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Sri Lanka: Budget 2019 - Exports and FDI

Exports

The key priorities in the export sector are to ensure improved access to markets, enhanced capacity for product development and quality to ensure acceptability in such markets, encouraging greater technological embodiment in our exports to ensure competitiveness, and to reduce non-tariff barriers to trade through trade facilitation. 



The 2019 budget continues to support programmes initiated in the 2018 budget – this includes the Export Market Access scheme and the National Export Strategy.

The Export Market Access programme has an allocation of Rs. 400 million in the appropriation bill. This programme will support companies seeking to establish export presence or expand exports.

The National Export Strategy (NES) has an allocation of Rs. 250 million as per the budget proposal. These resources will support sectors including electronics, spices & concentrates, boat building, ICT, wellness tourism, processed foods, and logistics. 

The NES includes the implementation of the National Quality Infrastructure which will support better resource utilization amongst laboratory and testing facilities which can serve both the export and import sectors. 

The budget also supports the seafood exports sector through investments in higher end fishing vessels that are compliant with EU requirements to access GSP +. This includes vessels with chilling facilities, safety and monitoring features. The government will bear 50% of the cost of these investments.

The solid tyre sector has become a major export for Sri Lanka – the government will facilitate the private sector to invest in testing and prototyping facilities for product innovation to enable the industry to remain at the helm of global markets. Support is also given to improve latex production by doubling incentives for rubber planting.

Sri Lanka is also the world’s major producer of Ceylon Cinnamon, and the budget will support the ongoing initiative to secure Geographic Indicator for this product. 

The IT initiative will be expanded to train 1,000 non-technical graduates through internship programmes where the government will bear 50% of the salary. The minimum employment requirement of 50 employees to benefit from the 35% additional deduction for the IT sector will be removed.

The government is committed to the strategy of building a network of trade agreements to link into regional value chains. After reviewing the Singapore FTA the government will build on progress made in negotiations with India, China, and Thailand.

The budget will support the Break into India and China Market Entry Strategy. Firms establishing in these and other key markets will be supported by proposed Trading Houses for priority sectors which will help Sri Lankan firms secure distribution networks, buyer linkages and other requisite support in market penetration. 

The government will continue its programme of paratariff removal to improve competitiveness of the economy and enable better resource allocation to tradable sectors. Macroeconomic policy has been supportive of the tradable sector by ensuring a competitive exchange rate.

A trade adjustment programme with an allocation of Rs. 250 million in 2019 is also proposed to help firms and workers adversely affected by tariff liberalization. 

The Economic Service Charge of 0.5% has been reduced to 0.25% for export companies (including IT and tourism). This will support cash flows of these companies. 

Amendments are proposed to the Customs Ordinance which will improve trade facilitation – enhancing transparency, risk management, consultation, and appeals processes. 

The Authorized Economic Operators programme will be launched by Customs in 2019 enabling better risk management by focusing resources on the highest risk cargo whilst facilitating compliant traders. 

Implementation of the National Single Window will be accelerated with a proposed allocation of Rs. 30 million.

Investment

A package for high value investments is proposed. This entails removal of upfront investment costs for investments over US$ 50 million, and additional capital allowances ranging from 100% to 150%. For investments over US$ 1,000 million additional benefits including exemptions from dividend tax and PAYE are also proposed. 

Industrial zones in Bingiriya and Wegawatte will be supported with Rs. 500 million proposed. 

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