BUDGET REVIEW th Nov 2017

Transcription

1 BUDGET REVIEW th Nov 2017 Marine Economy Eco Friendly Marine Economy Enterprise Sri Lanka Incubator Support REVENUE EXPENDITURE REVENUE SURPLUS BUDGET DEFICIT LKR 2,326 Bn (16.4% of GDP) LKR 3,001 Bn (21.1% of GDP) LKR 66 Bn (+0.5% of GDP) LKR -675 Bn (-4.8% of GDP) Unemployment E-Government Para Tariff Removal Private Public Partnership Listing of SOEs ANALYST CERTIFICATIONS AND REQUIRED DISCLOSURES BEGIN ON PAGE 16. The Budget for 2018 focused promoting entrepreneurship and proposing structural changes to convert the economy to a more outward looking policy framework while also taking an active stance in promoting green environment and also providing an enabling environment for Public Private Partnerships. Government plans on a sustained path of fiscal consolidation as it aims for the first time to achieve a revenue surplus and to reduce budget deficit to 4.8% of GDP for 2018 while the Debt to GDP ratio is expected to improve to 77.5%. With Government s revenue enhancement strategies on track, budget has proposed large number of low interest and interest free credit schemes for a range of small and micro industries and startups supported by establishing incubators with a vision to enhance entrepreneurship while para tariff removal for 1200 goods and supporting infrastructure including creation of EXIM windows are proposed accelerate growth in tradable sector. The budget has a special focus on creating green environment with tax concessions on electric vehicles and solar panels, implementation of a carbon tax and concessions for manufacture of degradable products while PPPs are promoted by establishing a single agency and creating regulating framework for PPPs. Measures relating to Capital Market Development, budget proposes improving legal and policy framework of the capital market, improve liquidity via listing of non-strategic enterprises and allowing state to raise equity and debt from the capital markets.

2 Table of Contents 1.0 FISCAL STRATEGY... 3 BUDGET SUMMARY FOR MID TERM MACRO FISCAL FRAMEWORK JAN SEP 2017 FISCAL OUTLOOK ANALYSIS ON APPROPRIATION BILL GOVERNMENT EXPENDITURE... 6 GOVERNMENT REVENUE CHANGES BUDGET AND THE CAPITAL MARKET CAPITAL MARKET DEVELOPMENTS BILLS, BONDS, CORPORATE DEBT, EQUITY BUDGET 2018 & LISTED SECURITIES

3 1.0 FISCAL STRATEGY The Government s fiscal strategy is focused on a sustained path of fiscal consolidation through revenue enhancement. The medium term fiscal strategy is expected to reduce overall budget deficit to 4.8% of GDP by 2018 and 3.5% by 2020 further strengthening its fiscal position. The fiscal position is expected to be improved primarily through digitalization leading stronger tax administration and also via the implementation of the new inland revenue act which broadbases the tax system and minimizes tax exemptions. Number of tax changes have been implemented in the 2018 budget aiming to remove para tariffs to focus on an outward-looking policies. Government is expected to register a revenue surplus for the first time reaching 0.5% of GDP in Further, Budget deficit is anticipated to be reduce to 4.8% with Debt to GDP ratio expected to fall to 77.5%. The Government plans to grow revenue to 16.4% of GDP to LKR 2,326Bn for 2018 with 87% of the revenue expected through taxes, while Taxes on Goods & Services projecting to take the top slot contributing 61% of tax revenue. Non-tax revenue is forecasted to be 8% of the total expected government revenue. The total planned expenditure for 2018 is LKR 3,001Bn resulting in 21.1% of GDP, growing from 20.6% of GDP in Recurrent expenditure is forecasted to be controlled at 75% of total expenditure constituting 15.8% of GDP maintained at the 2017 planned figure of 15.8% of GDP. Salaries and interest payments are expected to be the largest components of recurrent expenditure amounting to 31.3% and 36.4% of recurrent expenditure respectively. Government plans to grow public investments to 5.4% of GDP with the largest investment continuing to be for highways where 1.5% of GDP (31% of public investments) is expected to be spent. 3

