Budget : Committee Stage — 8th Day

Votes of the Ministry of Science and Technology
"We have paddy boilers and ovens which operate with rice husk and wood shavings for energy"

Batty Weerakoon, (Minister of Science and Technology) winding up said: I am confident that with the resources available I can continue the work for which the late Bernard Soysa, laid the necessary foundation. I have gone further than what was then contemplated. I have, with the approval of the Cabinet attached commercial divisions to my engineering corporation. Which is the National Engineering Research & Development Centre of Sri Lanka, or NERD, for short, the CISIR, which is the Ceylon Institute of Scientific and Industrial Research, and the CINTEC or the Council for Information Technology. I took this step in order to assist in the task of technology transfer. Although some of these technologies, as in the food sector, have been passed on to the private sector there is still plenty of room for improvement.

These commercial divisions will commence marketing the products of research so that there will be in the market an accepted product which the private sector entrepreneur can take over. The major products of the Engineering Institution, NERD, that are already in the market are the low cost rice huller and the bread oven. The rice huller which we sell at Rs 12,500/- per unit can be operated with the power unit of a two-wheel tractor and mills 60 kilos of rice per hour. It is an ideal piece of technology for the farmer who wishes to take his own harvest, and what paddy he could be from his neighbors, direct to the market as rice.

We have paddy boilers and ovens which separate with rice husk and wood shavings for energy. The food technology available with the CISIR can be regarded as an extended area of post harvest technology in which the institution has progressed considerably. However I will be failing in my duty if I do not remind the institution that it has still a long way to go to prove itself. In addition to what relates to food technology we have in the NERD improved crematorium systems that operate on big- gas or LPG.

The machinery costs less than half the cost of what is imported and installed. Much designing work has already been done on the fabrication of a two-wheel tractor, and I hope to have it in the commercial division of NERD by March 1999. I also take pleasure in reporting that Her Excellency the President has just handed over to the Colombo Municipal Council the first major pilot project of NERD in bio-gas and bio-fertilizer generation. This is at Kirillapone which is the site chosen for it by the late Bernard Soysa.

We intend erecting a larger bio-gas project in Muturajawela in the course of next year. It will function on the market garbage of the local government authorities along that coast line. There is also the salvinia that is plentifully available there. The Dutch canal system in that vicinity will be used as the principal means of transport of both the garbage, and the fertilizer that is the major end product.

Perhaps some micro and mini industries too can come up to take advantage of the low-cost electricity that will be generated. This bio-gas complex will certainly be a means of employment generation too. The Arthur C. Clerk Institute for Modern Technologies (ACCIMT) has lived up to its name in the current year too.

Many are its achievements but I wish to mention some of the highlights such as the Traffic light systems which it has devised and installed at several points within the Colombo Municipality including one opposite my Ministry. These have been installed at a fraction of the price of the imported product. There is now in progress the installation of a traffic lights system in the Dehiwela-Mt. Lavinia municipality too. I hope, that the House appreciates that this is high technology. In addition to this there is a lot more work done for industry by way of consultancy and innovation. Training of engineers in Switch Mode Power Supplies, Modern Power Electronics, Management of Electronic Systems, and in Telephony, Key telephones and PABX systems has also progressed.

The CISIR has continued with its research and technology transfers despite the felt constraints flowing from the lack of adequate science manpower. On prevalent salary scales we cannot attract scientifically skilled persons or keep them in our service. I have also found that there are not sufficient persons to be sent from the institution for the needed short duration foreign training courses and discussions. Hence the same persons have to be sent repeatedly, and some times thrice and four times a year, thereby denying to the institution the benefit it should derive from these exercises. By this the work in the institution too is bound to suffer.

However the institution has to some degree succeeded in transferring researched technology. I make special mention of the Poshita project set up for an NGO in the Hambantota district. This is a good example of what amount of work can be done where there is political will and co-operation too. We had all this from the Hon. Chamal Rajapakse. "Poshita’ is a child food from grain that is locally available. It requires constant laboratory testing too and this is the kind of infrastructure that the CISIR itself will need to provide. It is at present on that task.

