1 Hon. Speaker, it is with great pleasure that I am presenting my fourth Budget to this august house. Mahinda Chinthana, Ten Year Horizon Development Framework is being widely implemented across the country. The humanitarian operation to relieve the country from the grips of terrorism has reached its final phase. A democratic environment for a political solution in which the power of all people will be amply strengthened is emerging. A revival of religions, cultural and moral values has taken place. We have reached a decisive juncture in our journey towards peace and development. Exactly half of my term of office has been completed. At this point, it is important for all of us to look at our achievements during the past 3 years in retrospect and to know how we propose to go on our journey in the 3 years that is ahead of us.
02. Hon. Speaker, I wish to commence my speech with a brief note on the situation that prevailed in this country at the time I assumed office. I am sure you would recall that the North and East of our country were controlled by terrorists. These areas were even declared as L.T.T.E controlled areas. Illegal banking and Court operations were paid a blind eye. Innocent children were used as child soldiers and women were used as suicide bombers while operating large terrorist outfits in those areas. Terrorism was permitted to be operated in wide scale not only allowing damage to human lives and property but also our economy and the democratic image of our country. There was no stable policy towards defeating terrorism. Innocent civilians in the North and East were subject to the inhuman acts of terror and harassment for over 25 years. The LTTE carried out brutal terrorist attacks and destroyed not only key economic centers such as the Central Bank, Oil Refinery, Airport, and the World Trade Center in Colombo but also globally acclaimed places of worship such as the Sri Maha Bhodiya and the Sacred Tooth Relic. Virtually, all our Tamil leaders who were widely respected in our society were brutally murdered. The LTTE killed more Tamil leaders than Sinhala leaders and virtually eliminated democratic representatives of the Tamil people. The LTTE murdered not only those leaders who were dedicated towards peace and development but even a Prime Minister of India who was a close friend of our country.
2 When Provincial Councils were established in 1988, the LTTE terrorists did not permit them to be functioned in the North and East. Although many Governments put forwarded many proposals from time to time towards achieving peace, the LTTE was not interested in moving away from terrorism. I am sure you would also remember that there was even a Peace Accord that was signed with these brutal terrorists in 2002. It is a known fact that this Accord even acknowledged that the LTTE could administer as per their plans, in the LTTE controlled areas. In the pretext of Tsunami rehabilitation efforts, the LTTE was in fact consolidating their strength through Tsunami Rehabilitation Committees. The ulterior motive behind all these attempts was to strengthen as an armed force but not to embrace the democratic process. This situation became uncontrollable and spread outside the North and East, affecting the entire country. The situation got further complicated due to external interferences. Whatever the remaining democratic machinery that was in existence in the North and East was also destroyed with the signing of the Peace Accord by the United National Front Government in a short-sighted and hasty manner. Tamils, Muslims and Sinhalese in the East were demeaned and stressed. Security Forces were weakened. What I promised in Mahinda Chinthana is to move away from this unsuccessful old path already taken. The path towards a undivided country, a majority consensus and a dignified peace as chosen in Mahinda Chinthana, after having realized the dire consequences of the old unsuccessful path that the country had already travelled.
04. Hon. Speaker, on the other hand the Neo-liberal globalization process that was followed by our country for over 30 years, paid economic dividend only to a very small segment of our society. We were fast realizing that this process is unsuccessful. More than half of the GDP was Colombo based. Agricultural development was forgotten. Paddy fields were neglected. They were filled and used for other commercial activities. Rubber and tea cultivation was destroyed by permitting such lands to be blocked out and sold. The need to develop irrigation, highways, electricity, water supplies and rural development was also forgotten. In short, rural villages were so neglected and were made to distant from Colombo as though they were no longer a part of Sri Lanka. The country suffered a tremendous mental setback, realizing that not only the Government is unable to fulfill its primary obligation of being able to combat terrorism and bring about peace but that it has no will to construct even a rural road. Pushing aside the Professionals and the intellectuals of our country and using foreign consultants instead, became a habit. The public sector was pruned to a destructive level. Picketing campaigns by unemployed graduates became a common sight. Workers engaged in industrial actions due to closure of large factories such as those at Ambilipitiya and Thulhiriya. State Institutions such as the Food Department, CWE, Paddy Marketing Board, CTB , State Engineering Corporation and the Government Factory were being wound up. Alternate Institutions were being setup in place at Sri Lanka Customs, Inland Revenue Department, Railways and People’s Bank. Tax Amnesties that were introduced made a detrimental impact on the tax system. Large scale tax frauds took place. Banks such as Pramuka Bank, crashed. State revenue was low. Debt burden of the country increased having raised debt without building - up corresponding national assets.
05. The negligent attitude adopted towards building national roads and a network of bridges, transportation, electricity, irrigation and port development for over 25 years, hampered opportunities towards developing a modern economy. The oil dependent power generation process that was adopted was not only environmentally unfriendly but also proved to be expensive and created a debt burden that was difficult for the country to bear. Although over 40 years has lapsed, no action had been taken to improve facilities at the Sapugaskanda Refinery in order to strengthen the national economy. In fact there was a plan to hand over this facility to the private sector. There was a fictitious belief that all activities could be done through the Private Sector. While boasting of achievement of other countries in the region, action that should have been taken to place our country on par with them was neglected.
3 Hon. Speaker, our moral values deteriorated. Drugs and gambling was widespread in the country. Religious rituals and cultural bonds began to slip away from the society. People got distant from places of worship. Our sacred land became a country that consumes a high quantity of alcohol. Social discipline deteriorated to an extent that even children were susceptible to drugs, casinos and night clubs. Related activities were admired as attractive investments. Such investments were promoted with the grant of even BOI concessions. Child molesting, rape and underworld as well as organized crime, were widespread. Mahinda Chinthana Ten Year Horizon Development Framework for a New Sri Lanka was introduced with the hope of changing the dangerous economic, social and terrorists associated political path, which I just spoke of. It is to implement this that we got the mandate of our people in 2005. The main objective of Mahinda Chintana Ten Year Horizon Development Framework for a new Sri Lanka was to bring about an economy and a civilized society in which there is no fear or suspicion and in which value could be added to our national heritage and national resources. We are dedicated to bring about the required changes in all spheres during the past three years. In this process, adverse forces also got activated and surfaced in many forms. Despite all odds, we are determined to move forward on the chosen new path.