4 1.1 Budget Summary for 2018 Summary of the Budget: Total Financing Total Foreign Financing Foreign Borrowings-Gross Project and Programme Loans Foreign Commercial Debt Repayments Total Domestic Financing Non-Bank Financing Foreign Inv. in T-Bills & T-Bonds Bank borrowings Summary of the Budget ( ) (Percentage of GDP) LKR 'Bn Budget Total Revenue & Grants 1,774 1,997 2,326 Revenue and Grants/GDP (%) Total Revenue 1,766 1,989 2,316 Total Revenue/GDP (%) Tax Revenue 1,464 1,749 2,034 Tax Revenue/GDP (%) Income Tax Non Tax Revenue/GDP (%) Taxes on Goods & Services 842 1,054 1,239 PC Tax Sharing and Devolved Rev/GDP (%) Taxes on External Trade Grants/GDP (%) Non-Tax Revenue Total Expenditure/GDP (%) PC Tax Sharing and Devolved Rev Recurrent Expenditure/GDP (%) Grants Non Interest/ GDP (%) Total Expenditure 2,414 2,677 3,001 Interest/ GDP (%) Recurrent 1,838 2,053 2,250 Public Investment/GDP (%) Salaries & Wages including PCs Revenue Surplus (+)/Deficit (-)/GDP (%) Other Goods & Services incl. PCs Primary Surplus (+)/Deficit (-)/GDP (%) Interest Budget Surplus (+)/Deficit (-)/GDP (%) Subsidies & Transfers Public Investment Other Revenue Surplus(+)/Deficit (-) Primary Surplus (+)/Deficit(-) Budget Surplus (+)/Deficit(-) Medium Term Macro Fiscal Framework Medium Term Macro Fiscal Framework : (As a % of GDP) (Revised) (Forecast) Projections Total Revenue and Grants Total Revenue Tax Revenue Income Tax VAT Excise Tax Tax on External Trade Other Non Tax Revenue PC Tax Sharing & Devolved Revenue Grants Expenditure Recurrent Expenditure Salaries and Wages Interest Payments Subsidies and Transfers Other Goods and Services Expenses from PC Revenue Public Investment o/w Highways Education Health Irrigation Transport Revenue Deficit (-) / Surplus (+) (0.6) (0.5) Budget Deficit (5.4) (5.2) (4.5) (4.0) (3.5) (3.2) Government Debt (% of GDP)

5 1.3 Jan Sep 2017 Fiscal Outlook Summary of the Budget (Jan - Sep): Economic Classification LKR 'Mn YoY (%) Revenue and Grants 1,014,088 1,174, % Revenue 1,013,395 1,172, % Tax 931,980 1,094, % Non Tax 81,415 77, % Grants 693 2, % Expenditure 1,499,138 1,694, % Current 1,159,488 1,294, % Salaries 378, , % Interest Payments 414, , % Other 365, , % Public Investments 348, , % Other -9,145-4, % Revenue Deficit (-)/Surplus (+) (146,093) (121,980) 16.5% Overall Deficit (-)/Surplus (+) (485,050) (520,220) -7.3% Financing 485, , % Net Foreign Financing 149, , % Net Domestic Financing 335, , % 5