Two of the institutions I have mentioned, the CISIR and the Arthur C Clerk Centre, together with NARESA, the Natural Resources, Energy and Science Authority, have been treated as one unity in the Science & Technology Act, No. 11 of 1994 enacted by the previous government. The late Hon. Bernard Soysa had justified misgivings about this Act and refused to implement it. He did not declare by regulation the date for its operation. He found that it emasculated the research content of the research institutions that were brought into the Act. Up to the time of the present government the subject of Science & Technology was an activity attached either to the Ministry of Education or Industry.

In the period 1990-94 it was attached to the Ministry of Industry, and though given the dubious status of a State Ministry it had no policy of its own. Hence the weightage to making this ministry and its functions part of industry. The Hon. Mr. Bernard Soysa apparently did not see this as in the best interests of the full development of our science and technology. I however decided to implement this Act as from April 1998. To my thinking it was helpful to adopt it for the present. It provided a necessary framework that could be made more congenial with certain amendment to it which could be brought only after implementing it. I expect to bring these amendments before this House early next year.

The new Act creates the National Science and Technology Commission (NASTEC). It is a top policy forming body. It can set the necessary directions for the development and application of both science and technology. In the absence of this kind of machinery governments were unable to effectively mobilize the network of science and technical institutions for the priority objectives in development.

Task Forces set up for the purpose of development at various times defined closely the needed objectives in this field but were unable to co-ordinate the efforts and capacities of the science and research network that is spread through several ministries. The different units of this considerable network functioned in isolation. In the new ordering of the Act NARESA which is renamed the National Science Foundation will, in relation to NASTEC, be a feeder body as well as a functioning arm.

CINTEC which is the Centre for information Technology has been the flag ship of information Technology in this country. It has several achievements to its credit and it keeps on building progressively on its past achievements too. Her Excellency declared the year 1998 as the Year of Information Technology and this helped in the further development of this technology. Much of incentives provided in this area in the Budget were intelligently anticipated by CINTEC. There is now in the country a fine industry and service nucleus of information technology and this is spearheaded by the very youthful entrepreneurs and technologists engaged in it. This however can very easily be confined to the limitations of an elitist commercial activity. I do not wish it to be so and my efforts have spread to the provision of the benefits of the knowledge and practice of this technology to areas outside the metropolis. The late Hon. Bernard Soysa commenced this by gifting to schools outside Colombo too the 100 new computers and monitors presented to him by India. I am now making available computers at a very affordable price to the education system which includes schools, training institutions and others of a like nature. The industry is readily co-operating with me on this.

I am also now working on a programme for training thousands of computer programmers from among school leavers. For recruitment they do not need a knowledge of English. This knowledge will be given to them in the course of training. In this I have mobilized my apprentices training institution NAITA CINIEC, and the Software industry. The Open University is co-operating with me in this and I have the assistance of several educationists too. In fact I am now engaged in the task of orienting NAITA generally to training apprentices for greater value addition in industry.

Both the Meteorological Department and the Atomic Energy Authority, and the Sri Lanka Standards Institute, all of which are in my Ministry have been benefiting greatly by the assistance provided by foreign scientific bodies. The Meteorological Department has acquired new equipment under arrangements we have with India, and the Standards Institute has been helped greatly by the Swedish Aid Agency in helping us to bring our standards to the level of international acceptance.

Without this we are bound to suffer in international trade with the various regional blocks that impose standards in their own interests, and in a manner that help them to overcome the openness promoted by the World Trade Organization. The Atomic Energy Authority has brought into service in this country several nuclear techniques in an area ranging from health to the construction and maintenance industries. Its service to the rubber industry in nuclear centrifuging needs special mention. If we can break through the unfounded fears of radiation in this area it could also provide the needed technology for preserving grain from pests and insects.

The Human Resources Development Council is as yet getting into stride but has in the meantime done important surveys. It is at present working on several projects of which I may mention the extension of the Science and Technological Services to the bottom levels too. At present these services start from middle level and attempt to reach up. I have put the HRDC on the task of bringing in the lower segments too into this service. This if adopted would give the school leaver after his GCE (O Level) the chance to opt into scientific and technological employment which would ensure a worthwhile future for him.

It has been found that up to now engineering activity contributes only about 3% to value addition in the manufacture of goods. That certainly is poor value addition and I am told that it is among the lowest in Asia. The ADB project aims at rectifying this situation by upgrading the teaching and work standards in our research and academic institutions. The working out of this project at the Sri Lanka end has been entrusted to my Ministry and I take pride, Sir, in saying that we have been progressing very fast on this whilst at the same time taking care to see that we will in fact get all the benefit that the project is intended to give us.