Our Approach
07. Hon. Speaker, we have come to a stage in which we believe that we should and we can, eradicate terrorism. However, we have not disregarded the need for a political settlement. Terrorists were initially permitted for 10 months, to enter into a peaceful approach. Brutal terrorists who were not amenable to a democratic solution proceeded to escalate violence with the massacre of innocent civilians including mothers and infants at Kebithigollewa and proceeded to close the Mavil Aru anicut, denying even drinking water that is a gift of nature to the people. It is in this background that humanitarian operations were launched by our armed forces in the East, to rescue civilians, eradicate terrorism and to bring about a lasting peace to our country.
2 Hon. Speaker, the humanitarian operation that commenced in July 2006, and extended to cover the entire Eastern Province was completed with the liberation of Thoppigala (Barans hat). All displaced people were resettled within 9 months. Basic facilities were reconstructed. By the end of 2007, Local Authority elections were also conducted in those Districts. In early 2008, Provincial Elections were conducted and a democratic administration was established in terms of our Constitutional framework. Rs. 25,000 Million had been spent upto now, for the development of the East. Revival of the East as promised in Mahinda Chintana was made a reality. These areas have become giant contributors of our national production process.
3 It is our responsibility to eradicate terrorism to create a democratic environment and development in the North as well as to enable people to have a free life. This is also the expectation of people living in those areas. Our security forces were successful in liberating Mannar and Vavuniya Districts, and boarder areas in Trincomalee, Anuradhapura, Mullativu Districts and Weli-Oya. The secret Madhu Shrine was also liberated and our forces have develop this holy place of worship. 26th page of Mahinda Chintana states that, the Madhu church and the surrounding would be developed to protect the sacred area and propose to provide opportunities to all Catholics to visit this holy place, that they could not visit for over 25 years.
4 Hon. Speaker, I am glad to note that at this moment the Budget is being presented, our troops are advancing their operations having rescued a vast area in the Kilinochchi and Mulativu Districts. I am so glad not only on account of the bravery and victories of our armed forces. I also value the thoughts from a humanitarian point of view, that the day on which we can rescue around 200,000 of our own fellow citizens living in the affected areas from the brutal grips of terror, is near. Our security forces are fighting against the worst terrorist group in the world, without causing any destruction to civilians, dams, hospitals, school, temples or churches. These operations are truly commendable. Hon. Speaker, I propose a special honour of this august house, be offered to our security forces.
5 Hon. Speaker, it is to eradicate terrorism through this true humanitarian exercise that we spent a substantial amount of money on national security during the last three years. This Parliament has fulfilled a tremendous social responsibility by giving the required approvals to incur such expenditure. Unfortunately, certain liberal members in the opposition and peace agents saw these as wasteful expenditure. However, we view such expenditure as a priority need towards establishing a stable economic environment to restore democracy, consolidate human rights and achieve economic development. People are committed to make any sacrifice to relieve our country from terrorism and restore a peaceful living environment, since they do not intend to permit their future generations to go through the same sufferings experienced for over 25 years. A country that is free of terrorism is also the prime need of private sector investors.
12. The entire East and the liberated areas in the Vanni and Northern Province have rejoined the domestic production process. Major improvements will thereby be achieved in agriculture, fishery, milk production and tourism sectors. Terrorist activities are now confined to a few Divisional Secretariat divisions and their strength is gradually deteriorating. I know, that the day on which such Divisional Secretariat divisions will be relieved by our heroic forces without harming any civilians or public property, is not far away. Even during this period the terrorist can join the democratic process. We are committed to rehabilitate such terrorists and to absorb them to the society as productive citizens. Therefore, my earnest plea to the terrorist is to lay-down arms and join the democratic process, even at this last moment. If not, they would be militarily defeated. Further, we should also take steps to conduct Local Government elections, and Provincial Council Election in the North. We should also take simultaneous action to implement our development plans on an urgent basis to re-build infrastructure facilities which had been destroyed by terrorists themselves in the North and also take immediate action to develop the North which remained neglected without any development for nearly 30 years. 6 Hon. Speaker , We must liberate the innocent people living in Kilinochchi and Mulativu mortally scared of the firearms of the terrorists. We should assist them. They have had enough sufferings. We must improve the livelihood of these innocent people by developing schools, hospitals and electricity and transport facilities in those areas. The people in those areas will act with patience till we affect these measure on a priority basis. Our security forces are engaged in operations in such areas to liberate such people in the name of humanity. I appeal to such innocent people to join hands with the forces.
7 Hon. Speaker, we rejected “Regaining Sri Lanka” which underestimated local entrepreneurship and viewed any problem with a blind eye in the guise of globalization and neo-liberalism. We proposed an alternate strategy through ‘Mahinda Chinthana’ which would strengthen the domestic economy, domestic identity, and a new value to national wealth. We have realized through our own experience and by looking at the global experience, that economic and social welfare cannot be successfully achieved through total reliance on the private sector or only through a market economy.
8 Notwithstanding funding constraints, we stopped relying on sale proceeds of public assets to bridge the budget deficit. Leave alone compromising deployment projects, we did not abandon constructing even rural roads, saying that there are no funds available. We neither compromised development or welfare expenditure placing emphasis only on defense expenditure. We did not rely solely on the World Bank to raise funds. Measures were taken to increase bilateral aid and Government revenue. We commenced the construction of mega irrigation projects such as Moragahakannda, Uma Oya, Kirindi Oya and Daduru Oya to make an economic revival in irrigated and backward regions. Funds were raised and steps were taken to modernize our road network in a manner that would cater the demands of at least another 20 years. Priority was given for the development of rural and provincial roads and bridges. Development of railways and the highways system has also been given priority in the Government’s investment program.
