The Hon. Chathuranga Abeysinghe - Deputy Minister of Industry and Entrepreneurship Development

¶ 01 Hon. Presiding Member, as we discuss the Estimates of the Ministry of Industry and Entrepreneurship Development, I wish to clarify several points raised by the Opposition. In particular, Hon. Harsha de Silva did not speak to the whole subject, but raised two very minor technical issues. We thank him for that because we engage daily with entrepreneurs on such technical matters seeking practical solutions. However much we talk about technicalities, we must look at industry and entrepreneurship development through data. In 2015/2016 our export earnings were around USD 17 billion; in 2019 they were still around USD 17 billion, while growth had fallen to 2.3%. There is clearly a gap between theoretical knowledge and practical application on the ground.

¶ 02 We must therefore look beyond that. Global crises come at all times in different forms. Amidst such crises, a country must compete like a business with other nations and secure a share of the global market. That strategy is the strategy of the National People’s Power Government.

¶ 03 Our discourse on a production economy is within the question of how we plug into global value chains and capture a share of the world market. A production economy capable of joining global value chains was not built here over the last 40 years. We spoke only of a services economy and ended up losing both.

¶ 04 Hon. Presiding Member, I thank the Secretary of our Ministry, Ms. Thilaka Jayasundara, and all officials and our personal staff for their significant support over the past four months in framing these plans, and for their contribution to reshaping the country’s future.

¶ 05 Within these Estimates, we have proposed several items not yet discussed. We are addressing the issue of land lost by industries dismantled by the previous administration. We have included solutions to capital constraints, especially for SMEs. Many have lost market access because they cannot offer about a 30% margin to large buyers or three months of credit. We will help such businesses regain markets, provide structured knowledge, technology, and especially research data to the business sector, and support certification, research and development, and skills development. Although not directly within our Head, Rs. 16 billion has been allocated for skills development.

¶ 06 You handed us a country where “ease of doing business” had become a difficulty. Sri Lanka ranked 99th in the Ease of Doing Business Index. Our proposals aim to move that indicator forward significantly, targeting improvement toward around 60.

¶ 07 We are also supporting the development of traditional crafts and skills and restoring Sri Lanka’s unique traditional products and services, along with the artisans and their networks. Institutionally, we are adopting a collaborative approach, integrating systems, and designing a structured process that provides services according to the life cycle of a business—from start-up, to growth, to exporting. We are coordinating with other Ministries—Plantation, Agriculture, Fisheries—along with NGOs, banks, and universities, to bring fragmented efforts under a common national framework.

¶ 08 We are introducing a new SOP for the vehicle assembly industry to address current challenges, and are in discussion with the Ministry of Finance regarding tax-related issues. The gems and jewelry industry, weakened by measures of previous governments, is also being addressed with necessary changes.

¶ 09 For the first time, we are introducing an anti-dumping policy in Sri Lanka; the Cabinet took a decision yesterday. Low-cost, substandard goods entering our market will be curtailed through processes coming very soon. To build an export-led economy, we will bring a tariff policy to make raw materials used in export products duty-free. Once we establish these two laws, they will become national turning points.

¶ 10 We will also prioritize local content in the construction industry. Many products and services needed for development projects, including foreign-funded ones, are not being sourced locally. We are considering including a range of products in a negative list, and ensuring proper enforcement of the existing law that prioritizes local products in government procurement, rather than awarding tenders to friends.

¶ 11 We have already established a National Advisory Committee to frame SME policy and push SMEs forward. Specifically for SMEs affected by parate, we will introduce a relief process within the next two weeks. Around 20,000 SMEs now in distress are being taken up with banks through our Ministry to move them forward.

¶ 12 Regarding credit access, credit guarantee schemes have already commenced this year. Where a borrower lacks collateral, banks together with a credit guarantee institution can provide up to 60% coverage, enabling credit without traditional collateral. We are discussing with several banks to provide up to Rs. 1 million in start-up capital, collateral-free, through a structured process via the Ministry, and we are creating a capital fund for IT and other start-up industries.

¶ 13 With respect to State-Owned Enterprises under the Ministry (SOEs), these are intended to be self-financing and profitable; 69% of them do not take Treasury funds. We have appointed chairpersons and boards drawn from private-sector capability. Anyone may compare past boards with those we have appointed. Notably, BCC Lanka recorded its highest-ever sales last month. The National Salt Company is moving forward with the next production step. Salusala and Laksala—two major institutions—are being strengthened to support artisans and rebuild their networks. The Ceramic Corporation is operating within available capital. We aim to take these forward through public–private–people partnerships to the national level. NEDA, NPS, SED, and IDB are now operating under an integrated framework.

¶ 14 In sum, this is the first Budget designed to deliver a turning point and build an export-led production economy. The Ministry of Industry and Entrepreneurship Development has been allocated Rs. 13 billion, and across government more than Rs. 100 billion is being invested to strengthen value chains in industry and enterprise. The service tax on the IT industry discussed this morning was a decision taken after proper consultation with the industry.

¶ 15 All of this is occurring within a coordinated framework. The first Budget of the National People’s Power has not been presented based on a single Ministry, but rather to make the production economy the common outcome of industry, transport, technology, and agriculture. Thank you.