“Sri Lanka moving rapidly towards becoming a higher income economy”: P. B.

Sri Lanka has truly gotten into a new wave of development with a promising economic outlook, to move rapidly towards a higher income economy over the next decade, Treasury Secretary Dr. P. B. Jayasundera declared while addressing the 19th Annual Tax Oration, organised by the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) recently.
Dr. Jayasundera, who is also the Secretary to the Ministry of Finance and Planning, noted that the upcoming Free Trade Agreement with China will add value by expanding trade, investment and tourism, to the country’s high value exports, technology-based industries and services, enabling to strategize and promote the country’s five-hub economy. He also disclosed that the China-Sri Lanka FTA will also connect Sri Lanka to benefit from the China-Singapore FTA opening Sri Lanka to a new corridor of development.
“In my view, Sri Lanka no longer should work out business propositions based on cheap labour or endeavor to promote the transfer of land to foreigners or try to place undue reliance on tax holidays. Instead, the country should focus on quality investments that will add value to the country’s skills in the labour force, the rich biodiversity and environment and its fiscal strength to promote its economy on competitive activities focusing exports. The country needs to price all its resources in a proper context. These are the lessons one must learn, having viewed successful emerging economies,” he said.
Delivering his oration on the topic of ‘New Dimensions of Sri Lanka’s Public Financial Management and Taxation in the context of the Emerging Global Environment’, Dr. Jayasundera also underscored the important role in-demanded professionals like chartered accountants produced by CA Sri Lanka should wisely command by making the right contribution to facilitate Sri Lanka to make a difference in the emerging economic landscape.
“Sri Lanka’s plan to become a knowledge hub, being a critical pillar of the five-hub centric growth model, the required backdrop is gradually getting into proper shape with its professional workforce consisting of world reputed doctors, engineers, lawyers, accountants, architects, technicians, corporate managers, business analysts, navigators, aviation personnel, civil servants, researchers and the academic community supported by advancing technology and innovation becoming the driving force of future economic growth.
“However the multifaceted strengths they command should not be guided only by their knowledge and competencies, but also by the best professional ethics,” Dr. Jayasundera emphasised.
He also noted that a good budget, backed by a higher tax to GDP ratio for Sri Lanka, should be able to allocate an increased volume of resources in support of core public investments in physical infrastructure supported by an enabling environment that would in parallel attract private investments shifting beyond the 30% of GDP from the current level of 24% GDP.
“Such a budget should also be able to divert a large volume of funds for the development of human resources and research and technology in excess of 6% of GDP, towards creating a productive and demand-driven human resource base,” he stated.
He also said that efforts are being made to simplify overlapping regulations, taxes and levies that have crept into the system due to the build-up of layers of operations institutions, to reduce transaction costs and make doing business easier, particularly for Small and Medium Enterprises.
Progressing economy
The Sri Lankan economy is now on a high growth path of 7-8% per year and the economy is being driven forward increasingly, in a globally integrated manufacture sector with medium and high technology industrial activities while breaking ground into newer areas such as IT-enabling services, diversified tourism, shipping, aviation, banking and professional services that push the services sector beyond 60% of GDP, Dr. Jayasundera said, while adding that the economy is no longer dominated by primary agriculture but instead is involved in a deeply connected value chain process from primary agriculture to advanced services, connected through information technology.
“The steady build-up of external reserves surpassing $ 9 billion has brought about hopes of having reserves capable of giving full cover for market borrowings and target external reserves equivalent to annual export earnings instead of conventional pegging to import requirements in terms of the number of months.
If exports grow rapidly, the country’s tax base surely will grow through employment and business expansion and a 12 to 16% revenue growth is viable from tax to profit, employment income and aggregate spending,” he said.
Dr. Jayasundera also disclosed that Sri Lanka has performed well in the region in terms of many global indices.
“Our country is well-placed in the World of Rule of Law Index, the Global Peace Index, Economic Freedom Index, Ease of Doing Business Index and Global competitiveness Index, by being ranked on top in South Asia,” he said.
Citing reasons for his claim, Dr. Jayasundera noted in the Doing Business Index, which captures the ease of starting a business, obtaining construction permits, electricity connection, property registration, access to credit and investment protection as well as ease of paying taxes, ease of external trade, contract enforcement and resolve insolvency, Sri Lanka has been ranked 81 out of 185 countries in the world while in Asia it secures 20th place and is best in South Asia.
He said that in the Human Development Index which measured education enrolment, literacy, infant and maternal mortality and life expectancy, Sri Lanka is ranked among the top 5 in the Asian region (with Japan, South Korea, Singapore and Malaysia) and is the highest among SAARC countries.
He also said that Sri Lanka is also among the top 50 leading services locations in the delivery of IT/BPO and other knowledge services.
“I dealt with these not to argue that the country is perfect in terms of governance but to highlight that it is certainly not among the worst lot or even among the bad, and instead is among the promising lot in the emerging global economy as far as governance is concerned,” he said.