6 2.0 ANALYSIS ON APPROPRIATION BILL 2.1 Government Expenditure Total Expenditure Ministry of Defense Ministry of Finance and Mass Media Ministry of Provincial Councils and Local Government Ministry of Public Administration and Management Ministry of Higher Education and Highways Ministry of Health, Nutrition and Indigenous Medicine Ministry of Education Ministry of Law and Order and Southern Development Ministry of Megapolis and Western Development Ministry of Mahaweli Development and Environment Ministry of Home Affairs Ministry of Transport and Civil Aviation Ministry of City Planning and Water Supply Ministry of National Policies and Economic Affairs Special Spending Units Ministry of Irrigation and Water Resources Management Ministry of Agriculture Ministry of Social Empowerment and Welfare and Kandyan Heritage Ministry of Posts, Postal Services and Muslim Religious Affairs Ministry of Prison Reforms, Rehabilitation, Resettlement and Ministry of Housing and Construction Ministry of Justice Ministry of Skills, Development and Vocational Training Ministry of Foreign Affairs Ministry of Lands and Parliamentary Reforms Ministry of Industry and Commerce Ministry of Plantation Industries Ministry of Internal Affairs, Wyamba Development and Cultural Ministry of Fisheries and Aquatic Resources Development Ministry of Rural Economic Affairs Ministry of Disaster Management Ministry of Science, Technology and Research Ministry of Public Enterprise Development Ministry of Sports Ministry of Labour and Trade Union Relations and Sabaragamuwa Ministry of Sustainable Development and Wild life Ministry of Hill Country New Villages, Infrastructure and Ministry of Primary Industries Ministry of Women and Child Affairs Ministry of National Integration and Reconciliation Ministry of Ports and Shipping Ministry of Telecommunication and Digital Infrastructure Ministry of Development Strategy and International Trade Ministry of Buddha Sasana Ministry of Development Assignment Ministry of Tourism Development and Christian Religious Affairs Ministry of Regional Development Ministry of Power and Renewable Energy Ministry of National Co-existance, Dialogue and Official Languages Ministry of Foreign Employment Ministry of Petroleum Resources Development Ministry of Special Assignment Recurrent Expenditure LKR 'Bn Capital Expenditure LKR 'Bn

7 Recurrent Expenditure LKR 'Bn Ministry of Defense Ministry of Finance and Mass Media Ministry of Public Administration and Management Ministry of Provincial Councils and Local Ministry of Health, Nutrition and Indigenous Ministry of Law and Order and Southern Ministry of Education Ministry of Higher Education and Highways Ministry of Home Affairs Ministry of Transport and Civil Aviation Ministry of Agriculture Special Spending Units Ministry of Social Empowerment and Welfare Ministry of Posts, Postal Services and Muslim Ministry of Foreign Affairs Ministry of Prison Reforms, Rehabilitation, Ministry of Justice Ministry of Skills, Development and Vocational Ministry of Lands and Parliamentary Reforms Ministry of Mahaweli Development and Ministry of Internal Affairs, Wyamba Ministry of National Policies and Economic Affairs Ministry of Irrigation and Water Resources Ministry of Plantation Industries Ministry of Labour and Trade Union Relations Ministry of Industry and Commerce Ministry of Sustainable Development and Wild life Ministry of Science, Technology and Research Ministry of Fisheries and Aquatic Resources Ministry of Sports Ministry of Women and Child Affairs Ministry of Rural Economic Affairs Ministry of Megapolis and Western Development Ministry of Disaster Management Ministry of Housing and Construction Ministry of Primary Industries Ministry of Buddha Sasana Ministry of Foreign Employment Ministry of Development Strategy and Ministry of National Co-existance, Dialogue and Ministry of Tourism Development and Christian Ministry of Power and Renewable Energy Ministry of City Planning and Water Supply Ministry of Regional Development Ministry of Hill Country New Villages, Ministry of Public Enterprise Development Ministry of Petroleum Resources Development Ministry of Ports and Shipping Ministry of Development Assignment Ministry of Telecommunication and Digital Ministry of National Integration and Reconciliation Ministry of Special Assignment Capital Expenditure LKR 'Bn Ministry of Higher Education and Highways Ministry of Megapolis and Western Development Ministry of Health, Nutrition and Indigenous Ministry of Provincial Councils and Local Ministry of Mahaweli Development and Ministry of Education Ministry of Finance and Mass Media Ministry of Defense Ministry of City Planning and Water Supply Ministry of Transport and Civil Aviation Ministry of National Policies and Economic Affairs Ministry of Irrigation and Water Resources Ministry of Home Affairs Ministry of Housing and Construction Special Spending Units Ministry of Law and Order and Southern Ministry of Agriculture Ministry of Industry and Commerce Ministry of Rural Economic Affairs Ministry of Fisheries and Aquatic Resources Ministry of Plantation Industries Ministry of Public Enterprise Development Ministry of Disaster Management Ministry of Skills, Development and Vocational Ministry of Internal Affairs, Wyamba Ministry of Sports Ministry of Science, Technology and Research Ministry of Hill Country New Villages, Ministry of Lands and Parliamentary Reforms Ministry of Prison Reforms, Rehabilitation, Ministry of Justice Ministry of Labour and Trade Union Relations Ministry of Social Empowerment and Welfare Ministry of Primary Industries Ministry of National Integration and Ministry of Sustainable Development and Wild life Ministry of Ports and Shipping Ministry of Telecommunication and Digital Ministry of Women and Child Affairs Ministry of Development Strategy and Ministry of Public Administration and Ministry of Development Assignment Ministry of Foreign Affairs Ministry of Buddha Sasana Ministry of Regional Development Ministry of Tourism Development and Christian Ministry of Posts, Postal Services and Muslim Ministry of Power and Renewable Energy Ministry of National Co-existance, Dialogue and Ministry of Petroleum Resources Development Ministry of Foreign Employment Ministry of Special Assignment 7