9 Mega projects such as the development of Colombo, Hambantota and Oluvil Ports have been commenced to link our country with the global economy. Steps were taken to construct large power generation plants at Norochcholai, Upper Kotmale and Kerawalapitiya. Water supply projects are in progress in all main districts to enhance the availability of drinking water. Although the required funds were in place, it is unfortunate that terrorists did not permit us to construct the Jaffna Teaching Hospital and the Jaffna water supply project. We believe that these projects can be commenced next year. 17. Hon. Speaker, in addition to the large number of private investments that have taken place towards meeting urban needs of Colombo, construction of the Performing Arts Theater is also in progress. The International Convention Centre and the Administrative Complex being build at Hambantota, the Greater Colombo Urban Developemnt Project, International Stadium at Diyagama and new townships being built under ‘Nagenahira Nawodaya’ are also key projects in this transformation. Many projects have been commenced to preserve the environment, as envisaged in Nilla Pirunu Ratak – Pivithuru Parisarayak. A mega project for garbage disposal will be commenced next year, at a cost of Rs.150 Billion.
10 The disparities that prevail in education as well as in health infrastructure at provincial level are a problem. Steps have to be taken to avoid the resultant effect of overcrowding in urban schools and the eminent closure of rural schools. We propose to eliminate these disparities by developing over 300 Isuru Schools across the country and also by introducing information technology and sports related facilities to such schools. Priority was accorded to upgrade technical colleges to university status, setting up the Rajarata Medical Faculty, increase the number of vocational training centers and improve facilities in universities. We also upgraded the Defence Academy to University status. We have adopted an approach to minimize inter-provincial disparities by equipping district hospitals with all modern facilities and by setting up teaching hospitals with improved technology, operating theatres and staff accommodation facilities and setting up of Godagama new hospital.
11 Hon. Speaker, recent Governments of country tried to create a picture of economic development that is detached from agriculture and local industries. A trend was created to import rice, flour, sugar, wheat, milk powder, vegetable, fish, medicine and crops which can be produced locally and even industrial products such as textile, footwear, boats and vehicles. Through the provision of duty rebates, people were tempted towards consuming milk powder. The local dairy industry was neglected. There was a failure to ensure encouraging prices for farm products. BOI concessions were extended not only to import food for human consumption but even animal feed. Local producers were not given any concessions for parallel investments. This clearly demonstrates that we did not even attempt to produce animal feed within the country.
12 Our country being an island did not even have a strategy to make itself self sufficient in salt. The potential to use rain water for agriculture purposes and even as an export had been totally disregarded. Since imported goods were provided at concessionary prices , local producers were trapped in a framework within which they had to face unfair competition . Even our leaders had started to endorse this policy as correct and effective.
13 Hon. Speaker, the policy of ‘Mahinda Chinthana’ is to encourage local producers and production. As such, imposition of Cess, introduction of loan schemes and extension services were done to promote local production. Our country managed to escape from the prevailing global food crisis since we took a firm stand to move away from the aforesaid economic policy in 2006 itself. We were able to give encouraging prices to farmer for crops such as paddy, wheat, onion, potatoes, fruits and liquid milk. A subsidy of around 96 percent of the price of fertilizer, was given to paddy farmers. Substantial investments were made to promote the production of high quality seed paddy, provide extension services and loans to farmers and to revive the rice milling industry. Our policies helped farmers to get richer and enabled large foreign exchange savings. However, still we spend about US$ 800 Mn. to import food items. We need to develop agriculture, milk production, fisheries etc. on an accelerated basis if we are to make further savings. The income of farmers could thereby be increase and poverty could also be alleviated. Food security could be ensured. Our external reserves could also be increased. This is why we are implementing ‘Api Wawamu - Rata Nagamu’ policy strategy as a national priority.
14 Hon. Speaker, the industrial sector also experienced a reawakening. Production of motor cars, fishery boats, high value tea, garments, footwear, gem & jewellery, perfumes, furniture etc. have seen new beginnings within the country. Even security forces have ventured into producing their uniforms, boats, security vehicles etc. within the country in addition to being engaged in the important task of combating terrorism.
23. Hon. Speaker, I was able to mobilize aid to commence mega investment projects from every state visit that I have made so far. Substantial development aid was received from countries such as China and Iran. Increased aid was mobilized from countries such as Japan, India, Pakistan, USA, France, Australia, The Netherlands, Denmark, Sweden, Hungary, Spain, UK, Korea, Saudi Arabia and Kuwait. This is how we were successful in increasing foreign aid up to US$ 1,000 million towards development activities, within the last 3 years. If not for development assistance extended by our friendly countries, we would not have been able to proceed with mega development projects such as Norochcholai coal power plant, Moragahakannda and Uma Oya irrigation projects and Hambantota port. Operations of the Sapugaskanda oil refinery were proposed to be given to the private sector for the next 25 years. However, with assistance from the Government of Iran steps are now being taken to increase the production capacity of this CPC refinery to 100,000 barrels per day. We will thereby be able to refine the entire national demand of oil. We should appreciate the 7 month credit facility extended by the Government of Iran that helped us to successfully face the global oil crisis. World Bank and the Asian Development Bank have allocated a US$ 1,700 Million for development projects, for the next 4 years. In the above programs, priority has been given to increase the capacity of 11 main irrigation tanks including Parakrama Samudraya, Ridiyagama, Kaudulla, Thabbowewa, Chandrikawewa, Inginimitiya and Giritale and to develop provincial and rural roads.
