19 May, 2022


A Proposal For The 2016 Budget: An Open Letter To The PM

By Chandra Jayaratne

Chandra Jayaratne

Chandra Jayaratne

Prime Minister Ranil Wickremesinghe
Prime Minister and Minister of Policy Planning and Economic Affairs,
Prime Minister’s Office,
58, Sir Ernest De Silva Mawatha,
Colombo 7.

Dear Mr. Prime Minister,

A Proposal for the 2016 Budget to Address Key Issues of Regional Disparities in Household Incomes, and Achieve Sustainable Development, Reconciliation and Create New Livelihood Opportunities
This proposal supports the vision of the President as articulated in his recent address at the United Nations General Assembly, where he stated that “the edifice of sustainable development should be built upon the foundation of self-discipline and equity. If this could be practiced at a personal, community, national and global level, it would mark a giant leap forward for humankind” and proposed that “national leaders, take cognizance of this self-discipline and equity-based approach when drawing relevant Action Plans for the future”.

This proposal recognizes the policy commitment of the new government

  • To create one million new job opportunities;
  • To take steps to minimize the income disparity, thereby further broaden the middle class;
  • To ensure that development is spread equally to all parts of the country;
  • Especially, to ensure the fruits of development reach the conflict-affected areas in the North and East, so-called border areas of those provinces that suffered due to the conflict and under developed areas in other parts of the country, it being the responsibility of the government to ensure all areas of the country are equally developed;
  • To establish twenty five economic zones in selected districts;
  • In regard to the challenges in preparing this country for that new era to be dawned in order to fulfill the ambitions of that new generation with future in mind, whilst protecting the shared values of our culture which bind the Sri Lankan nation.

and as a response to the above commitments, deal with the setting up of at least two, and preferably four (in order that a level of positive value adding competition is created amongst managing companies), professionally managed Venture Capital Companies to support value adding small and medium size entrepreneur development, through whom a positive contribution to the realization of the above vision of the government will be realized.

Small and medium sector business entity development, alongside foreign direct investment and large local private sector led development will be essential in supporting the realization of the set objectives.

Global case studies establish that

  • foreign direct investment and large local private sector led development flows in to countries with a well developed small and medium scale enterprises;
  • large scale foreign direct investors and large local private sector look towards leveraging productive and quality/timeliness assuring small and medium enterprises using innovative and creative technologies for supply chain support, outsourcing and for securing operating shared services;
  • small and medium sector enterprises are key to highly capable, productive, innovative and visionary management and supervisory level human resources sought by large scale foreign direct investors and large local private sector being trained and developed

Small and medium sector entrepreneurs require equity capital, technology and best practices transfer support in enhancing their productivity, quality and competitiveness and in significantly expanding their growth and value addition.

Venture capital arranged equity infusions and management support will go a long way in enhancing the expansion of existing business and the development of new green field small and medium sector business entities.

It is proposed that the two initial venture capital companies (as well as additional two companies to improve competitiveness) be structured to support development of Small and medium businesses in;

  1. the Northern and Eastern provinces and
  2. other underdeveloped provinces, especially situated in areas not focused on by Ministry of Megapolis and Western and Ministry of Southern Development

It is also proposed that the joint venture partners to provide capital infusions to the Venture Capital Companies comprise of;

  • The Government of Sri Lanka
  • The State Banks
  • International Financial Institutions
  • Key Donor Country linked Institutions
  • The Private Sector Banks
  • The Diaspora members and local private sector enterprises

It is further proposed that each of the above joint venture partner groups contribute in 2016 Rupees one billion each, to each of the two Venture Capital Companies to be established and repeat such contributions the following year 2017 as well. This should build a capital base of over Rupees Twelve Billion in each of the venture capital companies.

The venture partners should also select two (or four as the case may be) capable, dynamic, innovative, tech-savvy and highly professional venture capital mangers with a proven track record of upper quartile performance. The venture capital managers must be compensated on a marginal fixed fees and high success fees.

The minimum investments by the venture capital companies will be fixed at Rupees Ten Million and a maximum investment of Rupees One Hundred Million each.

The target enterprises to be promoted and invested under the proposed model of development oriented venture equity investments should be focused on;

1. Small and medium, existing or green field private sector enterprises ( ie. not state enterprises or state controlled enterprises nor any enterprises engaged in unethical/immoral or trading in dangerous and harmful substances and associated services)situated the within the targeted investment areas, and preferably outside of major cities and areas targeted for development by other state agencies , but include support investments in small and medium sector businesses in new economic zones to be opened by the government;

2. The enterprises prioritized for investments should be those with the following characteristics;

  • High local value addition
  • Export of goods and services
  • Market/Business expansion and quality productivity and competitiveness enhancing support investments
  • Significant market demand generating capacity embedded enterprises with high growth potential
  • Technology and best practice transfer seeking enterprises
  • Enterprises capable of creating new sustainable employment and livelihood opportunities
  • Enterprises offering new employment and livelihood opportunities for women and youth
  • Providing options for capability and technical competency enhancement of employees
  • Investing in modern and innovative Technologies
  • Acceptance of equality and promoting gender sensitive employment practices
  • Adopting fair consumer supportive trading practices and abhorring unethical and societal unacceptable trading/operating practices
  • Enterprises delivering environmental sustainability and positive carbon footprints
  • Enterprises with a ethical and competent management with proven track records of delivery of high quality sustainable results
  • Enterprises investing in research and development
  • Enterprises setting up small scale modern ICT parks
  • Enterprises engaged in ICT services and other products with promising sustainable Intellectual property values
  • Enterprises supporting logistics, supply chain management , shared services and outsourced services packages
  • Investments with a high probability of maturity for divestiture or buy back options within 7- 10 years

3. In consultation with revenue authorities and taxation specialists a package of tax incentives, which do not run counter to the agreed taxation policy framework, may be offered to the venture capital companies and its investors and managers.

I trust that the above submission receives the due consideration by you , Minister of Finance and others engaged in budget policy.

Yours Sincerely,

Chandra Jayaratne


Minister of Finance
Secretary to the Treasury,
Senior Advisors of the President and Prime Minister

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