SRI LANAKAN’S COMPLAIN ABOUT HIGH COST OF LIVING

Today many Sri Lankans complain about the high “cost of living”. In this regard, everyone seems to think, “cost of living” is all about the “cost of services and commodities” that people incur in “living”. Well, in a way that is true. However, I would like to stretch that definition and understanding a little further, and argue that “cost of living” is more about the ability and financial strength that people process at a given time to meet those living costs. After all even if prices of commodities and services were rising, if our wages and incomes were also correspondingly rising to levels, which are, enough to meet those rising costs not be too adversely felt.

In most developed countries, the people’s average wages are sufficient to provide for food and drink in a fraction of around 20%, for housing about 25% for clothing 10% for education 10% for leisure and travel 10% for savings 15% and for other special interests. However, in Sri Lanka, the average lower middle class Sri Lankans spends almost 80 – 90% of their earnings on food, drink, and shelter, which leaves very little for them to spend on other essentials and to save for a rainy day.

In my view this issues cannot be dealt with by tinkering about with the selling prices of a few essential commodities or services only. The response should be a multi – pronged and integrated one. At the same time, it should be noted that the only long – term solution is the increasing of opportunities to people to enhance their income levels, and to boost their productivity levels. So it is clear that our economic activity should be clearly focused on these objectives at all times.

On the issue of attempting to deal with the rising cost of living we must now try to think of fresh initiatives instead of only traversing the same old beaten track of attempting to reduce commodity prices. To a certain extreme granting of selected subsidies and income support schemes for the poorest of the poor. In our country, we have a large percentage of very "poor people" and I believe that strategies that provide the poorest sections are strengthened to face the economic challenges of a liberalized economy. But we should not forget that producers too are consumers within a national economy. Therefore, we must remember that when producers are well off and economically stronger, the economic cycle gets healthier and consequently everyone will benefit in the long and medium term.

TEA INDUSTRY IN SRI LANKA

The tea plant was introduced into Sri Lanka (then Ceylon) in the year 1824 and more actively planted in 1839 it became established with a 19 acre field in the year 1867 by James Taylor who had the plantations in the Kandy District and did the manufacture of the leaves in the veranda of his of log cabin.

The planting expanded to 40 hectares and considered commercial product from then the land in tea expanded and by the year 1900 tea from Sri Lanka occupied a very special place and tea as a beverage occupied a place in western countries. By this time the extent of tea was 121,410 hectares continuing to increase and by the year 2000 it had reached to 195,000 hectares and kept on increasing.

Considering cost of production it became necessary to increase yields rather than increasing land extents only. Towards this end studies and experiments were conducted from 1930 and a disease resistant and high yielding clone was developed to be actively market in the year 1941. From then onwards replanting commenced with government subsidy to increase crop and thereby increase total quantity to be marketed.
Along with this development to increase the profitability of this industry the made product came to be known as the “Cleanest tea in the world.” in the year 1997 by ISO and, was accepted world over. by this marketing became more convenient.
The economy improved due to price segment and yield segment. In the 21st century tea became Sri Lanka’s number 1 foreign exchange earner competing with Tourism and Gem Industry. The industry has grown during the last few decades and contributing to country’s foreign exchange now faces greater competition from many of the new comers world over producing tea, however the competition is mainly met by the high Quality tea produced by the country.
The tea industry must be considered the largest employment-generating unit along with all its infrastructure components from growing to exporting. It is very clear that the industry plays a key role in its economy and indications are this can grow and hold for decades.
The world now looks at tea as a “Food”, it is therefore necessary that clean, healthier tea be produced. The sooner we get into claming that the Sri Lankan tea is produced to the highest standard of food processing and tending more towards "Organic Tea" will earn a good demand and Sri Lanka with its known Quality will be a leader in the world were our tea will be looked ati n the shelves of the supper markets. This is a further contribution towards the improvement of our economy.
The world is now looking not merely at Tea as “Black Tea” known for many years. It now looks for variations with improved technology in the manufacture. Sri Lanka has now moved into this field very actively to meet this. Some of the areas, in which this development has to take place, can be “Value Addition” in the form of Tea Bags, Packeted Tea, Instant Tea, Green Tea, Ready To Drink, Hot and Cold Soluble Tea, Flavored Tea, and "Organic Tea".
The Tea industry can look forward to a bright period when approached correctly with the various factors indicated above and not being pessimistic.
Cost of production can be a burden but can be controlled, having traced the history of tea I am confident that the future growth can be good provided Sri Lanka produces the best Quality tea meeting worlds standard as a “Food Drink”

CONSTRUCTION SECTOR IN SRI LANKA

It should be noted that the Construction sector, which was a mere 3.8% of the total GDP in 1977 had grown to a relatively reasonable 7% by the year 2000. Superficially at least, this growth figure tells that this sector’s sectoral contribution over the past 25 years has almost doubled, and indeed it has. However, the actual ground situation may not be all that wonderful for several reasons.