Challenges
24. Hon. Speaker, the global oil prices hikes witnessed during the last 3 years are massive. A barrel of oil that was US$ 40 went up to US$ 147 by July this year. Foreign exchange spent to import oil in 2005 was US$ 600 Million. Although the oil prices are presently low, we have to spend around US$ 3,000 Million towards importation of our oil requirement. It was around US$ 2,500 Million last year.
The foreign exchange required to import fertilizer and raw material also increased consequent to the steep escalation of oil prices.
15 During this year, the price of all essential commodities increased by 100 percent. The crisis escalated to such extent that compelled even certain countries with open economic policies to proceed to ban exporting food. Consequent to the oil price escalation, inflation rose to around 25 percent. In spite of pressures that were exerted to import rice and predictions given that a kilo of rice would be around Rs.100, we successfully overcame such issues. Those who belong to the working class faced this situation with the Government, with a proper understanding and responsibility. This was indeed a strength to us.
16 Hon. Speaker, we have completed constructing over 100,000 houses for those who were displaced by the Tsunami disaster and also reconstructed the affected fishery harbours, roads, bridges, schools, hospitals etc. During the past 3 years, not only we were able to successfully rebuild the affected regions faster than other countries that faced this disaster, we also managed to implement a program through which the impact of such a disaster could be minimized.
17 Hon. Speaker, one of the greatest challenges we are faced with is to rebuild the public sector. We experience a sever shortage of man power of teachers, doctors, nurses, tax and Customs officers, technicians due to the employment freeze that was there in the state sector for many years. The operations of state institution were consequently weakened. Substantial quantum of money had to be spent to resolve salary anomalies which have gone unattended for many years and due to the new salary structure that was introduced. I wish to note that we are the only government that took care of security concerns and development priorities while also not forgetting to develop the public sector, while ensuring annual recruitments and salary increments as well.
18 Hon. Speaker, the global economy is presently facing a serious crisis. Key Financial Markets including the United States and Japan have collapsed. In this backdrop, the United States alone has allocated US$ 700 Billion in an attempt to prevent their economy from crashing. In this background, the United States and United Kingdom have moved to nationalize major banks and financial institutions. In the meantime, the economic crisis has started to affect Asia and the Middle East as well. Major foreign currencies have weakened. As a result, the prices paid for our main exports such as tea and rubber, are going down.
19 Hon. Speaker the European Union has adopted a new trend, wherein conditions are being attached to concessions granted by them such as GSP+. It is unfair to engage in international trade and investment within a framework through which political objectives are tried to be achieved. As much as we do not permit terrorists to operate in the North at the cost of innocent people, we will also not permit other countries to accomplish their political agendas through our export industry. We are a proud nation that is not second to any developed country which respects fundamental rights, human rights, rights of women, respect labour laws, laws preventing the use of child labour, environmental laws, gender equality, election and civil rights
30. Hon. Speaker, We propose to implement Mahinda Chinthana - the Ten Year Development Strategy, giving consideration to views and proposals of everybody. We have direct dialogues with Trade Unions to be able to address problems of the working class who are serving amidst economic hardships. Through this process we have worked towards developing industrial peace within the country. Around 90 strikes that we experienced during the year 2002 had reduced to less than 20 by the year 2008. Workers are conducting themselves with greater dedication and tolerance, being aware of global trends and the situation that is prevailing in the country as well as the Mahinda Chinthana development program. We have maintained an economic growth of over 6 percent in the last 3 years.
Economic Progress
20 Amidst economic challenges, country’s GDP has grown by an average of 7 percent. The Per capita income which was US$ 1,000 in 2004 increased to US$ 2,000 this year.
Unemployment was reduced to 500,000 from 800,000. We generated 300,000 new job opportunities. The rural income thereby increased since those who benefited most through these new job opportunities were the youth of such areas.
We have constructed a large number of concrete roads under the Maga Naguma program connecting many villages. Many Gama Naguma and drinking water projects were also implemented at village level. During the past 3 years, we have spent around Rs.39,000 Million on account of such projects. In addition the villagers also contributed with a 20 to 30 percent labour input. As such, the amount of money spent towards village development as well as participation of villagers was immense.
Capital Expenditure that was Rs. 177 billion in 2006 was increased to Rs. 278 billion to implement ports, power plants, railways and irrigation projects that were so far neglected. Rs. 360 billion has been allocated in the Budget estimates for such projects.
Government income that was Rs. 400 billion was increased to Rs. 700 billion.
Tea sector was transformed to be a US Dollar 1 Billion export industry. Tea, Rubber, coconut and minor export crops became very popular among tea Small holders and contributed towards improving their income.
Despite a heavily competitive environment, necessary encouragement was provided for the garment industry to move forward and record itself as a US$ 3,500 million industry. Numerous incentives were granted to this sector throughout the last 3 years. A construction boom was created to revive the local construction industry that had collapsed and this sector has now recorded over a 9 percent annual growth. Today several of our own construction firms have come to the forefront. These firms are entrusted with a lot of responsibility in the backdrop of major construction and development work that are envisaged in the North and East. The minimum monthly wage of a public servant was increased from Rs. 7,900 to Rs. 11, 730. The Cost-of- Living allowance wa
Budget Speech 2009
Part II
Mahinda Rajapaksa
President and Minister of Finance & Planning 06th November 2008
PART II
Budget Proposals -2009
1 Hon. Speaker, We have now come to an important juncture. Having liberated the East from the grips of terror we are now in the final stage of liberating Vanni and the North. While Nagenahira Udanaya has become a reality, we are hopeful of Uthuru Vasanthaya as well. Democracy has to be strengthened in the North through Provincial and Local Government elections. In the same manner that a political consensus is sought, urgent development activities that need to be implemented in the North should also receive priority. After many decades, there is an opportunity immerging to implement a development strategy that would bridge the North and South. On the other hand, virtually all major development projects in terms of Mahinda Chinthana Development Framework for a New Sri Lanka, are being implemented at various stages. Oil exploration work has also commenced. National security has been strengthened to enable the private sector to expand investment and production. Lacunas in the public sector are being addressed to make it productive and people friendly. Action should also be taken to ease the cost- of- living. In the midst of all this, the sudden collapse of the global economy has posed new challenges to our economy. We have to steer the economy forward, while managing these challenges as well. This Budget has been prepared having taken into consideration all these facets.
