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The National Chamber of Commerce of Sri Lanka recognizes that this budget was presented in a difficult economic environment. When the country has to foot a heavy defence bill it is unrealistic to expect the government to grant too many concessions. It is pleasing to note that there have been no policy reversals. The surcharge on corporate income tax of 20% is assumed to be a short-term measure and not a reversal in government's previously stated policy of reducing the tax rates over time. The National Chamber is also pleased that the government has accommodated some of the concepts advocated by the Chamber over the last few years such as: 1. Rationalization of holidays 2. Introduction of a National Health Insurance Scheme 3. Further facilities for the development of the Small and Medium Enterprise sector including the establishment of a specialized banking institution 4. Recognition and support for the IT sector 5. New initiatives for the agricultural sector by strengthening the marketing infrastructure 6. Further concessions to the health sector eg. Exemption of medical equipment from GST 7. Duty concessions for importing raw materials which are not available locally. The creation of a new dedicated fund for the garment industry is a positive step especially in view of the challenges in 2005 when the multi-fibre agreement ceases to operate. Tax holidays for relocation of industries to the regions will support sustainable development. The budget proposals focus on expenditure control and management in the state sector through stringent cost control measures. This will call for much more discipline than has been witnessed in the past. The Chamber hopes that the political will and the leadership will be provided to achieve this as otherwise there will be cut-backs on capital expenditure which will be detrimental to development.
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