All over the world, countries that have developed rapidly have experienced steady and quick growth of the construction industry. In that light, particularly in view of the fact that our infrastructure including roads, highways, buildings bridges, waterways, ports, airports, transmission lines, etc… is still at a very basic level when compared to international standards, the recorded growth in this sector seems woefully inadequate. Even at this late stage, our planners should urgently attempt to enhance construction activity so that it would be reflected as an improvement in the sectoral contribution of the Construction sector. A vigorous promotion of construction activity would serve to steadily raise this sector’s composition to around 10% to 12% of total GDP over the next five years and that would be highly desirable. Such an acceleration in the growth of this sector, if it takes place would possibly reveal that the country’s infrastructure is being rapidly developed and such evidence would in turn, prompt new investment to flow into the country, leading to further improvements of the economy.

If this is to happen, the building industry too, has a lot to do. In my view, the industry must improve its construction and design standards to bring them into line with the best in the world. Our architects, engineers, quantity surveyors and other building industry professionals are no doubt very competent, but they still need to closely concentrate on certain key aspects such as productivity enhancement, meeting dead – lines and finishing projects on time, if they are to compete in the international marketplace that prevails in this sector. The new and popular construction sections, use of power tools at sites, use of standard modern materials, etcs are not utilized sufficiently in Sri Lanka and it is time that the industry moved forwards using these techniques and implements.

WIDENING THE SRI LANKAN TAX BASE

During 1999, 141.333 income tax payers representing about 0.75% of the population in our country had coughed up Rs.27.4 billion and 16,249 registered taxpayers for GST had paid Rs.34.8 billion. At the same time, 7,361 National Security Levy contributors chipped in with Rs.27.6 billion towards the country’s coffers. These astoundingly meager numbers of taxpayers, beg the question: “Could it be possible that Sri Lanka has so a few people who should be paying taxes? We all know that the answer is an emphatic “no” The ground situation even in the year 2003 is not much difference.

The method for widening the Sri Lankan Tax base proper, tax officers would be actively required to seek and draw into the “tax net” people who should be paying taxes, but who are not doing so now. The officers would be expected to collect data by making field visits, monitor business activity and advertisements, introduce systems and procedures to ferret out regular evaders, offer assistance to those who may be evading because of the lack of knowledge, visit institutions and establishments and interview key officials and others to ensure that the correct amount in tax is being paid free of corruption.

Perhaps the Indian model of making it mandatory for certain categories of people to file tax returns could be useful in supporting the programmes towards the success of this endeavor. The Indian model works on the basis that if a person has any two of four attributes, namely, the ownership of a house, or car, or telephone or has traveled abroad during the past year, he/she should file a tax return. The scheme could be conveniently implemented by making it mandatory for the purchases of a house, vehicle or telephone to declare their income tax file number on the transfer form if they purchase a vehicle, or on the telephone request application if they apply for a telephone. In order to streamline this procedure and ensure compliance simple administrative actions where the local authorities that register land/house transfers are, by law made to record the tax file number of the purchaser may be introduced and easily implemented.

If these programmes are implemented a target of at least 30,000 new direct income tax payers, and about 5,000 – 7,000 new indirect tax payers could be netted in, within a year. But the numbers of new taxpayers could considerably be more if these strategies are pursued diligently, professionally and enthusiastically.

TRAINING OF SMALL AND MEDIUM SCALE ENTREPRENEURS IN

SRI LANKA

The most important step is training of our small and medium scale entrepreneurs in management and financial matters. Many of our small and medium scale entrepreneurs know something about their businesses,but know nothing or very little about managing the business or financial management. As a result, many of them quickly fall into trouble and end up losing their business and many of their other assests and resources. This has happened to many people and if all the banks could respond positively to this issue by conducting short - term training courses in financial management, marketing and other management disciplines before disbursing loans,it will be a big help. If this takes place small and medium scale entrepreneurs will be prepared to meet the challenges ahead successfully.