The votes were passed.

Budget balances military, development and welfare expenditures – GL
The windingup speech of the Deputy Minister of Finance, G L Peiris at the end of the Second reading of the 1999 Budget in Parliamant

Continued from yesterday

One can therefore maintain with justification, Mr. Speaker, that Budget deficit was reduced without diminishing expenditure on social services in real terms. When the budget deficit is to be reduced in a path to medium-term fiscal consolidation it needs to be achieved through such revenue enhancing measures as well as a containment of expenditure growth hurting economic development in the medium-term. The balancing-process became, complicated with a sharp increase in defence expenditures. However, despite a sharp rise in military expenditures, the Governemnt has been successful in achieving a reasonable balance without curtailing the expenditures on civil administration, social services such as health and education and economic services such as agriculture and irrigation, fisheries, manufacturing and mining, energy and water supply.

Expenditure on general public services including military expenditures and public order and safety increased in nominal terms at an annual average of 23 per cent during the last four years compared with 22 per cent during the previous 17 years.

Mr. Speaker, The annual average inflation measured in terms of GDP deflator, which is the more appropriate indicator to measure overall inflation in a given year, increased by 9.6 per cent during the last four years compared with 12 per cent during the 1978-1994 period.

The increase of expenditure on general public services after adjusting for this inflation was 12 per cent during the last four years compared with 9 per centduring the previous 17 years. This indicates a faster growth in real terms during the last four years.

If adjusted for only the exchange rate depreciation, the increase was much larger, 15 per cent compared with 12 per cent in the previous period.

As a percentage of GDP deflator, expenditure was 7.4 per cent during the

last four years,compared with 5.4 per cent during the previous 17 year period. The higher ratio mainly reflects the rise in military

expenditures from an average of 2.7 per cent of GDP to an average of

5.7 per cent of GDP between these two periods.

Social Services
In the effort to strike a balance among various sectoral priorities, some sacrifices had to be made in view of the increased defence expenditures. However, essential expenditures were allowed to grow even in real terms while improving fiscal discipline by reducing waste and containing the growth of expenditures in low priority areas. This is a cardinal budgetary principle where sacrifice has to be made to accommodate higher unavoidable expenditure in certain areas.

The overall expenditure on social services increased in nominal terms by 9.5 per cent,indicating a slight reduction in real terms. This reflects largely the rationalisation of welfare programmes towards better targetting.

Expenditure on education, after inflation, increased in real terms by 2.2 per cent annually, health by 2.4 per cent, housing by 9.2 per cent and community services by 19.2 per cent,thus indicating that the government has not allowed an erosion of the value of expenditures on essential social services.

As a percentage of GDP, on an annual average basis, ratios were maintained at 2.7 per cent for education and 1.5 per cent for health during the 1995-98 period compared with similar percentages during the previous 17 years. Expenditure on community services increased to 0.4 per cent from 0.2 per cent of GDP in the previous 17 years. This increase was the result of an introduction of new programmes under Samurdhi and higher expenditures for training of youth and sports.

In the case of housing, the government has launched several housing programmes recently. The plantation sector housing programme was started in 1996 and there has been an annual allocation of Rs.100 million. The fisheries housing development programme started in 1998. The urban housing development programme continued and the new Jana Udana Housing Development and the Sevana Housing Development Programmes were also initiated.

Economic Services
Increases in government expenditures, in real terms, were seen in the case of agriculture and irrigation, fisheries, energy and water supply and manufacturing activities. However, as a percentage of GDP, the ratio in the case of agriculture declined reflecting the completion of major agriculture and irrigation projects including mainly the Mahaweli and the avoidance of transfers to the plantation sector after the privatisation of the two plantation corporations.

In the case of fisheries the expenditure grew by l3.5 per cent in real terms during the 1995-98 period compared with 3.6 per cent.

In the case of transport and communication, too, private sector participation has been encouraged. In particular, the telecommunication sector is far more efficient now.

