Export policy sans taxes

Econ Trade‘Ex Govt’s ‘transaction cost’ hindered Volkswagen project’

Volkswagen Company in Germany was negotiating with Sri Lanka to set up an assembly plant for the past two years but it did not materialize.

Former Deputy Minister Dr. Harsha de Silva, MP said that this was because the ‘transaction cost’ of the then government officials and politicians was too high. “It was not profitable for them to start business in Sri Lanka paying such a high ‘transaction cost.’

We have managed to bring them as there was no ‘transaction cost’ involved.

Meanwhile it was also disclosed that a another German investor had been trying to set up a factory in Sri Lanka but failed due to red tape two years ago. “Today this German entrepreneur has taken this investment to Thailand and has already opened three factories.”

Sri Lanka should immediately consider removing taxes imposed on exporters including CESS which would help to encourage more exports, said former Deputy Minister Dr. Harsha de Silva, MP.

Speaking at the annual general meeting of the Spices and Allied Products Producers and Traders Association (SAPPTA) at Ramada last Friday he said that he does not see any reason to impose any kind of tax on exports. “I think we should completely get rid of export CESS.” (On average, Rs. 6 per kg is charged as CESS on some export products.)

CESS was introduced to formulate a fund from exporters which in turn could be used for promotions and to ‘increase value addition.’ “However what I saw was that this money was used by the previous Government for the past few years for political work and for unwanted glorification of a few individuals. It was also used to fund unsuccessful projects.”

He also lashed out at the previous government and said that virtually nothing was done to promote Sri Lanka’s export competitiveness. “The exports share of GDP which was at 35% a decade ago has dropped to 14.9%, and this is highly disappointing.”

He said that the new government would take meaningful steps to increase exports not by 20% or 35%, but by at least 200%. “We want exports to be larger than the GDP similar to countries like Singapore and Hong Kong. We want Sri Lanka to be the most competitive economy in the region.” He said that the country in the last decade was investing on non tradable sectors such as building roads and big projects and due to this the country’s competitiveness had dropped.”

The ex minister said that after the new government is formed they would make several reforms including introducing a special ‘Development Act’ to cut unwanted ‘red tape’ placed on investments. He said that both President J. R. Jayewardene and R Premadasa has positively turned around the country is just six months and a repeat of this was very much on the cards. Minister Dr De Silva added that he was ashamed to point out that Sri Lanka’s highest foreign exchange earning of US $ 8 billion had come from slavery by way of house maids while the country earns US $ 2. 5 million from apparels value addition. (Daily News)

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