New legislation proposed to tackle failing businesses

President Ranil Wickremesinghe stated that it is not feasible to indefinitely maintain the temporarily suspended Parate law. Consequently, a new bill will be introduced to address bankrupt businesses.

The President also mentioned that the proposed bill includes provisions for restructuring loans taken by Micro, Small and Medium Enterprises (MSME).

Additionally, a new institution named “Enterprise Sri Lanka” will be established to provide necessary support and assistance to Micro, Small and Medium-Scale Entrepreneurs. The President emphasized that the government is committed to encouraging and empowering these entrepreneurs in Sri Lanka.

President Ranil Wickremesinghe made these remarks at the “Critical initiative to revitalize Sri Lanka’s micro, small and medium scale economy” event, organized by the Ceylon Federation of MSME, yesterday (19) at the Bandaranaike Memorial International Conference Hall (BMICH) in Colombo.

The President stated that a copy of the new bill, which has already been drafted, can be provided to the Ceylon Federation of Micro, Small, and Medium Enterprises. He requested that micro, small, and medium enterprises submit their views and suggestions on the bill.

Additionally, the President mentioned that an opportunity could be arranged to discuss the issues faced by micro, small, and medium enterprises with the International Monetary Fund delegation scheduled to visit Sri Lanka at the end of this month.

President of the Sri Lanka Micro, Small, and Medium Enterprises Federation Mrs. Sashika De Silva, presented a special commemorative gift to the President.

President Ranil Wickremesinghe further stated,

“There have been many questions from you, the Micro, Small and Medium-scale Entrepreneurs, about the recent challenges. Before addressing your specific concerns, I want to explain the background that led to these issues. We need to find solutions based on this context.

During the recent past, the country’s economy faced a severe collapse, impacting all businesses, particularly small enterprises and causing widespread losses among micro-enterprises. The banking system was also at risk. Our immediate priority upon taking office was to stabilize the situation, negotiate with the International Monetary Fund (IMF), and work towards economic recovery.

They indicated that reaching an agreement with the IMF would allow us to move forward. Private creditors also agreed to address the framework once we had an agreement with the official creditors. Without financial support, making progress was impossible.

During that period, we had to agree on several key issues. We decided not to print more money or borrow from banks, as banks themselves were struggling. These practices had become our main sources of income, but we were advised to abandon these flawed approaches and adopt a new strategy.

As part of this shift, we had to remove subsidies from some corporations. Previously, we were providing between LKR 700 and 800 million in subsidies annually, funded by the people of this country. To correct this, we stopped the subsidies, which led to an increase in prices for goods, including fuel.

Additionally, we had to raise the VAT because the revenue from it was insufficient. Currently, the country’s economy is being managed with our own resources. This has placed a significant burden on us, but we had to bear it. The international community observed our efforts to manage our own challenges before seeking external support, and this is where we began our recovery process.

“Ultimately, we successfully managed all public corporations using our own resources. This has led to fuel prices fluctuating in line with global trends. There is potential to further reduce fuel prices by cutting certain costs, and the same applies to energy prices.

Next year, we aim to address all inefficiencies. Once the economy is stabilized, we will be able to make further progress. However, it is crucial to protect the banking system. We had to inject capital into government banks, such as the Bank of Ceylon and the People’s Bank, as well as private banks. This required using a portion of our funds. Safeguarding the banking system is essential for our continued advancement.

The International Monetary Fund and the World Bank have pointed out that our subsidies were insufficient and needed to be better targeted. As a result, we initiated the ‘Aswesuma’ program. Under this program, we are providing three times the amount previously given through the Samurdhi movement. While Samurdhi benefited 1.8 million people, our new Aswasuma program extends benefits to 2.4 million low-income earners. This program is a key initiative for supporting those in need.

In addition to safeguarding our banking system and supporting micro, small, and medium enterprises, we are also advancing large scale businesses.

We are focusing on granting land rights to 02 million people through the ‘Urumaya’ program by providing freehold deeds. This process may take three to four years to complete, resulting in 02 million new landowners. We are also working on providing household ownership to approximately 200,000 people and establishing villages in the plantation sector with associated land and housing rights. In total, this initiative will benefit between 2 and 2.5 million people. Our goal is to continually work towards providing rights and support to the people.

Preliminary, we are focusing on providing rights at the grassroots level. This includes land used for agriculture, as poverty remains prevalent in villages. We are advancing agricultural modernization in rural areas to boost economic activity. This initiative will increase local money circulation, raise entitlement levels, and expand bank accounts, ultimately enhancing individual wealth. By supporting these efforts, we aim to help small and medium-scale businesses thrive alongside these communities.

Currently, we have suspended the Parate law, but it cannot remain suspended indefinitely. Therefore, we are working on a new Insolvency Bill, which we have now presented. A copy will be made available for discussion. Please review it, as it includes provisions for restructuring.

We should also focus on boosting exports. To support this, we are establishing a new organization called ‘Enterprise Sri Lanka,’ which will provide the necessary assistance. Additionally, we are setting up a National Bank for Development. While these changes cannot happen all at once, we are implementing them systematically as the economy develops.

In this context, your issues can be discussed. If you are interested, I can arrange consultations with representatives from the International Monetary Fund, who will visit Sri Lanka at the end of this month.

First, review and discuss these points among yourselves – What legal remedies are needed? – Are additional concessions required beyond those outlined in the draft? Discuss these matters and share your concerns. You can later discuss the law with the government. However, before doing so, let’s consult with the International Monetary Fund. I will also assign several officers from the Ministry to assist you. We are ready to help.

Former Finance Minister Ravi Karunanayake, President’s Senior Advisor Neranjan Dev Adhitya, Secretary of the Ministry of Industries Shantha Weerasinghe, Industrial Development Board Chairman Dr. Saranga Alahapperuma, President Counsel Ronald C. Perera, along with Chairmen and representatives of public and private banks, and officials from the Ceylon Micro, Small, and Medium Enterprises Federation, were present at the event.