To own and live in your own house is the dream of most Sri Lankans. Sadly for over 2.5 million families it will only be just that, a dream. According to the housing needs assessment and data survey conducted by the Ministry of Housing and Construction, over 2.5 million families either live in temporary housing, on rent, in partially constructed housing, in cadjan roofed houses or are homeless and landless.
When Dhananath Fernando first saw the statistics he was taken aback. “This means that half the population, that’s ten million people, are in need of housing,” he says emphatically. Which is why for Dhananath, the high protectionism taxes placed on construction material is so problematic, with wall and floor tiles being levied 108% import tax and 90% on construction steel.
The high taxation on building material disproportionately affects those with lower income due to the regressive nature of indirect tax, and thus makes it far more difficult for the average Sri Lankan to own a house. This impact on the poor and vulnerable in society is what then motivated Dhananath, a policy researcher to find out where exactly this extra cost comes from.
Dhananath’s research study –‘Cost of construction and protectionism’ won the main award at the Asia Think Tank Shark Tank Championship held in Jakarta, Indonesia in February. The competition which was held during the Asia Liberty Forum pitted think tank professionals from across the region in front of a panel of thought leaders – the prize – a USD 10,000 grant for their project.
This year’s eminent panel included former Finance Minister of Indonesia and Ash Centre Senior Fellow at the Harvard Kennedy School, Harvard University Dr. Chatib Basri; Prof. Razeen Sally from the National University of Singapore; Chairperson at Atlas Network Linda Whetstone -; CEO and Co-founder of Free the People in the United States Terry Kibbe and Siegfried Herzog – Regional Director for East and Southeast Asia at the Friedrich Naumann Foundation for Freedom. Of the three finalists, Dhananath’s pitch was adjudged as creating the most impact on public policy for helping the economic prosperity of Asia.
This victory has meant that Advocata, the freemarket think tank founded by Dhananath, can go forward with his research study. He intends it to be a twofold one with the first part focusing on the regional comparison of construction and material cost within the South Asian region, for benchmarking purposes. The second part will be an industry analysis on the challenges faced by the industry as well as identifying the areas in which efficiency can be achieved. Dhananath intends the study to result in a policy brief for the consideration for the government and engagement with the local industry stakeholders. But the final objective for him is to help those he calls the most vulnerable, the poor consumer.
The issue of high protectionism taxes on construction material first came to his attention when reading a report published by a local conglomerate, the Jafferjee Brothers. Though such taxes are applied across several industries, what surprised Dhananath was the sheer scale of it especially when there is a dire need for housing, with even basic necessities such as sanitary fixtures being levied upto 70% in taxes. The argument for such protectionist measures is acceptable during the infancy stages of industries, however as Dhananath points out it has been decades since these industries have started up. With no publicly available plan by the state detailing a timeline for protectionist measures and the end of such measures, it appears that there are no plans to phase them out according to Dhananath. “A 108% tax rate shows that the local industry is very inefficient,” he says, questioning why the general consumer must bear their inefficiencies.
The high construction costs may even explain why Sri Lanka has failed to attract the level of FDI initially expected. Dhananath recounts speaking with developers and investors who’ve stated that it’s cheaper to build in other parts of the region rather than in Sri Lanka, which allows them to recover the cost of their investment faster.
An old boy of St. Sebastian’s College in Moratuwa, Dhananath became interested in public policies as a child through his involvement in the Liberal Youth Guild (LYG) and debating. But coming from a traditional background, he was steered towards the sciences and medicine. “My parents wanted their only child to become a doctor,” he says, as he recounts how he attempted to enter the Medical Faculty, but missed out and instead followed a bio-science degree at the University of Colombo. However due to a lack of funds to pursue further education, Dhananath ended up working in the fields of HR and Market Research. It was during this time that his passion for public policy was rekindled. He followed courses at Atlas Leadership Academy in the USA and the Centre for Policy Research in Kochi, India. Once armed with the practical experience in research, and backed by academic qualifications, Dhananath founded the free market thinktank Advocata with a small group of friends.
Established two years ago, Dhananath explains that Advocata aims to create public awareness on public policy issues, and help governments make policy decisions based on facts and research rather than just anecdotal evidence. They’ve attempted to do the former through various articles and videos in collaborations with popular media such as Yamu.lk. “The response has been humbling,” says Dhananath, especially from the young urban professionals.
For Dhananath, the goals of Advocata and free market ideals are very personal. “Liberalisation isn’t for the rich, it’s for the poor. It gives everyone the opportunity to succeed,” he says emphatically. Witnessing the hardships faced by the poor and vulnerable during his time with the charity organization CandleAid, furthered his resolve to change things. “Sri Lanka has not met its full potential. We’ve been doing the same thing for the last 70 years,” he says critically, noting that we’ve slid towards greater protectionism, that mostly benefits a few and not the public as a whole.
Coming from modest beginnings himself, he truly believes that everyone should be given an opportunity to succeed. “I wouldn’t say things were difficult, but rather that things weren’t easy,” he says, recounting how as a student he used to provide for his retired parents by conducting tuition classes. Learning English too was an obstacle having grown up without studying in the language. Which is why having presented his proposal to the eminent panel at the Asia Think Tank Shark Tank and winning the grant is also personally satisfying to him as it shows how far he has come.