2 Hon. Speaker, the security forces are liberating the North for all of us. Their lives are equally valuable as the lives of those living comfortably in Colombo. They are protecting the country at the cost of their lives not for any political gains but targeting the future of this country and for peace and development for the next generation. Before I outline the proposals, I request all of you that we unite and dedicate ourselves to bring about sustainable peace, development and welfare in our country. As much as soldiers are fighting to liberate the country from terrorist at the cost of their lives. I strongly believe that our country can achieve national security, peace and economic prosperity through such unity.
3. Flourishing Society - Sustainable Development Hon. Speaker Mahinda Chinthana Development Strategy envisaged a realistic national economic policy. Its thrust was to promote local producers, utilize foreign investment productively and blend all this to bring about our national identity. We believe that we should produce all what we can, within our country. I therefore, wish to initially make certain proposals to promote domestic production.
o I propose to increase import duty on wheat grain from 6 percent to 10 percent to discourage the consumption of wheat flour and to promote the production of paddy and other grain.
o A 5 percent Cess will be imposed on wheat flour to promote the production of locally made flour such as rice flour and kurakkan flour.
o To promote local agricultural produce such as black gram, kurakkan, cowpea and sesame seed, I propose to impose a 15 percent Cess on similar imports.
I believe that these proposals will encourage maximizing the production of rice and other grain throughout the country in the forthcoming Maha season.
o Only a small quantity of around 25 percent of the demand of liquid milk is produced locally. I have stated in Mahinda Chinthana that we should get away from this dependency on imported milk powder and instead become a country that is self sufficient in milk. Our dairy farmers are engaged in production of milk in the North, East, South and North West, North Central and Central Provinces. I propose to increase the special commodity levy on imported milk powder import from Rs. 5/- to Rs. 15/- per kg. to further encourage dairy farmers. Money will be set aside from the levy so collected to import milking cows, promote breeding centres and set up small and medium milk
farms on a scientific basis and to broaden the veterinary services. This will also enable milk farmers to secure remunerative prices.
o Cultivation of sugar cane and manufacturing of Sugar was progressing in Badulla and Monaragala districts. These industries faced a draw back due to the closure of Hingurana and Kantale Sugar factories. I propose to increase the special commodity levy on imported sugar from Rs. 14/- to Rs. 16/- per kg. in order to encourage the local sugar industry and sugar cane cultivation. This will also promote the Palmyrah industry in the North and Kithul industry in the South.
o A Cess of Rs. 25 / kg on rubber latex and Rs. 4 / kg on tea will be imposed on imports in order to maximise domestic usage of tea and rubber.
o There is injustice caused to local producers of animal feed since BOI registered companies engaged in such production enjoy tax concessions. I propose to impose a 25 percent Cess on imported maize and animal feed applicable to all importers including those in the BOI regime. This will be a major incentive to those farmers getting ready to cultivate around 70,000 hectares of maize in the forthcoming season.
o Paper manufacturing factories at Ambilipitiya and Valachchenai were closed down due to neo - liberal policies that were followed. We took steps to revive these two factories. I propose to impose a 5 percent Cess on paper imports to modernize these two factories and make them commercially viable.
o Furniture manufacturing industry in various parts of the country including Moratuwa has witnessed a speedy improvement. Local manufactures are in fact exporting high quality household and office
furniture. I propose to impose a 15 percent Cess on all imports of such items to further incentivize related local manufacturers.
o To incentivize the manufacture of foot-wear, hand bags, belts and other leather goods, I propose to impose a Cess of Rs. 200 / kg. on all imports of such products. I propose to exempt all raw material required for such manufacturing from import duty and VAT. Steps will be taken to improve the leather industry alongside the garment industry.
o I propose to increase the Cess on polythene and plastic from 1 percent to 5 percent to discourage the usage of such products, in order to preserve the environment.
o We have achieved good results in our efforts to improve the manufacture of ayurvedic medicine by implementing Osu Gammana -projects cultivating ayurvedic plants. I propose to increase the Cess on ayurvedic medicine imports to prevent the undue competition faced by our indigenous medicine industry.
o The importation of fruits and vegetables has caused a heavy threat to domestic agriculture. I therefore, propose to increase the existing Cess on all imports of fruits and vegetables.
o I propose to increase the Cess on sarees, sarongs, ready made garments and material imported for local consumption by 50 percent to improve the quality of handloom and other material manufactured in Sri Lanka.
o Our manufactures have graduated to be able to export fridges, fans and ceramic-ware. I therefore, propose to increase the cess on imports of such items by 50 percent.
o Chocolate, biscuit and sweets manufacturing are businesses that our manufacturers are very familiar. As a further incentive to promote the production of such items, I propose to increase import Cess on Chocolates, biscuits and sweets by 50 percent. I propose to implement regulatory standards on such imports with immediate effect, to ensure that they do not contain melamine.
o We promoted domestic motor vehicle manufacturing. Locally manufactured vehicles are now in the rise. Manufacturers of motor bicycles should also be promoted. I propose to continue the incentives given to such industries.
o Funds and technological know-how required to improve product standards of the handicraft industry are arranged by the National Craft Council. I therefore, propose that the Cess imposed on all related substitute imports to be increased by 100 percent. Import duty and VAT on raw material such as copper, silver will be exempted to minimize the production cost of local entrepreneurs.
o I feel that it is a shame having to import around 50 percent of our salt requirement. I therefore, propose to impose a cess of Rs. 10/kg of imported salt to promote local salt production to reach self-sufficiency and develop as an export industry.
