By Azhar Razak
The Sri Lankan government should lay out a very conducive business environment to attract greater private sector investment, if the island is to achieve its ambitious medium term per capita income target, a top official says.
According to the chairman of the Chamber of Commerce, Dr. Anura Ekanayake, the government’s target of doubling the present per capita income by the year 2015 would be wholly dependent on investments made by the private sector since the public sector would not be able to afford a spurt in investments while keeping up to its medium-term fiscal targets.
“In order to achieve the government’s economic target of doubling per capita income from the present US $2,000 to US $4,000, the country would need to achieve a sustained Gross Domestic Product (GDP) growth of at least 8-10 percent for the next five years. This requires the present average Investment Ratio to GDP of approximately 25 percent, (excluding year 2009) being increased to 40 percent by the year 2015,” Dr Ekanayake said.
Therefore, he is of the candid view that if the Investment Ratio is to be increased, the required growth would have to come from the private sector as the public sector, which has a target of reducing the budget deficit in the medium term, would find it harder to make larger investments.
“If the government tries to increase its investment, it will only bloat the budget deficit. Therefore, investments from the private sector will be vital to achieve the per-capita income growth target and thus, a more conducive business environment would be imperative to attract such a growth spurt in private investments,” he said.
Dr Ekanayake was speaking on the 23rd ‘Sanvada’ (Dialogue) programme on the topic of ‘Investment Dilemma: What can be done?’ organised by the Pathfinder Foundation held at the BMICH recently.
The Sri Lankan government should lay out a very conducive business environment to attract greater private sector investment, if the island is to achieve its ambitious medium term per capita income target, a top official says.
According to the chairman of the Chamber of Commerce, Dr. Anura Ekanayake, the government’s target of doubling the present per capita income by the year 2015 would be wholly dependent on investments made by the private sector since the public sector would not be able to afford a spurt in investments while keeping up to its medium-term fiscal targets.
“In order to achieve the government’s economic target of doubling per capita income from the present US $2,000 to US $4,000, the country would need to achieve a sustained Gross Domestic Product (GDP) growth of at least 8-10 percent for the next five years. This requires the present average Investment Ratio to GDP of approximately 25 percent, (excluding year 2009) being increased to 40 percent by the year 2015,” Dr Ekanayake said.
Therefore, he is of the candid view that if the Investment Ratio is to be increased, the required growth would have to come from the private sector as the public sector, which has a target of reducing the budget deficit in the medium term, would find it harder to make larger investments.
“If the government tries to increase its investment, it will only bloat the budget deficit. Therefore, investments from the private sector will be vital to achieve the per-capita income growth target and thus, a more conducive business environment would be imperative to attract such a growth spurt in private investments,” he said.
Dr Ekanayake was speaking on the 23rd ‘Sanvada’ (Dialogue) programme on the topic of ‘Investment Dilemma: What can be done?’ organised by the Pathfinder Foundation held at the BMICH recently.
 From Left : Chanuka Wattegama, Dr. Sirimal Abeyratne, Dr. Anura Ekanayake and Gayathri Gunaruwan |
The theme of the programme was on ‘Pre-budget’ while other speakers on the panel included Dr. Sirimal Abeyratne, Professor of Economics at the University of Colombo, Chanuka Wattegama, Senior Researcher, Telecom and IT sectors at LirneAsia and Gayathri Gunaruwan, Senior Economist at the Ceylon Chamber of Commerce (CCC).
Meanwhile, according to officials, the CCC, which had recently submitted its policy recommendations and taxation proposals to the government in view of the 2011 budget being prepared, has urged the government to concentrate on facilitating investment, export promotion, developing financial markets, public sector reforms and setting out the long overdue tax policy reforms.
“The laying of a more conducive business environment so that the private sector would be able to increase their participation in the economy is vital at this juncture. We should take many cues from the globally recognised indexes such as the Ease of doing business Index and Index of Economic Freedom where we have been more regularly falling,” stressed Dr Sirimal Abeyratne while delivering a presentation on the topic of “Budget 2011 on the Road to Economic Miracle’.
This year’s ease of doing business Index rankings showed that Sri Lanka has slipped eight places from the 97th position it held in Year 2009 to 105th position in the year 2010.
Dr Abeyratne also identified the importance of implementing several economic reforms that are immediately needed since sustaining higher growth rates for longer periods would remain a huge challenge given the present scenario.
Meanwhile, according to officials, the CCC, which had recently submitted its policy recommendations and taxation proposals to the government in view of the 2011 budget being prepared, has urged the government to concentrate on facilitating investment, export promotion, developing financial markets, public sector reforms and setting out the long overdue tax policy reforms.
“The laying of a more conducive business environment so that the private sector would be able to increase their participation in the economy is vital at this juncture. We should take many cues from the globally recognised indexes such as the Ease of doing business Index and Index of Economic Freedom where we have been more regularly falling,” stressed Dr Sirimal Abeyratne while delivering a presentation on the topic of “Budget 2011 on the Road to Economic Miracle’.
This year’s ease of doing business Index rankings showed that Sri Lanka has slipped eight places from the 97th position it held in Year 2009 to 105th position in the year 2010.
Dr Abeyratne also identified the importance of implementing several economic reforms that are immediately needed since sustaining higher growth rates for longer periods would remain a huge challenge given the present scenario.
| If the government tries to increase its investment, it will only bloat the budget deficit. Therefore, investments from the private sector will be vital to achieve the per-capita income growth target and thus, a more conducive business environment would be imperative to attract such a growth spurt in private investments |
He also criticised the authorities for not putting greater emphasis on the loss making major public enterprises which accumulate massive losses each year.
“The five monsters, CPC, CEB, Water Board, CGR, and CTB are making enormous losses each year. Although authorities have identified this issue for a long time and even mentioned it in the Annual Report of the Ministry of Finance and Planning in 2008, it is still unknown as to what measures they have taken to specifically address this issue from then onwards,” he pointed out.
He argued that their major problems lie in the heavy reliance on the government budget for recurrent expenditure while not reaping any dividends to the government.
“The five monsters have been continuously running on heavy public enterprise debts that are mainly owed to the state owned banks and they have a tendency for unusual accumulation of ‘circular debt’ such as each enterprise owing monies to one another,” he highlighted.
Dr Abeyratne also recommended that the current development strategy should be changed to picking winners, government assistance being provided to support sectors that are draining taxes (and not which are paying taxes) and the regulatory framework being vastly improved.
The Sanvada programme is aimed at critical analysis and debate on proposed or likely legislative initiative impacting the economy and the society of Sri Lanka.
The mission of the Foundation is to play a catalytic role in changing attitudes of legislators, government officials, civil society groups, and the general public towards the role of government in the economy and society, markets, the globalisation process and private initiatives through research, information dissemination, action and dialogue.