Mr. Speaker, Mr. Ronnie de Mel also made a point with regard to the balance between public expenditure and the role of the private sector. He said the Government is relying far too much on the private sector and has made incorrect provision for a public expenditure programme. That is not at all true. We are not depending entirely on the private sector for the development of the economy of this country. I would like to ask my Friend, Mr. Ronnie de Mel what about the Kotmale scheme, what about the Upper Kotmale scheme, what about the Sapugaskanda extension and what about the Seethawaka project. All these are public expenditure programmes. These are not being entrusted by us to the private sector.

So we do recognice that the State has a rule to play in these matters and that contribution by the State has by no means been neglected by the Government.

In the field of hydro electric power the major actor has been the State and this have been organised and carried out under the aegis of the State. The State has uhndertaken obligations with regard to the transmission and distribution of electricity. Now I think it is unfair Mr. Speaker to argue on the premise that the private sector is lacking in capacity. We sometimes talk of the P & O Project in the context of the Port of Colombo. But actually the contribution from John Keells Holdings is greater than the contribution of P & O. The total value of the project is US dollars 200 million and the greater part of that comes from the John Keells Holdings and from P & O. It has been possible for John Keells to interest the IFC, the CDC and the ADB in this project. All these are highly recognized and respected international financial institutions and they have sufficient confidence in our own economy to looks seriously at the Develoment of the Port of Colombo as full partners in this project.

Very recently Mr. Speaker interest was menifested for this project by Ever Green which is a very large establishing company whose ownership is ethnic Chinese. The owners of that company are from Hong-kong and Taiwan and they have also come into this project with full confidence of its economic viability.

Carsons has invested in palm oil plantation in Malaysia and Indonesia. They have shown their confidence not only within the continents in this country but they are also operating overseas. Aitken Spence have opened hotels in the Maldives. The Finance Minister of Bangladesh the Hon. Kibriya told me how successful Vanik Corporation was operating in Bangladesh. So there is a great satisfaction with the performance of these Companies in other countries of this region and elsewhere.

Mr. Speaker, our philosophy is that we do recognize a role for a public expenditure programme. But we realise that the greater the quantum of public expenditure the necessary consequence is inflation. Wherever possible therefore we would like to bring the private sector in and for that purpose we have placed very substantial incentives at the disposal of the private sector. I would also like to emphasise Mr. Speaker that for the private sector we do not mean only the very large ompanies. We are particularly interested in the well being of the small time and the medium scale entrepreneurs. It is in order to make provision for these categories of entrepreneurs that we have now taken action to reduce interest rates.

During the first two years of our Government, we felt that the interest rates were too high and the small time entrepreneurs found out difficult to make adequate provision for debit servicing. It was in that situation that we took a decision to reduce the statutory reserve ratio by two percentage points. That release has much as Rs. 8,000 million which become available to the Commercial Banks for on lending to the private sector. The major beneficiaries of that exercise were the small people and the Government’s decision to utilise Rs. 10,000 million which represented the profits of the divestiture programme towards the retirement of public debt had a very beneficial impact on the debt profile of the country.

From that again it was the small time people who benefited.

Mr. Ronnie de Mel also said that the present Government is obsessed with the control of the overall Budget Deficit. We do not accept that criticism at all , Mr. Speaker. The overall Budget Deficit was 10.5 per cent of the GDP in 1994 and it is approximately 7.8 per cent of the GDP in 1998. If we look at the variety of other indicators we can establish very clearly that the economy of our country is performing exceedingly well.

Look at the position, Mr. Speaker with regard to the country’s foreign reserves. The foreign reserves in 1994 amounted to US Dollars 2,124. In September, 1998 the foreign reserves went up to the level of US Dollars 2,675. During the last four years we have had sufficient foreign reserves to pay for five to six months of imports into the country. That has been contrasted with the situation during the period 1978 to 1994. During that period we had sufficient cover only for four months of imports. So, with regard to the total foreign reserves available to the country, the position has improved very considerably under the stewardship of Her Excellency the President as the Finance Minister.

Mr. Speaker, I would also like to refer to the position in respect of Gross Domestic Savings. The Gross Domestic Savings Rate is now 19 per cent. It was 15 per cent when we assumed office in 1994. This means more people are saving money and this is evident from the deposits that are being made in the branches of the People’s Bank, the National Savings Bank and the Bank of Ceylon in the rural areas of Sri Lanka. It is also reflected in the purchase of consumer goods by persons in the remoter regions.

