Choksy spells out foundation for development

By Sumadhu Weerawarne and Kesara Abeywardena
Minister of Finance K N Choksy presenting the first budget of the United National Front government set out the facts before the House with little drama but great precision. The legal luminary made a clinical analysis of the current state of the economy, without recourse to jibes. The speech which lasted just ninety minutes, also saw a departure from the usually lengthy expounding which runs into a number of hours. The Minister it seemed was concerned not with the economy alone, but also with the economy of words.

The opening speech was well attended, with Prime Minister Ratnasiri Wickramanayake who had been absent for some time too making an appearance. There was little disturbance during the course of the speech which commenced in the midst of a silent protest by PA members. The main opposition party members carried placards decrying what they termed a "faulty and corrupt" election. The MPs stood up briefly holding their placards and sat down almost immediately, as the Finance Minister laid bare the dire state of the economy.

It was notable that the protest was without voice and noise. The sole murmuring followed the announcement of the abolishing of a long list of taxes including the GST and defence levy. As the Minister was announcing that a value added tax would be introduced instead, there were cackles from Opposition ranks. The dream of no taxes, had been shattered.

Giving a very dismal picture of the economy he said that it had for the first time contracted by 1.3 per cent. The state coffers too he said were empty. He said that there had been a rise in debts, even as revenue withered and expenses soared in 2001. The budget deficit had been the casualty in all of these.

While taking stock of the country’s present financial predicament, the Minister said that the government was "yet committed to the task of nation-building", which he said the party had held out to the voters at the last election in December. "We then made a solemn pledge to our people to change the face of our nation, to lead the country out of the internal conflict that has torn apart the fabric that bound all Sri Lankans together, to lead our people out of the degradation of poverty, and to revitalise the economy. This budget represents the first step in redeeming that pledge we made to our people," he said.

He detailed the two options available to the government, the first of which he said was to pass on the burden to the people. "This we could do by way of additional taxes, customs duties, loss recovery charges, and other short term revenue raising measures. This would be the easiest path for the government to tread. But we have decided not to do so," he said.

He added that it would be most unjust and unfair to make the people pay the price of the mishandling of the economy over the last few years. "Furthermore to do would be wholly unproductive and be counter to investor confidence in the system," he said.

The second option, being the path the government would tread he detailed as being the implementation of well-structured fiscal measures and incentives immediately to revive investor confidence, increase growth and reduce recurrent expenditure in areas which do not yield corresponding dividends. "We must rationalise the fiscal system and remove bureaucratic constraints so as to attract private investment into the formal economy. We will take immediate measures to activate the rural economy and by doing so reduce unemployment," he said setting out the government’s clear policy of being the facilitator with the private sector as the developer of the economy.

He pointed out that planning, method and transparency which he were lacking in the conduct of government business, were necessary for rapid and planned economic revival. "No major expenditure will be permitted except after a full appraisal followed by Cabinet approval. Facts and figures will be made public," he said. Highlighting defence expenditure as a constant area of doubt, he said that the office of a controller general would be created immediately, so as to regulate defence expenditure. He reiterated the government’s commitment to depoliticise both the public and police service.

Outlining the overall policy, he said that the economy would be freed from excessive bureaucratic control. "Considerable de-regulation is a pressing necessity," he said. Under this he said that a Tariff Commission would be set up to review tariffs time and time again, and also measures would be taken to simplify the tax regime. Amendments to labour laws too are envisaged with limits stipulated on the hearing and decision of labour disputes and also statutory specifications on compensation payable on termination of services.

On effective private sector participation, the Minister said that the government would provide a framework within which "the private sector can operate without unmeaningful restrictions and excessive taxation". He added that the incentives for private sector growth would be subject to schemes to channel part of the benefits to the private sector into training educated youth in job oriented spheres.

There was also emphasis on special measures for the youth sector. On employment opportunities for youth he said that deserving and educated youth would be provided with an allowance and given job-oriented vocational training under the guidance of the state, and thereafter provided with working capital to set themselves up in self-employment.