8 Total Ministry of Defense Ministry of Provincial Councils and Local Government Ministry of Higher Education and Highways Ministry of Education Ministry of Megapolis and Western Development Ministry of Home Affairs Ministry of Finance and Mass Media Ministry of Public Administration and Management Ministry of Health, Nutrition and Indigenous Medicine Ministry of Law and Order and Southern Development Ministry of Mahaweli Development and Environment Others With the aim of narrowing the budget deficit the Appropriation Bill for 2018 projected a total Government expenditure for 2018 to be LKR 3 Trillion (21.1% of GDP) as opposed to LKR 2.7 Trillion for The highest allocation of expenditure in the 2018 Budget is for Defence which is LKR 291Bn, of which 90% is recurring expenditure (LKR 261 Bn). The bulk of the Budget s total expenditure is allocated for recurrent expenditure, amounting to LKR 2.3 Trillion (15.8% of the GDP). 36% of the recurring expenditure reflects interest payments (LKR 820 Bn) while 31% is allocate for salaries and wages (LKR 705 Bn). Total capital expenditure stands at LKR 761Mn (5.4% of GDP) which is surprisingly less than the interest payments (5.8% of GDP). The highest capital expenditure allocation is for Ministry of Education and Highways which is allocated LKR 150 Bn of capex, which represents 82% of its total allocated expenditure. Finance ministry has been allocated a sum of LKR 227Bn while Ministry of Provincial Councils and Local Government was allocated LKR 218Bn of which bulk of the expenditure still reflects recurring expenditure. 8

