The much-awaited inaugural budget of the good governance regime was presented last week. While the debates on it are currently under way, the Dailymirror spoke to the Deputy Minister of Public Enterprise Development, Eran Wickramaratne, to get a closer look at what it has been proposed.
QIf we begin from where the previous government stopped; there is a burden of a huge debt to start off with. How would the government implement this budget while repaying those debts?
The biggest challenge faced by the government is the drastic drop in revenue representing about about 10-11% of the GDP. You need revenue to keep government services going and people expect the government to do that. And we are doing our best without burdening lower-income segments with taxes. So we have to maintain a balance between consumption today and investment tomorrow. Through this budget, the finance minister has tried to simplify the tax structure where he has reduced the bans from 5-3% .He has tried to raise revenue on one hand while trying to bring down the cost of living by cutting down prices of some essential items. The problems he is facing are those that have accumulated over a decade and it is difficult to make adjustments [to overcome them] in one budget. There are investments made in new areas such as the human resource base that has been neglected for a long time. The priorities of the new government are clear and are in line with Prime Minister Wickremesinghe’s policy statements.
QThe government tax revenue has declined to around 10.2% of the GDP. Today the revenue is not sufficient to accommodate debt service payments. Isn’t it a serious situation?
He has taken measures to increase revenue that lies at 2047 billion. It involves a simplification of the structure in widening the tax net and improving tax administration and taking away exceptions given to family and friends as practised in the past.
QWhat about the high fiscal deficit?
The high deficit won’t come down immediately. There are certain adjustments that are needed. People are used to a certain standard of living and you can’t make a sudden adjustment but over a period of time of about 3-4 years. This is the first budget of the new government.
QAs mentioned in the budget speech, how can an ‘economic resurrection’ be achieved?
It is about reviving certain things. This budget focuses its attention on education and human resource development thereby improving the quality of education. A teacher should undergo a 2-year compulsory training course and we are focusing on improving the infrastructure of schools because some lack basic facilities. Also we are going to teach science, technology, mathematics and English to these teachers at school level. We are also allocating around 30% of the budget for higher education to improve its quality. We will be putting up a new state university which will focus on technology and management. We are also trying to invest more in skills development. There is a higher allocation for health as well. The previous government cut down investments in education. In order to create an environment where the human resource base can build sound potential, the private sector has to create an investment climate. Accordingly, the existing Board of Investments (BOI) will be restructured to create an environment for investments. We are also planning a venture capital fund for new investors who have new ideas. Basically younger people don’t have access to capital for new projects. Banks too will have schemes where they will lend capital based on the project and cash flows rather than on collateral schemes.
QThere is also a decline in exports which stands at 14% of the GDP. How can it be improved?
Less than 5% of our exports are by small and medium industries (SMEs). There have been schemes in the past to assist small and medium scale companies which were administered by the Central Bank and a few other commercial banks. But this time we are assisting these industries to export their products by setting up an EXIM bank. Other countries are at comparable stages and we have announced that we too will be going for an EXIM bank to foster entrepreneurship in small businesses and lend a hand to explore export markets.
Q The Pension Bill had increased by 170% during the 2005-2014 period. What plans does this budget propose for the aging population?
Those getting ETF and EPF will continue to receive those retirement benefits. But there are two things that we intend to do: one is to improve the returns on the EPF and ETF by ensuring that they are managed by an independent authority. Over the past several decades it was very clear that the workers lost. There will also be a pension fund setup which is one, in which the public sector and the private sector could participate.
QThere was also a proposal to setup three airports. Is it really the need of the hour?
I think that proposal has to be viewed in terms of demand. If we have tourists in adequate numbers then we will have to prioritise it. Otherwise we will have to reprioritie the implementation.
QThe tourism sector itself has many loopholes, hasn’t it?
We will need both local and foreign experts because to propel the economy, tourism is essential. Tourism is an established industry which continues to bring substantial revenue [to the country] but additional investments are needed to take it forward.
QDo you think that price reductions made on essentials were the essentials where prices needed to be reduced?
We can’t reduce the prices of each and every item. I think the cost of essentials have declined since January. Inflation is also low in 2015. As a result, higher incomes were generated and living standards improved. Now we are at a consumption oriented investment phase.
QHow will your ministry benefit from the budget proposals?
The government is having a range of products and services and we are trying to figure out whether they are strategic or non-strategic. For example, if the government runs a hotel at a loss, then we will be using tax payers’ money to run it. Whatever the government is involved in, it is with the view of providing high quality goods and services at competitive prices. In order to do that you need top class management. The other thing that we need is technology and capital; if situations arise, we will have to tap capital from the market. Therefore state enterprises would be pushed in being commercially viable.