00:08 banning something is okay i suppose for 00:10 00:10 some reason but if you do it in a grand 00:12 00:12 scheme you are going to fail in a grand 00:15 00:15 scale 00:20 00:20 we know where it's going to end we have 00:22 00:22 to address the problem domestically 00:26 00:26 if you don't increase productivity you 00:28 00:28 can't sustain 00:32 00:32 bite the bullet and make the changes 00:35 00:35 that need to be 00:39 00:39 [Music] 00:51 00:51 what is meant by industry policy 00:54 00:54 is the 00:56 00:56 collection of policies that deal with 00:59 00:59 industry so there are two schools there 01:01 01:01 that's one of the main points that i'll 01:03 01:03 be making today 01:05 01:05 one is school that uses the term 01:07 01:07 industry policy 01:09 01:09 means mostly most of the time 01:12 01:12 interference government interference in 01:15 01:15 the economy in a way to promote 01:17 01:17 some part of the gdp but most of the 01:20 01:20 time it is to promote industry in this 01:22 01:22 case then there's the other side of the 01:24 01:24 people use the term policy towards 01:26 01:26 industry which is different 01:28 01:28 where the policy is largely 01:31 01:31 directed at 01:32 01:32 a private sector assuring 01:35 01:35 microeconomic credibility 01:38 01:38 sustainable balance of payments 01:41 01:41 an enabler rather than direct interfere 01:43 01:43 in the system that's the main difference 01:45 01:45 between the two 01:52 01:52 so distinction between policy 01:55 01:55 towards industry and industry policy 01:57 01:57 that industrial policy to start with the 01:59 01:59 second is a more active role for the 02:01 02:01 government so in so for example public 02:05 02:05 officials 02:06 02:06 will promote certain areas depending on 02:09 02:09 their view 02:11 02:11 does the government want to do this so 02:12 02:12 it is more like a bureaucracy given 02:15 02:15 operation 02:16 02:16 whereas industrial policy the way that 02:18 02:18 we mean is policy towards industry 02:22 02:22 is where the choice is made by 02:24 02:24 the private sector 02:26 02:26 now there are exceptions to this 02:28 02:28 it doesn't mean to say that the 02:30 02:30 government abdicates his role from the 02:32 02:32 economy no government only deals with 02:35 02:35 providing better macroeconomic 02:38 02:38 environment to sustainable in terms of 02:40 02:40 price stability and 02:42 02:42 external stability but 02:45 02:45 government can intervene in what we can 02:47 02:47 come to later we are going to discuss 02:49 02:49 calls in the case of infant industries 02:52 02:52 industries on their own will never be 02:54 02:54 started so the government can 02:56 02:56 address that type of quote unquote 02:58 02:58 distortion 02:59 02:59 in the system so 03:01 03:01 to help 03:03 03:03 a company firm 03:05 03:05 to establish itself for a limited period 03:08 03:08 of time 03:09 03:09 with a sundown clause so that after a 03:12 03:12 certain while if they cannot manage this 03:14 03:14 closed down 03:16 03:16 whereas industrial policy 03:19 03:19 or the first kind that we talked about 03:21 03:21 the term independent means 03:23 03:23 continuous support that's what we have 03:25 03:25 also got done in our country 03:29 03:29 but countries who succeeded with 03:31 03:31 political industry 03:33 03:33 switched off they said hey we promise to 03:35 03:35 help you here because of this distortion 03:37 03:37 we address that it's up to you now and 03:40 03:40 if you cannot make it then you know the 03:42 03:42 system says 03:44 03:44 then you know it's a profit and loss 03:46 03:46 system losses tell you that you are not 03:47 03:47 suited to you cannot deal with that 03:50 03:50 market 03:51 03:51 the government has a more active role on 03:53 03:53 the industrial policy 03:55 03:55 not under policy towards industry the 03:57 03:57 policies are equal 03:59 03:59 balanced in the case of the 04:02 04:02 policy towards the industry 04:04 04:04 it's subtle but a very important 04:05 04:05 decision 04:06 04:06 because it only 04:08 04:08 defines the actors involved does a 04:10 04:10 government play a very active role 04:13 04:13 just the government is playing only a 04:15 04:15 promotional role meaning 04:17 04:17 providing better macroeconomic 04:19 04:19 situations 04:20 04:20 and dealing with 04:22 04:22 what i call public goods and also in 04:24 04:24 this case dealing with what are called 04:27 04:27 infant industries 04:28 04:28 [Music] 04:34 04:34 what is what is meant by infant industry 04:36 04:36 is their lack of consistency by saying 04:40 04:40 you can promote some industries actually 04:42 04:42 there is no lack of consistency 04:45 04:45 this is not what i say it's 04:47 04:47 a come from a very good economist 04:50 04:50 who has looked at it very closely 04:52 04:52 there are very two famous economy robert 04:55 04:55 baldwin 04:57 04:57 wrote a very famous paper about 15 20 05:00 05:00 years ago 05:01 05:01 and then max gordon 05:03 05:03 was my teacher once 05:05 05:05 or they may look at this argument very 05:07 05:07 closely 05:09 05:09 so there is a legitimate reason 05:12 05:12 in neoclassical economics 05:14 05:14 for infant industry 05:16 05:16 [Music] 05:18 05:18 support 05:19 05:19 meaning if there's some important 05:21 05:21 industry that is needed in the country 05:25 05:25 it will not get started because the 05:27 05:27 private sector will not be able to 05:29 05:29 either mobilize the users to do it 05:31 05:31 or at that rate will be at that point 05:34 05:34 would be too risky for them to 05:35 05:35 understand 05:36 05:36 so the government can come