9 2.2 Government Revenue Changes for 2018 Alcohol volume based Excise Duty depending on the type of liquor will be introduced as follows: Hard liquor-lkr 3,300/- per litre of alcohol, Beer LKR 2,400 per litre of alcohol and Wine LKR 2,400 per litre of alcohol Excise duty will be imposed on import of non-potable alcohol at LKR 15/- per Kg Excise Duty will be imposed on raw materials used for manufacturing of ethanol to be as Toddy LKR 5/- per litre, Molasses/Maize/Rice/Fruits LKR 10/- per Kg Rate structure of Liquor license fee will be simplified w.e.f. 01st Jan 2018 Excise duty based on the quantum of sugar contained will be introduced for the beverages with added sugar, the rate will be LKR 0.50 per gram of sugar Excise duty on plastic resin will be introduced at LKR 10 per Kg Excise duty will be applied based only on the Engine Capacity (cubic centimeter (cm3)) for petrol and diesel motor vehicles Cellular Tower Levy will be introduced on mobile towers, LKR 200,000/- per month per tower paid monthly by the mobile tower operator For bulk SMS advertisements a levy of LKR 0.25 per SMS will be imposed and paid by the advertiser Debt Repayment Levy (DRL) will be introduced on cash transactions by financial institutions and the rate is LKR 2/- per LKR 10,000/- cash transaction (i.e. 0.02%) Carbon tax will be imposed on motor vehicles based on the engine capacity One-time payment luxury tax will be introduced in lieu of the present system of payment over 7 years Nation Building Tax Exemption on Importation of gem stones for cutting and re-export purposes and Importation of equipment that enables advanced technology agriculture practices, including greenhouses, poly tunnels and materials for the construction of greenhouses, by any grower. PAL will be revised on the importation of non-motorized equipment and accessories for water sports such as Kayaks, Canoes, Kite Surfing, and diving. Value Added Tax exemptions remove for sale of condominium housing units. NBT Exemption on liquor will be removed. Impose a tax of 1% on the commission derived or accrued by Online Travel Agents from reservations in Sri Lanka. 9

10 3.0 BUDGET & THE CAPITAL MARKET 3.1 Capital Market Developments Bills, Bonds, Corporate Debt, Equity Propose to allocate LKR 75 Mn to develop an automated Commodity Exchange Designed a Capital Market Strategy, which includes an advisory board consisting of key stakeholders, who will guide the implementation of the strategy and enhance the development of the Capital Market activities Listing of non-strategic government enterprises which will create liquidity in the CSE Introducing necessary legal framework and the policy environment to further development in Capital Market State will allow the BoC and the PB to raise both debt and equity capital. In raising equity capital, the State will not relinquish the controlling ownership, but is willing to allow the divestitures, provided that the depositors and the employees are given the option of becoming shareholders Remove restrictions that limit the land ownership rights of listed companies with foreign ownership 10

11 3.2 Budget 2018 & Listed Securities Budgetary Move Counters Affected Impact All vehicles in the country to be powered by non-fossil fuel sources by Government vehicles will be converted to hybrid or electric vehicles by LIOC Reduction in petrol and diesel volumes Taxes on the importation of electric vehicles including electric three wheelers, cars and buses will be reduced while rationalizing the import taxes on vehicles powered by fossil fuel. - Import taxes on an electric car will be reduced by at least Rs. 1 million -import tax on the high end fossil fueled cars will be increased by almost Rs. 2.5 million -Special tax on super luxury vehicles with an engine capacity exceeding 2,500 cc -import taxes on a diesel three wheeler will be increased by around Rs. 50,000 The loan to value ratio for the electric buses and three wheelers will be revised to 90/10. Emission and safety standards will be introduced together with the revisions in the pre-shipment certificates on vehicle imports Private bus operators will be incentivized to go electric. Introducing 50 electric busses into the SLTB bus fleet. Diversified Financials, Insurance, Automabile sector Banks, Diversified Financials Automobile sector Automobile Sector Increased business for banks and finance companies with possible increase in vehicle importation; Boost in demand for selected vehicles; The selected automobile dealers will face reduced demand for luxury vehicles Insurance companies can expect vehicle premiums to respond to the resultant increase/ decrease in vehicle prices Possible rise in credit demand vehicle importation Increased compliance requirements, Changed demand patterns Impose an excise duty of LKR 10 per kilogram for Plastic resins The private sector will be incentivized to convert to environmentally friendly alternatives and to engage in manufacturing bags, packing materials etc. out of biodegradable materials Customs duties will be removed for all machinery, equipment, raw materials and intermediary goods used in manufacturing of bio degradable packaging material All counters HAYL Increased production cost Lower capital costs in related investments Establish the Haritha Udyana (Eco Friendly Parks) or a green lung with a jogging track in every Pradeshiya Saba Division Cellular Tower levy of LKR 200,000 per tower per month to discourage the proliferation of such towers. Construction and Engineering DIAL, SLTL More project opportunities Increased regulatory compliance cost Hotels and other industries that dispose of their waste into the lagoons will be assisted invest in technology to ensure zero discharge of waste into the lagoons. Weather indexed insurance scheme - The insurance cover will be a minimum of LKR 40,000 per acre for 6 crops including paddy and other 5 emerging crops such as Maize, Soya, Big Onion, Potato, and Chili. Allocation LKR 3Bn Backward integrated activities related to agriculture will be taxed at the concessional Income Tax rate of 14%. Hotels and travels Insurance Increased capex to build proper waste disposal systems Increase in insurance penetration Plantation sector, RICH, CARG, CCS Reduced taxes on agri products sourcing Exempt NBT on the import of selected equipment including greenhouse technology that enables advanced technology agriculture practices. Introduce a carbon tax where the applicable rates for a motor cycle, car and a passenger bus will be around 17 Cents,LKR 1.78 and LKR 2.74 per day, respectively HAYL, CIC SMOT, UML. ASHO Lower capital costs in agri business Lesser demand for vehicles affecting the revenue and earnings 11