Consequent to the above proposals that were made for local industries, we will be able to produce high quality products using latest technology. The Production economy will thereby broaden at district level. Local entrepreneurial community will thereby emerge and we will be able to achieve sustainable development. In the backdrop of the global economic crisis, our main objective should be to improve local production. We managed to face the recent global food crisis since our rice requirement was produced within the country.
1 Milk Subsidy for children of low income families I propose to give a monthly allowance of Rs.200 for children between the age of 1 to 5 in Samurdhi and low income estate families, to reduce the cost-ofliving of such families and also to promote liquid milk consumption among such children. This will also promote the production of liquid milk. The Ministry of Child Development and Women Empowerment and the Samurdhi Authority will issue stamps for all eligible families from January 2009. I propose to allocate Rs. 900 million for this purpose.
2 A Land in harmony with nature Hon. Speaker, I have explained in Mahinda Chinthana that my aim is to achieve sustainable development in close liaison with the earth, the animals and fauna and flora. Environmental preservation should be ensured by growing trees alongside roads as a part of highways and urban development that is taking Place Island wide. Special projects should be launched to plant trees in temple, kovil, mosque, and church and office premises. Fauna and flora in river banks all over the country should be nourished and cared for. It is proposed to develop such areas as Green Circles. I proposed to allocate Rs. 150 million to setup plant nurseries, avail plants and provide other required facilities.
3 Preservation of native habitats Preserving Dambana, Rathugala, Pollabadde, Henanigala, Dalukana being villages occupied by our native inhabitants will do proud to our nation. I propose to allocate Rs. 50 million to preserve the natural habitat of such villages, their life style and earning patterns as well as their traditional customs and rituals.
7. Preservation of Elephants The human elephant conflict has reached a peak and is a concern for both parties. These conflicts have caused loss of human life, destruction to agricultural assets and affected day to day lives of those living in such areas. This has also caused major harm to elephants. The construction of electric fences is estimated to cost Rs. 950 million. I propose to give special priority to
construct these protective fences within the next two years and allocate required fund.
4 Co-operatives and supermarkets (Co-op City outlets) Hon. Speaker, we exempted the entire cooperative sector from all taxes in order to revive cooperative societies. Many cooperative societies which have benefited by these concessions and have made satisfactory progress. At present there are over 300 Co-op City outlets in operation. I propose to allocate Rs. 300 million to further popularise Co-op City outlets in rural areas and also to setup around 1,000 mini Co-op City outlets at village level.
5 Serving the public and simplifying administrative procedures A program is underway through the Ministry of Public Administration to provide an administrative service that is closer to the people. Public proposals have revealed that forms and procedures used in the public service delivery process are cumbersome. Even charges levied for public services rendered and the receipts issued have not been simplified to suit the present era. I propose to appoint a task force to be headed by the Minister of Public Administration to simplify the administrative process and the systems and procedures through which these services could be extended to the people in a simpler manner. I have proposed in Mahinda Chinthana to setup Jana Sabha Secretariats, to make villages prosperous by bringing together the efforts of field level public servants and community organizations in such villages. This Task force will take steps to ensure that village level development officers such as Samurdhi officers, and agricultural officers will render their services through these Jana Sabha Secretariats. This will enable to provide facilities to rural people under one roof. I propose to allocate Rs. 150 million for this task.
10. Training of National Languages Ordinary people in our country face many difficulties when they obtain services from public as well as private institution owing to the non-usage of Sinhala and Tamil languages. In order to overcome this problem, working knowledge of Sinhala and Tamil languages among public servants needs to
be developed. I therefore, propose to allocate a sum of Rs. 50 million to conduct related training programs by the National Language Institute.
6 Mathata Thitha and protection of milking cows Excise Department, religious places of worship, schools and voluntary organizations have done a tremendous service under the Mathata Thitha programme to eliminate the drug menace from the society and to rehabilitate those who are addicted to liquor, drugs and cigarettes. I propose to allocate Rs. 100 million to consolidate these measures at village level, to assist religious places of worship, voluntary organizations and schools which are dedicated toward such services and to eradicate from the society the slaughter of milking cows. 7 International level facilities to rural sportsmen I propose to allocate Rs. 300 million to broaden training programs for rural youth in international sports such as badminton, tennis and swimming, to upgrade related stadium facilities and to widen opportunities for rural youth with exceptional talents, to take part in international sports events.
13. Compensation for acquisition of lands for road development Heavy compensation is required to be paid on account of land acquired for road development throughout the country. The compensation payable for this purpose as of now is around Rs. 10,000 million. Those who are entitled to receive compensation are confronted with various difficulties consequent to delays associated with such payments. Further road development activities also suffer various setbacks, consequently. To resolve this issue, it is proposed that compensation less than Rs. 1 million would be directly paid by cash. In relation to compensation in excess of Rs. 1 million, action will be taken to issue Treasury Bonds by the Central Bank of Sri Lanka through Bank of Ceylon, with a 1 -2 year maturity period and attracting an annual interest rate of 17 percent. These Treasury Bonds could either be used as security to obtain a loan, be discounted or be redeemed at the end of the two years along with interest. If needed the owner could even obtain interest at six monthly intervals. This arrangement will enable property owners to receive their
compensation in a timely manner. I propose to allocate Rs. 10 billion to issue Treasury Bonds for this purpose.
8 Coordination of development activities at rural and provincial levels Enhanced foreign aid had been mobilized for rural and provincial road development, supply of drinking water, electricity and minor irrigation projects. I propose to set up a Presidential Task Force consisting of representatives from the Provincial Council Ministry, the Nation Building Ministry, Finance Commission, Provincial Councils and other relevant state institutions and the Ministry of Finance and Planning to coordinate the implementation of such projects operated at village and national level.
9 Small scale hydro power plants Around 600 small scale hydro power projects have been identified which are capable of adding around 300 MW of power to the national grid. Such electricity generation will help to save fuel used for power generation substantially. However, many obstacles have surfaced in implementing these projects. I propose to setup a Presidential Task Force that could assist in resolving expeditiously, issues pertaining to provision of land, bank loans, environmental certificates and administrative approvals.
