FDIs will be encouraged through the replacement of BOI, EDB and SLTDA by the Agency for Development, which is expected to complete processing of applications for FIs within 50 days. Removing the 7.5% and 15% tax imposed on leasing land to foreigners, replacing Exchange Control Act with an investor friendly Foreign Exchange Management Bill and doing away with Securities Investment Account (SIA) to allow monies to be brought in through any bank account existing in the formal banking system are all viewed positively.

It is further proposed that any interest income from foreign loans will be tax exempt, to the extent of interest cost incurred on loans obtained from foreign banks or financial institutions. In addition the proposal to provide tax holidays and Government lands to those who invest in lagging regions in the country and the provision for foreigners to borrow 40% of their investment in condominiums from banks in local currency and the relaxation of regulations on foreign equity been brought in and that which could be borrowed within, we believe will motivate foreigners to invest in new markets and establish a ‘second home’ concept in Sri Lanka.

Further AmCham believes that the proposed exempt dividend income on investments made by non-citizens or foreign companies in listed shares through inward remittances, the non-application of 10% withholding tax on such dividend income, removal of the Share Transaction Levy (STL) that is imposed on transactions carried out through stock exchange and removal of stamp duty on share certificates will motivate foreign investments in listed companies. 

AmCham also hopes the liberalisation of the international freight forwarding which provides foreign participants with 90% of local employment to extend a maximum of 75% with a minimum investment of $ 5 million and the removal of restrictions on Global Logistics Companies, which have the scale to use Sri Lanka as the hub will generate global trade. The proposed introduction of $ 250,000 million investment for residence visa for a three-year period and $ 500,000 million investment for a permanent residence visa we believe will encourage stable and sustainable foreign investment growth.

The establishment of an Export Development Council of Ministers (EDCM), we hope would synergise the strengths of all the stakeholders involved in export promotion, development and facilitation by removing the duplication of work among institutions, ensuring regular monitoring of the progress, taking corrective actions and effectively moving towards the achievement of medium to long term targets on exports while the incorporation of an International Trade Agency (ITA) would pave way to enter into Free Trade Agreements (FTA) such as TPP and enhance exports through GSP+ scheme.

The setting up of Export Import Bank (EXIM Bank) and the revival of Underperforming Enterprises and Underutilised Assets Act No. 43 of 2011, replacement of the existing Imports and Exports Control Act which was a hindrance to many investors and the call on commercial sections of Sri Lankan diplomatic missions to provide a market guide on products and services of interest to local businesses periodically which will also be available online through the Department of Commerce and Export Development Board (EDB) are positive steps seeing by AmCham towards easing business and attracting investors. 

AmCham welcomes the overall simplification of the tax structure and the setting up of the national digital identity platform, which will enhance compliance and monitoring while reducing evasion. Revision of import tax on goods such as garments and cancellation of Super gain tax will help SL enhance its competitiveness among the rest of the region. We believe it is a definite boost in the international trade and investment sphere to be known as the lowest taxpaying country in the world, as the Budget reduces personal income tax flat 15% to 16% and corporate tax to 15% and 30% based on the industry. 

AmCham supports the focus on a knowledge-based economy envisioned by the increased budgetary allocation on education and skill development. We hope the three-tiered investment on the quality of teaching by way of continuous training conducted by the National Institute of Education (NIE), development of both soft and hard infrastructure, and offering a practical career oriented curriculum especially on the tertiary education will impact the competitiveness of the country.

In keeping with the innovative knowledge hub concept the proposal to set up an Innovation Accelerator, a platform that will combine the National Innovation Programmes (NIPs) of the Coordinating Secretariat for Science Technology and Innovation (COSTI) and the National Thematic Research Programme (NTRP) and the technology support schemes of the National Science Foundation (NSF), with clear deliverables directed towards three pillars of sustainability of economic development, social justice and the environmental quality, which is to be managed by the National Innovation Centre in the Ministry of Science, Technology and Research is seeing by AmCham as a much needed futuristic step taken for the betterment of the present and future generations.

The establishments of the ‘Colombo International Financial Centre’, digitisation of the payment system while discouraging cash usage in the economy, National Payment Platform (NPP) setting up of a private crib for insurance are all aspects we see as a positive step towards increasing trade and investment in Sri Lanka. Proposed blanket guarantee of finance company deposits, removal of leasing from commercial banks, increase in corporate taxes on banks and directed lending should be re-examined in relation to its economic impact and the ability to implement the same.

We believe given large-scale changes proposed in the Budget continues engagement of stake holders will be essential to ensure efficient implementation and avoid unintended consequences during this process. It’s also important to ensure fiscal discipline is maintained to achieve proposed aggressive fiscal targets set out in the Budget. Since the management of an efficient and effective execution and monitoring system is the key to reap results of the proposed policies, we urge the government to also develop the present capacities of governing bodies and individuals to rise up to this challenging task.