12 Budgetary Move Counters Affected Impact Remove restrictions that limit the land ownership rights of listed companies with foreign ownership together with the restrictions on foreigners ability to purchase condominiums below the 4th floor Finance a health insurance scheme for all university students Rationalize the tax structure based on a formula linked to the alcohol content and type and NBT will be imposed on liquor with effect from 1st April The Sri Lanka Ports Authority Act, No. 51 of 1979 and the Merchants Shipping Act, No. 52 of 1971 will be amended to cater to the demands of the modern day logistics and marine industry. Ports regulator will be introduced. Restrictions on the foreign ownership on the shipping and the freight forwarding agencies will be lifted. All Listed entities Insurance and Healthcare DIST, LION, BREW HAYL, JKH, HHL More attractive to foreing investors Reduction in future potential clientele base Increased taxes lowering demand Increased competition for logistics business The logistics hub which includes front end services, Multi Country Consolidation, Warehouses, Entrepot Trading and Off Shore Businesses which have immense potential. Amendments will be made consisting of the liberalization of the existing investment regime with the inclusion of working capital, expansion of designated areas and introduction of updated operating guidelines. JKH, HAYL, HHL Possible expansion in overall logistics market Tax concessions will be granted on imported capital goods through bonding facilities during the construction period for large scale pharmaceutical investments, dairy industry and solid waste management ventures. CARG, CCS, NEST, HHL, ASIR, NHL, LHCL Lower capital cost for future investments The EDB, supported by institutions such as Sri Lanka Customs, Department of Commerce etc., will establish a trade portal (E trade Information Platform). Introduction of a system for standardization and quality assurance and creation of dedicated industry zones in Trincomalee and Koggala, facing the waterfront to encourage boat building industry and nautical tourism. Exempt the upfront payment of NBT and PAL applicable on the sale of yachts built by BoI companies to the local BoI charter companies. Stringent regulations will be imposed to ensure good quality products protecting the Sri Lankan identity in the spice and concentrates industry. Providing incentives to increase the production of high quality planting materials in 1,000 nurseries. Activities will be strengthened at the Cinnamon Training College. SPEN, HAYL, JKH, RICH Hotel Sector, DOCK Plantation Sector This increases the access exporters have to reliable trade information and trade promotional tools such as trade statistics and regulatory requirements as and when needed Increased tourist attraction leading to improved occupancy rates and revenue. Reduced taxes leading to imporved earnings. Increased demand resulting in improved volumes, evenue and earnings. A revenue model for the Tea industry will be developed in the medium term. Strengthen assistance to Tea small holders to improve productivity. NBT on domestic Coconut oil and kernal products will be removed for a period of 1 year. Introduce regulations to ensure mandatory packaging and labeling and standardization of quality in compliance with international quality standards for all Coconut kernel products. Support the Coconut Research Institute to produce Hybrid Coconut Seedlings to meet the demand from growers. The implementation of the Rubber Master Plan has 22 different projects covering the raw material base and manufacturing with a heavy focus on product innovation and infusion of new technology will be supported. Plantation Sector Plantation Sector Plantation Sector The creation of the revenue model will help plantation companies forecast the revenue in the medium term. The short term positive impact of the removal of NBT will be negated by the longer term impact of more costly packaging procedures. Howvever, in the long term, the increased supply of produce due to the Hybrid Coconut seedlings will bring the producers higher revenue Product innovation and new technology will ensure that the companies operating in the plantation sector will benefit from reduced cost of production in the long run 12