Then, the Annual Average Revenue Growth is 13 per cent. That is certainly good for a country like Sri Lanka. Mr. Speaker, we have also been able to contain expenditure growth at 11 per cent during the last four years, despite increases in Health, Education and other welfare expenditure, Through a policy of sound financial management, we have been able to control the expenditure growth at the level of 11 per cent.

The position with regard to the Annual Growth of Money Supply is also very satisfactory, Mr. Speaker. The Annual Growth of Money Supply was 14 per cent during the last five years compared with 20 per cent during the 1978 to 1994 period. This is one of the factors which have enabled us to keep inflation under control.

Mr. Speaker, there has also been an appreciable reduction in Interest Rates. If you look at the Twelve Month Treasury Bills, the interest rate during the period 1988 to 1994 was 18.8 per cent. That rate has been down to 14.7 per cent during the period 1995 to 1998.

Mr. Speaker, I would also like the House to consider the position with regard to the net increase in power generation capacity, which is a very considerable achievement. During the period 1989 to 1994 the Cumulative Mega Watt capacity was 201. From l995 to 1998 the Cumulative Mega Watt capacity has gone up to 209. During the period 1989 to 1994 the average Mega Watt capacity was 34. It has gone up to 52 during the period 1995 to 1998. Thermal power capacity has increased by 30 per cent. So, the country will never again have to face the situation that arose during the drought of 1996.

Mr. Speaker, there has been a very considerable expansion with regard to telecommunications. If we consider the number of new telephone lines installed during the period 1989 to 1994 the average was 13,520 telephones for a year. This has gone up to 76,300 telephones an an average during the period 1995 to 1998.

The Hon. Ronnie de Mel refused to give us credit for the ability of Sri Lanka to withstand the negative impact of the South- East Asian crisis but we would maintain, Mr. Speaker, that this is not a matter of coincidence and it is not a question of fortuitous circumstances. But there were certain conscious and deliberate decisions that we made and the manner in which the economy is being handled had a direct bearing on our ability to withstand the tempests which have devastated economies which are stronger than our own.

For example, Mr. Speaker, the banking country has not been exposed to the vagaries of the real estate market. Last year I came to Parliament on behalf of Her Excellency the President with no fewer than six pieces of legislation to make it possible for the banking sector to make decisions on a commercial basis without being dictated to by organs of the State.

We have also followed a flexible policy with regard to the management of the Exchange Rate, intervention by the Central Bank of Sri Lanka to place only in very exceptional situations and the Sri Lanka Rupee was allowed to find its level naturally in relation to other currencies. For example, Mr. Speaker, during the first half of the year 1998 the Sri Lanka Rupee depreciated against the US Dollar by approximately 5.4 per cent. These are some of the factors which enabled us to hold the economy of Sri Lanka on an even keel when tumultuous developments were taking place in other countries.

I think another factor that we can justly take credit for, Mr. Speaker, is the diversification of Sri Lanka’s economy. We are no longer dependent entirely on the export of our primary agricultural commodities. We have diversified very considerably. The manufacturing sector grew by about 9 per cent and the servicing sector by about 7 per cent last year and the vigorous performance of the economy was made possible by the extent of diversification that took place under Her Excellency the President’s stewardship of the Sri Lankan economy.

Mr. Speaker, we have also placed very considerable stress on regional industrialization, the relocation of industry in order to provide employment opportunities for people in different parts of our country. The new industrial parks that have been established at Malwatte, Mirigama, Wathupitiwala and Seethawaka symbolize that achievement. The tax incentives which have been given to companies which were relocating their industries in the remoter regions have paid very substantial dividends.

I would like to respond briefly to some of the points that were made by the Hon. Ronnie de Mel. He made much of the decrease of the price of crude oil in the world market. But there is one factor which he forgot to mention. It is true that the price of a barrel of crude oil has fallen from Rs. 35 in his time to Rs. 15 today. But the Hon. Ronnie de Mel did not mention that the Exchange Rate has increased very significantly. The Exchange Rate in his time was Rs. 18 for the US Dollar. Today, it is Rs. 67 for the US Dollar. Surely that factor has a crucial bearing on the pricing policy with regard to oil in this country.

Continued tomorrow

Parliament on Tuesday