DEVELOPING THE TOURISM INDUSTRY IN SRI LANKA

Sri Lanka has been actively developing its Tourism industry since 1965 and today it has reached quite a significant level with massive investments having already been made over the past 3 decades or so.

So far, the main tourist generating market for Sri Lanka has been Europe. But given the geographical location of Sri Lanka only miles away across the Palk Strait, with a middle class population exceeding 20 million persons, our natural tourism - generating source should have been identified as India. In that context, we must make every endeavour to facilitate the influx of Indian tourists into our country and the promotion of "conferences" among Indian companies to be held here. If Sri Lanka can accept Indian currency it may be an advantage. Sri Lanka should also permit domestic airlines to operate between Lanka and India. Of course,such initiatives which would have a bi-lateral impact on both India and Sri Lanka would need to be discussed and the modalities worked out.

Another area that we urgently need to focus upon is the development of our country's attractions that should now be brought in line with international standards. The Pinnawala Elephant Orphanage, the Dehiwala Zoo and the historic Sigiriya Fortress to mention only a few of our heritage,while being extremely appealing to tourists do not offer sufficient opportunities to tourists to spend their money on connected activities at the respective sites.

In contrast, many other countries with even lesser quality attractions have been able to gather higher revenues because of their presentation techniques and the variety of events,activities and programmes. If sufficient activities are provided for travelers to enjoy,they are bound to spend more foreign exchange to pay for such acitivites which in turn would boost the per capita spending per tourist.

Another series of activities that could be promoted which would generate foreign exchange and employment are short duration ocean cruises for tourists and locals. Harbour cruises and one or two day cruises which take holiday makers out into the ocean where they can enjoy leisure activities (e.g.parties,dances,deep sea diving) Such experiences would probably be well received by a high spending and discerning clientele. Further activities that could be promoted would be yachting, wind surfing.

SRI LANKA'S ECONOMY

If we are to review our economy, we have to learn lessons and plan for the future. We have to reflect on the past so that we may assess the progress of our country during that period economically and socially. In doing so, it would also be useful to assess from an economic and social point of view and whether as a nation we kept pace with other nations.

Over the years, several governments have downplayed the important role of the agricultural sector. To some extent, the World Bank and other multi - lateral lending institutions have to be blamed. We are importing almost our entire consumption of wheat, sugar,and milk foods. Today we are importing milk powder to the value of nearly Rs. 10 billion while causing the export of our mothers of our rural children to the middle east to undertake menial jobs., Instead of sending rural mothers, if we had provided these rural families with a reasonable livelihood by providing them with good quality milking cows to be reared in thier plots of land in a systematic manner,and collected the milk through a well organised co-operative movement like that prevailing in New Zealand, not only would our GDP have increaed, many of the social problems would also have not risen.

If we look at the past ten to fifteen years , we will realize that today's top industry in our country, namely the apparel industry, was virtually non - existent. How did it grow to be a US$ 2 billion industry by the year 2000? How did an industry that was only limited to a couple of factories to have one million people employed account for 60% of our country's total industrial exports be able to face international competition. It happend because the then President Premadasa and the Industries Minister Ranil Wickremasinghe gave so much support and encouragement to the industry to start up and grow steadily and rapidly.We should identify key economic thrusts and give them a boost through government policy and government support.

If we are to kick start our economy the first initiative is the peace. Without peace we cannot show progress in our economy. The next important thrust is the initiation and introduction of certain new industries and sectors into our economy. We already have initaited key development projects to kick start the economy.

I believe we have three ready made major projects cum industries that could to be successfully launched.The first is the construction of the Hambantota port and the connected infrastructure. The second is linking ourselves to the vast, globalized knowledge economy.and the third is making use of the exclusive economic zone in the Indian Ocean.The power projects should also been given consideration.

In my view these four projects should be launched as soon as possiable that would give a tremoundous boost to the economy with highly skilled and energtic Cabinet Ministers who are capable of producing results like late President J.R Jayawardene got his Minister Gamini Dissanyake to deliver on the Mahaweli Project. Once this takes place the figures,bases,statistics,and assumptions that we are today talking about when analysing imports,exports,investments etc. would undergo an unbelievable transformation, in much the same way the apparel industry transformed the export and industry statistics over the last ten years.