13 Budgetary Move Counters Affected Impact The import of maize will be liberalized provided that such imports will be made only to meet any gap created due to a lack of domestic production of maize. Provide on lease basis underutilized state farms or land suitable for this industry to develop modern poultry farms with a view to increase the live birds stock from 110 million to 500 million per year. BFL, GRAN, TAFL In the event of a disruption in the local production of maize, there will be no supply side shock. Thereby reducing the chances of high volatility in prices. Also, using more land (input) will increase their economies of scale. Support the Horana and Makandura Research Centres and the Institute of Agro-Technologies and Rural Sciences to develop high yielding plants using micro propagation methods and disseminate the necessary technologies. Also support the Wayamba University in establishing a Center for Food, Technology, Research and Training focusing on sectors including the Dairy industry. Plantation, Agri Companies (HAYL, CIC) Access to high yielding seeds and plants Mechanisms such as the Homestay programme will be encouraged. A special credit facility will be introduced to upgrade such facilities. Suggested to register all tourist service providers with the Sri Lanka Tourism Development Agency (SLTDA) and to bring the informal sector in to the broader tax net. Impose a tax of 1% on the commission derived or accrued by OTAs from reservations in Sri Lanka. The para-tariffs imposed on certain imported food and beverages will be removed. Focus on developing a few anchor sites for tourism in collaboration with the SLTDA and the Sri Lanka Tourism Promotion Bureau (SLTPB) and, this will include: the development of 6 Forts in Matara, Hambantota, Batticaloa, Fort Fredrick in Trincomalee, Mannar Fort/Doric House and in Kalpitiya in collaboration with the Archeological Department and the private sector. The EDB together with the SLTDA will invest in the development of a Branding Sri Lanka Cuisine initiative. The proposed SME Guarantee Fund will enable SME Exporters who are in the CRIB but have the potential to export, yet has no access to finance its operations, to access financing from Banks utilizing the SME guarantees. Hotel Sector Beverage, Food & Tobacco Consumer Service Hotel Sector Banks and Diversified financials Increases competition for hotel companies and higher regulation and cost for tourism companies Increased competition from imported food & beverage items Increased tourist arrivals leading to increased occupancy levels and revenue Increased tourist arrivals leading to increased occupancy levels and revenue Increased clientele base leading to improved loan disbursements and earnings The liquor licensing fee structure will be rationalized. License issuance mechanism will be revamped. A tax file number will be one of the essential requirements when issuing these licenses. Introduce an Excise duty of 50 cents per gram of sugar contained in beverages DIST, LION, BREW Food and beverage sector: CCS, NEST, CARG, etc. Possible changes to applicable tax rates Increase in costs will impact profitability of counters affected Primary health care network of Government dispensaries will be strengthened, An assisted Reproductive Treatment Centre at the Castle Street Hospital for women and 3 highly specialized Obstetrics Centers in Healthcare Sector: CHL, ASIR, LHCL, Private hospitals may face competition that may Colombo, Kandy and Anuradhapura will be established, NHL, AMSL,SINH lead to reduced revenues establish a unit that will be dedicated to Sexually Transmitted Diseases (STDs) and HIV/AIDS with the state of the art facilities at the National Hospital of Colombo 13

