Eight-year economic development plan : ‘Vision 2025’ a country enriched | Sunday Observer

Eight-year economic development plan : ‘Vision 2025’ a country enriched

President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe last week launched an eight-year economic development plan ‘Vision 2025’ which outlines a series of development programs focused on the entire economy with emphasis on youth who are the leaders of tomorrow.

The plan maps out the development journey of Sri Lanka in the coming years - and over the next three years the government will implement a comprehensive economic strategy to address constraints to growth.

In the ‘Vision 2025’, the government will aim to raise per capita income to USD 5,000 per year, create one million new jobs, increase FDI to USD 5 billion per year, and double exports to USD 20 billion per year. These intermediate targets lay the foundation for our ‘Vision 2025: Sri Lanka’ to become an upper-middle income country.

Following are some of the key areas of the growth plan.

NEW APPROACH TO GROWTH

“Our new approach to growth will be structured on a knowledge-based, highly competitive, social market economy model. The principles which underpin a social market economy are a well functioning and regulated market that will foster competition and efficiency, combined with high standards of social welfare and protection for the vulnerable. In addition it will be a knowledge-based economy, which will be driven by our intellectual capabilities. The result will be a highly competitive environment which is imperative for us to succeed in the modern integrated global economy.”

The social market economy principles will foster and sustain successful institutions and policy, strong market structures, and a fairer society. The private sector will play a key role: achieving high productivity, innovating, enhancing quality, as well as investing and creating new jobs. The Government will coordinate with the private sector to make the economy competitive and successful in the global environment. With market principles, economic competitiveness and social benefit in mind, we will drive appropriate economic and social policies and strategies to ensure prosperity for present and future generations. In order to advance towards a diversified, high value tradable sector growth process, alongside domestic private investment, we must attract the right type of FDI that brings in modern technology, access to GPNs and managerial know-how.

The Government will strengthen the drivers of growth and make growth more inclusive. The Government is undertaking macroeconomic, factor market, institutional and regulatory reforms to enhance the productivity and competitiveness of the economy. These reforms are expected to raise private investment, especially knowledge-intensive and technology-driven FDI for export growth in both goods and services.

The Government will strive to create a strong and influential middle class towards an inclusive society. Mobility up the socioeconomic ladder allows people to achieve higher incomes and living standards. We will ensure that all people have more equitable access to public services, job opportunities and living conditions.

“We will introduce supportive legal reforms. In particular the new Inland Revenue Act, Foreign Exchange Act, Voluntary Disclosures of Income Act, State Land Bank Act, Anti Dumping Act, State Commercial Enterprises Act, Ports and Airports Act, Ruhunu Economic Development Corporation Act, Lands (Special Provisions) Act, Sustainable Development Act, Liability Management Act, and National Debt Office Act will considerably improve the business-friendly environment.”

STRENGTHENING THE MACROECONOMIC FRAMEWORK

The Government’s strategy to strengthen the national macroeconomic framework will have three prongs: fiscal consolidation, ensuring price stability, and maintaining a market-based competitive exchange rate.

“We will move Sri Lanka into the top 70 countries on Ease of Doing Business global rankings from its current ranking of 110 through legislative and regulatory changes.

“The Task Force for Investment Climate Reforms has identified the reforms needed to create an enabling business environment. One hurdle that investors currently face is the large number of Government agencies they have to deal with. We will establish a Single Window for new business registration that brings together 20+ Government agencies to streamline procedures and improve the investment climate. We will clarify and reform investment incentive policies to improve investment policy predictability. We propose to phase out tax holidays, which have been the main traditional incentive offered to investors, and switch to other forms of efficiency improving incentives. The new investment framework will ensure policy coherence and consistency, and streamline procedures to improve the overall business climate and attract FDIs. We will stipulate a standardised package of incentives with clear eligibility criteria. Incentives will be linked directly to physical investments made in the form of capital allowances while appropriately designed incentives will be offered for those in high technology and innovative industries. These incentives will be second to none in attracting the kind of investments that are appropriate for Sri Lanka at our current stage of development.

“We will encourage Public-Private Partnerships (PPPs). The Government will support PPPs as a means of reducing reliance on loan agreements in the provision of public assets and services. We are formulating a clear PPP policy with a well-defined legal, regulatory and institutional framework to attract private players with the requisite capacities. PPPs currently focus on provision of public amenities such as transport services, energy generation, drinking water, waste management, and industrial parks. Potential areas for expanding PPPs include health care, leisure, tourism, education, ports and aviation. We will prioritise expanding opportunities for alternate financing, including securitisation, to support PPP programs. The Government will take steps to integrate SMEs into the formal sector. To boost domestic private investment, we will better integrate the SME sector into the formal sector through the financial system. We will establish hard and soft infrastructure frameworks to help them improve their brand value, and access credit and new markets. We will implement policies to increase project-based lending rather than collateral-based lending, remove taxes that prevent firms from expanding, and encourage knowledge sharing between R&D institutions and SMEs.”

New trade policy

“We have formulated a new Trade Policy, along with an original National Export Strategy. These aim to create a more liberal, simple, transparent and predictable trade regime. These policy changes will attract more export-oriented FDI, improve trade logistics, make customs procedures transparent and quicker, and boost firms’ abilities to compete in global markets.

“We will phase-out para-tariffs. The Government will simplify the tariff system to increase competitiveness, encourage integration into GPNs and enhance market access. The timing and sequencing of the trade liberalisation programme will be announced in advance giving adequate time for the business sector to adjust. We will develop a trade adjustment programme to mitigate any harmful effects on domestic firms and affected workers. This will include Government-sponsored training and capacity building activities and trade cost adjustment compensatory finance programmes.

The Government will ensure anti-dumping laws are passed to protect domestic firms from unfair competition. By implementing these trade adjustment packages, we will enable all domestic enterprises to become competitive while mitigating any negative impacts of liberalising imports. We will take advantage of new and existing Free Trade Agreements (FTAs). Trade and economic partnerships that cover goods, services, and investment with China, Singapore, and India will be finalised and other similar opportunities will be explored. We will leverage the resumption of duty free access to Europe through GSP+ to over 6,000 products, and negotiate expanded market access for the post GSP+ era.

The government will simultaneously focus on unilateral trade reforms to raise overall export competitiveness. We will enhance access to trade finance by strengthening the Sri Lanka Export Credit Insurance Corporation (SLECIC), with a window for export-import services. To promote the export sector, SLECIC will actively engage in the provision of trade-related services in the drive towards increasing exports. The Government will encourage diversification of exports into services. We will take advantage of the potential to export services in the fields of knowledge process outsourcing (KPO) and business process outsourcing (BPO), while moving towards cutting-edge technology and intellectual property rights (IPR)-based software product solutions.” 

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