16. Mihin Lanka Airline and Weerawila Airport Our Government is taking measures to expand domestic and international airline services, operate Mihin Lanka Airline to be able to offer an affordable service to the general public and to construct the Weerawila International Airport. Although Mihin Lanka Airline suffered a setback due to increasing oil prices and inadequate capital, the operations could be revived by providing the required capital, since we have secured long - term financing to acquire the required aircrafts. This move will improve domestic and regional air travel and also be a major concession to the export of fruits and vegetables. We have already included the required allocation of Rs. 6,000 million in the Budget Estimates. The Airport and Aviation Authority will make the required investments to construct the Weerawila International Airport. I propose to allocate Rs. 500 million as the Government contribution for the year 2009 for this construction.
10 Universities for all As stated in the Mahinda Chinthana, steps have been already taken to provide hostel accommodation, lecture hall facilities and curricula development to provide opportunities to a greater number of students who qualify for university education. The facilities available in universities outside Colombo are insufficient. Steps need to be taken to improve facilities of such universities and also to develop areas in the vicinity as university townships. Priority has to be given to improve faculties of these universities on par with other universities and to develop the area in the vicinity to be able to cater to the needs of the campus community. We also need to give priority to immediately fill vacancies in the academic staff and to provide foreign post graduate opportunities for such staff. I propose to allocate an additional allocation of Rs. 950 million to improve Rajarata, Wayamba, Sabaragamuwa, Uva Wellassa, Northern, South Eastern and Jaffna universities.
11 50 year commemoration The celebrations to mark 50 years since the establishment of the Vidyodhaya University and the Vidyalankara University that gave our country an intellectual revival are scheduled for next year. I propose to allocate Rs. 100 Million to conduct programmes planned to value this memorable event.
19. E - Villages Allocations were made in the 2006 Budget to connect rural villages in backward areas with the rest of the world and enable them to blend with the global community and economic trends, through Information Technology. This program has enabled online connectivity through around 500 Nana Sala Centres, between villages, schools and state and public institutions, and also facilitates to broaden the knowledge of English and Information Technology. I propose to name the year 2009 as an year dedicated to expand the
knowledge of English and Information Technology and allocate Rs. 100 million to broaden the scope of this programme.
12 A knowledge economy Our people reawakened with knowledge with the expansion of free education in our country. The children of remote villages were empowered with knowledge. The way forward in the next 10 years for our country should be based on a knowledge economy. Our agriculture, industry and services should be directed with a high level of technological and intellectual input. At the same time our knowledge should also be utilized for services which are internationally acclaimed. Therefore, income tax concessions available to professionals for services rendered either in or outside Sri Lanka should be further expanded to serve such economies. I therefore propose that income tax payable by any Sri Lankan professional serving a company or a partnership based in Sri Lanka and providing international services and earning in foreign currency, should be confined to 20 percent. This will avail tax concessions to professionals such as lawyers, accountants, engineers, doctors and computer technicians for services rendered by them while being based in Sri Lanka. I believe that this will enable our country to become an international hub providing professional services and also encourage our professionals and the institutions to which they are attached, to adopt mechanisms to provide such services while being based in Sri Lanka.
13 National Research programme The attention that we have given for scientific research is inadequate. We need to improve scientific research into agriculture, new products, national security, history and culture. I propose to allocate Rs. 300 million to expand such research work steered by the National Research Council with the help of universities, other research institutions, various ministries and the intellectuals in our country to promote new revelation in various fields and to promote research work.
14 A quality health service to all The main objective of Mahinda Chinthana is to provide a quality health service to people in less developed regions. Priority was given to develop hospitals in remote areas, to build doctors quarters in such hospitals and also to develop estate hospitals. I propose an allocation of Rs. 350 million to further improve the quality of health facilities available to people in remote areas, to develop Akkaraipattu base hospital, to introduce a cancer treatment unit at the Batticaloa teaching hospital, to develop the Monaragala base hospital, to modernize estate hospitals in Kandy, Kegalle, Ratnapura, Nuwara-Eliya and Badulla districts and to provide ambulances to hospitals with less facilities.
15 Indigenous Medicine We possess a great knowledge in indigenous medicine that we can proudly impart to the world. I have gone on record in Mahinda Chinthana that I treat it as a duty cast upon me by history, to preserve and disseminate indigenous medicine related knowledge to the world. Based on a request made by indigenous doctors, I propose to allocate Rs. 100 million for research related work in this field, by enhancing research on ancient treatment methods that will contribute towards improving health standards of our country.
16 Revival of Arts Mahinda Chinthana accords special priority to enrich Art and Culture. Several concessions were provided through the last Budget, to uplift the local film industry and the tele drama industry. A greater acceptability was ensured to local art and culture by imposing a tax on foreign films, tele dramas and advertisements. The construction of Ranminithanne universal tele cinema village has now been commenced in order to provide training and studio facilities to improve talents of local film and tele drama artists. Phase I of this project is proposed to be completed and declared opened next year.
Duty concessions have been already provided for various essential equipment required to be imported for the production of films and tele dramas. Tax concessions are also provided to construct cinema halls with high tech facilities or for renovation purposes. Since there is a notable revival in the local film and tele drama industry and since related activities are of a lower commercial value, I propose to continue the tax concessions already availed to this industry for a further period of two years.
I also propose to provide income tax concessions to producers including authors, singers, musicians and stage drama artists on income arising from such creations. I propose to amend the Intellectual Properties Act to make it mandatory to provide financial benefits for script writers, composers and singers of songs, when their songs are transmitted via radio or television channels.
