Points to ponder: Mixed signals

During the Q&A session, an audience member who identified herself as Amila Bandaranaike employed at the Central Bank of Sri Lanka posed three observations that we bring to your notice.

Investment: The Government is laying the stage for infrastructural development, essentially a huge gamble. The private sector needs also to move in as it offers a huge area of potential. Signals being given out by the Government vis-à-vis the words of the Government are not positive in that sense. The private sector is not encouraged to move in to these sectors.

Labour market: As an expanding market, we need capacity. The Government gets revenue of Rs. 4 billion from migrant workers, which needs to increase to Rs. 6 billion. So the Government wants people to move out; at the same time however you say you need people to stay in to develop the country. Here again there are mixed signals.

Information: The economic information coming out from the Government is often contradicted. For example, during the recent floods, a particular Government minister stated that 30-40 per cent harm had occurred in paddy cultivation and that things were looking bad. The very next day, another minister of the Government said everything was under control; inflation was not fluctuating, etc. Such contradictions would go on to undermine the other good work done by the Government. This also sends out mixed signals to investors.

Amunugama’s response:

Investment will take some time to come in. For example, international hotel chain Shangri-La will take another two-and-a-half years to come into operation. So the question is, why isn’t more investment coming in? But the public investment programme is on track. The difficulty is from the private sector investment – it certainly is not as much as we expected.

The reason maybe that the path is still not very clear for investors. Many investors borrow from banks and banks are very stringent these days. On trading we offer 33-year leases but what they expect is a 99-year leases or outright transfers. Domestic banks are not so ready for such risk takings. It is a difficult process and the bureaucracy is not very high.

There is a new strategic investment law coming into place soon, this will be the answer to most issues. Under this we look at abolishing the tax concessions given under the BOI. As at now there are two regimes for tax concessions – the BOI and the Inland Revenue. With this law it will only be under the Inland Revenue. Special projects such as South Port and Shangri-La falls under this law and have received the 99-year concession.

There are hundreds of laws that prevent investors from coming in, this law however will put things right, we hope.

We need both migrant workers as well as those working inside. Most of those who go as migrant workers have little or no skill. Those who migrate are mostly from the rural areas and they have a tremendous impact on the lifestyle of their family members as well as the country on the whole. Rural areas need the support and the kind of stability they receive via migrant workers. There are a lot of small and medium benefits for the rural population.

We cannot prevent politicians from saying what they say. It is up to you to find out what is right and what is wrong.