14 Budgetary Move Counters Affected Impact 20,000 housing units under the Urban Regeneration Project for the low income segment, a programme to construct houses in the North and the East, 25,000 houses will be provided for plantation sector employees, integrated flood mitigation mechanism to cover the Colombo city limits and its suburbs including Weras Ganga project, the relocation of the Manning Market to Peliyagoda, Administrative City Development project, development of Ancillary Infrastructure for the Colombo Port City, Transport Development project, Beira Lake Rehabilitation and Redevelopment project and, the provision of Road Infrastructure for the Tec-City at Homagama, the township and strategic city development programme covering Kandy, Anuradhapura, Galle and the Jaffna Districts, extend support to implement master plan for greater Kalmunai and Samanthurai, invest to improve the rural road network covering the entire country The accident and medical insurance scheme for artists. Agrahara Insurance will be extended to all retirees for the entire lifetime, with a contributory premium 50,000 brick and mortar type houses will be constructed in the North and the East, support programs and activities in rural irrigation development including drip irrigation, rain water harvesting, and integrated village development, construction of a special home for differently abled women in the North Construction Sector: AEL, KAPI Insurance companies Construction Sector: AEL, KAPI Increase in revenues in construction sector companies with increased projects Increase in revenues of insurance companies Increase in revenues of construction sector related companies Existing small industries will be facilitated to increase production and to connect with the markets through existing subsidized credit schemes under the Enterprise Sri Lanka Credit Schemes. Charge a Special Levy for Debt Repayment at the rate of 20 cents per Rs. 1,000 on the total transaction made through banks with effect from 1st April The domestic airports at Sigiriya, Batticaloa, China Bay and Koggala will be developed as PPP s. In keeping with the vision to make Sri Lanka a Shopping hub, a VAT refund scheme for foreign passport holders will be implemented at the Airports and Sea Ports with effect from 01st May Remove restrictions that limit the land ownership rights of listed companies with foreign ownership together with the restrictions on foreigners ability to purchase condominiums below the 4th floor. Established a special Unit under the Ministry of Finance, which will be the single facilitation point for all stakeholders in designing and implementing PPPs. Banks and Finance Companies Banks and Finance Companies Hotel and Travel sector Retail Sector All counters All counters Increased demand for loans Profitability will be affected with increase in costs which shall not be passed to the customer Increase tourist attractions and promotes more tourism Increase productivity and earnings in the sector Ability to increase foreign ownership and purchase property Opportunity for investment for cash rich companies The para-tariffs applicable on the tariff lines which do not at present carry any Customs duties will be abolished within the next 3 years, in keeping with our policy of liberalizing and globalizing. Last year, over 100 applicable para-tariffs on import items were removed and in this year, almost another 1,200 para tariff will be removed All counters Increased competition from imports Introduce anti-competitive laws addressing Mergers and Monopolies practices. Smuggled Cigarettes have flooded into the local market creating major source of revenue leakage. As part of our strategy to address this matter, we will issue licenses to import Cigarettes and Cigars while clamping down heavily on smuggling. All counters CTC Ability to control unfair competition Increased competition and possbile loss of customers leading to decline in revenue and earnings. 14

15 Budgetary Move Counters Affected Impact The Usance LC facility will also not be permitted to be used for the importation of motor vehicles from 1st January In order to monitor the production of liquor, and assisting in curtailing of illegal liquor production, an excise duty will be imposed on raw materials used for Ethanol production based on the quantity. Propose to introduce an excise duty of Rs. 15 per litre on nonpotable alcohol. Automobile Sector LION, BREW Possbile loss of customers leading to decline in revenue and earnings. Increase of cost to the Company 15

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