1 One Village - One Crop A programme is underway to identify a conventional crop for each province and to ensure the successful cultivation of such crops in those provinces. This program will prioritize the promotion of crops such as onions, chillies, tomatoes, beans, lime, papaya and bananas. In order to provide extention services, high quality seeds, fertilizer, financial assistance, storage facilities, preservation mechanisms and post harvest management facilities to relevant farmers from one central location, to improve facilities required to transport such crops, to develop Agrarian centers and link them with economic centers, I propose to make an allocation of Rs. 300 million for these purposes.
2 Agro Exporting Zones The Export Development Board has proposed a program to establish export zones with the involvement of farmer villages in order to provide high quality, value added agri products to the export market. Through this program selected products such as Palmyra products, cinnamon, ginger, vanilla and drinking water could be produced with high quality standards, to be exported. I propose to make an allocation of Rs. 500 million to the Export Development Board for this purpose.
3 Community tourism villages The Mahinda Chithana emphasises the need to develop attractive tourist destinations in selected traditional villages situated in cultural and environmental surroundings. Under the Gama Naguma programme, I propose to allocate Rs. 100 million to develop selected villages in each province, as tourist villages.
4 Development of world heritage - Galle We need to give priority to develop Galle as a World heritage city. Already the Government of Japan has allocated funds to develop Galle port as tourist port. I propose to allocate Rs. 100 million to develop Galle city, alongside this port development project.
5 Salutation to soldiers
Hon. Speaker, people who are away from the ground reality and living luxury lives in Colombo often underestimate the danger s associated with the humanitarian operations carried out by our soldiers in the North. At present, our soldiers are engaged ina perilous operation of combating terrorism at the cost of their lives. As a result, people in the South, specially those in Colombo have got sufficient security. We should be lifelong indebted to such soldiers and their families for their sacrifices and we should constantly admire them. We in fact built a monument to commemorate all soldiers who died in action. I propose to increase the monthly allowance paid to soldiers engaged in action from Rs. 3,000 to Rs. 5,000. I also propose to allocate Rs. 4,500 million for this cause.
30. Ranaviru Gammana - villages dedicated for soldiers We promised to construct 50,000 houses under the Ranaviru Gammana in the Mahinda Chinthana. In phase I, we constructed a Ranaviru Gammana in Ippologama consisting of 1,500 houses with other facilities such as roads, water, electricity , telephones, banks, market places, schools and hospitals. The abandoned building at Malay Street the belonged to the Ministry of Education has been renovated and converted into a modern education institute to enhance education of children of soldiers who are engaged in
security operations. I propose to allocate Rs. 3,500 million to commence the construction of few more Ranaviru Gammana with all facilities during the next year.
2 Value Added Tax - VAT VAT need to be simplified. I therefore, propose to decrease the present 15 percent VAT to 12 percent with effect from 1st January, 2009. This will provide a substantial relief to tourism, industries, leasing, construction insurance and telecommunication sectors and also to the entire production sector. With reduced production costs, the overall cost-of-living will also come down. The 20 percent VAT on motor vehicles, luxury goods and liquor will continue to be applicable. The registration limit applicable to VAT will be increased from Rs. 1.8 million to Rs. 2.5 million to simplify VAT administration and also to provide relief to small and medium entrepreneurs. Gama Naguma, Maga Naguma, Samurdhi and community water supply schemes carried out by community based organizations, with community participation will be totally exempt from VAT.
3 Economic Service Charge - ESC Hon. Speaker, I propose that the annual maximum ESC liability of Rs. 60 million, be increased to Rs. 120 million. This increase will affect only to large businesses not paying any income tax.
4 Telephone Levy The telephone levy of 10 percent presently applicable to mobile and codeless telephones will be expanded to be applicable to fixed line telephones as well. However, fixed line telephones used by any surviving spouse of service personnel killed in action and disabled soldiers will also be exempt from this tax.
34. Port and Airports Levy - PAL Hon. Speaker, our government has made large investments to develop ports. Around US$ 1,000 million is being invested to develop Colombo port, Hambantota new port, Oluvil new port, Trincomalee port, Galle tourist port,
and Kankasanthurai port. Since environment related issues that hampered the progress of the second international airport at Weerawila has now been resolved, the construction of this airport is due to be commenced. We need to allocate counterpart funds to complement foreign aid secured to construct six ports and the second international airport. I therefore propose to increase the PAL form 3 percent to 5 percent.
5 Nation Building Tax Hon. Speaker, this country faced a total draw back consequent to terrorist activities that prevailed for over 30 years. Terrorists destroyed railways, ports, highways, bridges, state institutions, hospitals and schools in the North and East. Once congested areas became uninhabited. A large number of brave soldiers of security forces sacrificed their lives. Some became disabled and helpless. A large number of people become homeless and shifted themselves to temporary shelters. Public and private properties were destroyed in various parts of the island including Colombo. Places of worship were also destroyed. The time has now come to rebuild these. As such we should accord priority for development and welfare, whilst seeking a political solution. We need to pay greater attention to the people in the North and South who were affected by terrorism and thus became helpless and also to the brave soldiers who sacrificed their lives to combat terrorism and their families. As such I propose to impose a Nation Building Tax as a social contribution towards welfare of security forces, and to rebuild communities and infrastructure facilities affected by terrorism. This tax which would be 1 percent, will be applicable on the turnover on imports, manufacturing or services other than on the banking and financial sector, for a period of 2 years. In addition to the revenue collected from this tax, we will also seek the assistance of our friendly countries to obtain additional aid to implement nation building programs.
6 Preparation of a National Tax Policy Our tax base got eroded as a result of various tax concessions granted from 1977 to promote investment. Different tax rates prevail in country, for similar entrepreneurs in the same region. Local entrepreneurs have been accorded second class status. We have to be mindful of effects on local entrepreneurs due to changes that have taken place in the area of international trade consequent to free trade agreements , duty concessions etc. A tax system that lacks transparency has evolved consequent to there being no consolidated or coordinated approach between revenue administration institutions such as Inland Revenue and Customs and the Board of Investment that grants major tax incentives. Further a high tax rate of 55 percent applicable to banking and financial institutions.