President Mahinda Rajapaksa  seen having a friendly chat with the DNA MPs including Anura Kumara Dissanayake and Sunil Handunnetti at the tea party after the budget speech yesterday. Pic By Kushan Pathiraja

Incentives to raise per capita income to US$4,000 by 2016

By Kelum Bandara & Yohan Perera

President Mahinda Rajapaksa presented his budget for 2011 in Parliament yesterday with emphasis being placed on the acceleration of development projects, and incentives on export and import industries which aims at increasing the country’s per capita income by US $ 4000 by 2016.

The President started his budget speech at 1.30 pm in the House and noted that his brother Speaker Chamal Rajapaksa was reminiscent of his late father D.A. Rajapaksa who was once the Deputy Speaker of the House.

At the very beginning, he said he decided, above anything else, to allocate Rs. 3000 million  over a period of three years to address the economic needs of servicemen and their families who made enormous sacrifices in the victorious fight against terrorism. The President proposed to give cash assistance of Rs.100, 000 for a live birth of third child in the families of soldiers.

However, the President did not announce any proposal for the much awaited pay hike of Rs. 2500 for public servants despite pledges in his election manifesto, Instead, he proposed to grant a five percent increase as a non pensionable allowance for public servants and security forces along with an increase of their cost of living allowance by Rs. 600 from next January next year.

UNP MP Dayasiri Jayasekara passed a remark at this point that some public servants would get only Rs. 500 as an increase to their salaries.

The President rebuffed the remark saying there would be an increase of Rs.3, 500 for some public servants.

The recommendations of the National Salaries and Cadre Review Commission will be implemented by mid next year. 

“Mr. Speaker, I gave serious thoughts to salary related issues of public servants. An increase of Rs.100 per month for salaries and pensions will cost Rs.1.9 billion annually. As such wage increases are not easy. However, public servants deserve some relief without compromising development priorities,” he said.

For the first time, the President announced that pension benefits will be given to employees of the private and corporate sector. In this regard, Employees Pension Fund will be set up, and employees and employers are expected to contribute two percent each to this Fund.

Similar pension benefits will also be ensured under the 2011 budget for expatriate workers who bring in foreign remittance to the tune of US $ 4 billion. Each employee is required to contribute at least Rs.12,000 annually for this purpose.

Besides, for every citizen over 65 years of age, the President said the Citizen’s Pension and Insurance Fund would be set up.

“We need to prepare for a larger elderly population by 2020,” he said.

For one seeking membership of this scheme, a minimum of Rs.5000 has to be contributed annually for ten years. Pension salaries can be drawn only after they complete 65 years of age.

President Rajapaksa also proposed a hike of cost of living allowance by Rs. 250 a month for pensioners.

“In order to correct anomalies in the pension structure, I propose an increase of Rs.750 per month to those who retired prior to 2003 and Rs.250 for those who retired between 2003 and 2006. This will be effective from July 2011,” he said. 

Outlining the economic achievements of the last five years, he said that poverty level had dropped from 15.2 percent in 2006 to 7.6 percent this year according to a pre-budget review of 25 districts.  Besides, access to electricity in the rural sector has risen from 78.5 percent to 83.2 percent during the period, and to safe drinking water from 84 percent to 87 percent.

The President stressed the need diversify the country’s exports with value addictions. As a step in this regard, a CESS will be imposed on exports in raw and semi-processed form. Exports of finished goods will only be exempted from such taxes hereafter. 

“Secondly, I propose to reduce duties and taxes on machinery, equipment and raw material to enable our enterprises to have affordable access to world class technology,” he said.

Referring to the tourism sector, he said that though tourist arrivals expected to be around 600,000 this year, earnings from the industry showed a moderate increase due to the services being under valued. As a result, the government has decided to impose a levy of US $ 20 per bed on all five star hotels which charge a room rate less than US $ 125 per night. 

“We must get ready to facilitate 2.5 million high spending tourists by 2016,” he said.

In the telecommunication industry, the minimum rate of call charges will be reduced from Rs.2 to Rs.1.50 per minute next year, and a levy of Rs. 2 will be imposed on IDD calls per minute.

After the budget, the President, in a lighter vein, invited the opposition MPs for tea. There were ripples of laughter in the House when Mr. Jayasekara asked whether tea would be served with sugar or not, and the President responded in an equally humorous manner.