evaluate it 05:39 05:39 and say 05:40 05:40 evaluate it and say yeah we can support 05:43 05:43 you 05:44 05:44 uh 05:45 05:45 how it really works it's a given 05:47 05:47 definite era period in which the support 05:50 05:50 could be extended we can say for the 05:52 05:52 next five years don't worry about this 05:54 05:54 part we will help you 05:57 05:57 give 05:58 05:58 money 05:60 05:60 in order to start this industry 06:04 06:04 and we can help you by other other veins 06:06 06:06 where there are certain restrictions and 06:09 06:09 this thing they can also get them 06:11 06:11 removed 06:13 06:13 but it must be a dynamic argument that 06:15 06:15 in the future 06:16 06:16 they might be able to reduce cost 06:19 06:19 they must convince the people who are 06:21 06:21 allocating the money for the import 06:23 06:23 industry 06:24 06:24 that there's a genuine case for infant 06:27 06:27 and 06:28 06:28 that there's a future decline in the 06:30 06:30 cost so therefore they can 06:33 06:33 be more competitive 06:36 06:36 and 06:37 06:37 and that they 06:38 06:38 have what are called sundown clause 06:41 06:41 that is out of ib they are not going to 06:42 06:42 get any help this is what south korea 06:45 06:45 did 06:46 06:46 south korea did then set up a couple of 06:48 06:48 enterprises when the enterprises started 06:50 06:50 losing for the 06:51 06:51 second and third fourth fifth year they 06:53 06:53 said sorry we are done 06:55 06:55 and they will do support now in our case 06:57 06:57 we didn't do that 06:59 06:59 we created public enterprises 07:01 07:01 during the type of mr bandung i mean 07:03 07:03 bandaranaike 07:06 07:06 very good intention people by the way 07:08 07:08 good people 07:10 07:10 and 07:11 07:11 they didn't switch off they continued to 07:14 07:14 support them 07:16 07:16 then it got captured by the politicians 07:18 07:18 they saw a fine opportunity to reward 07:21 07:21 their friends and relations 07:24 07:24 uh through giving them jobs a chairman 07:26 07:26 of corporations 07:28 07:28 give them motor vehicles to run about 07:31 07:31 and so if he kept 07:33 07:33 losing indus 07:35 07:35 enterprises public enterprises 07:38 07:38 that there are certain public news they 07:39 07:39 must be there they must be there nobody 07:42 07:42 deny that 07:43 07:43 but this bit too much isn't it to be 07:46 07:46 subsidizing for 30 40 years some 07:48 07:48 enterprise never going to like kabuk 07:51 07:51 operation somebody when we just mooted 07:54 07:54 said hey we did the car 07:56 07:56 why don't we have kadu pulang 07:57 07:57 cooperation also 07:59 07:59 so you know embrace it so we still have 08:01 08:01 them actually as you know as 08:04 08:04 we are going to be looking at public 08:06 08:06 enterprises pretty soon to see 08:08 08:08 what is what are their promo 08:11 08:11 what is the outcome to see how we can 08:14 08:14 find ways of rescuing or 08:17 08:17 saying you know they must 08:19 08:19 they mind their way or 08:21 08:21 leave that industry 08:30 08:30 what is the theoretical and 08:33 08:33 uh 08:34 08:34 empirical 08:35 08:35 argument for both sides 08:38 08:38 now if i start with the theory part 08:41 08:41 now it's well established in economics 08:43 08:43 in the last 50 years or 60 years 08:47 08:47 that the government's interference 08:49 08:49 should be minimized 08:51 08:51 that government role is a more 08:53 08:53 passive role 08:56 08:56 than actively in 08:58 08:58 getting involved what to produce how to 09:00 09:00 produce and how to distribute it those 09:03 09:03 things in a particular in a capitalist 09:04 09:04 economy like ours 09:06 09:06 is done 09:07 09:07 through the private sector the 09:09 09:09 government only interferes when 09:11 09:11 in the case of infant industries 09:13 09:13 properly 09:14 09:14 now 09:16 09:16 of course there's a big challenge how to 09:18 09:18 identify input industries 09:21 09:21 and how often how much how longer you 09:24 09:24 want to give them to get support 09:27 09:27 and also be able to have a mechanism 09:30 09:30 that switches off when it is not able to 09:35 09:35 deal with the 09:37 09:37 prices and things that evolved in the 09:39 09:39 market 09:40 09:40 because it is 09:42 09:42 either that is not suitable to produce 09:44 09:44 in the country or something has changed 09:46 09:46 in order to get the country into a 09:48 09:48 difficult situation in which case a 09:50 09:50 government also should help so it's not 09:52 09:52 a abject sort of a departure for the 09:55 09:55 government from the market but 09:57 09:57 being like a 09:59 09:59 more like an umpire rather than a play 10:02 10:02 in the game 10:03 10:03 empire's role that's what the government 10:05 10:05 could do under policy towards the 10:06 10:06 industry 10:14 10:14 yeah there have been 10:15 10:15 has there been a big change in the 10:19 10:19 among the economies about these issues 10:21 10:21 whether it is industrial policy or 10:23 10:23 particularly in that year there there 10:25 10:25 has been 10:26 10:26 there has been starting from the in the 10:29 10:29 1950s 10:30 10:30 most economic thought that free markets 10:33 10:33 were not going to work 10:35 10:35 they didn't want to let go 10:37 10:37 we understand that they didn't want that 10:38 10:38 go even our countries they didn't want 10:40 10:40 to let go the government must go there 10:42 10:42 and do all those things 10:44 10:44 it turned out that if you reduce the 10:47 10:47 role of the government and allow the 10:48 10:48 private sector to make those 10:51 10:51 decisions and take the risk then they 10:54 10:54 are fully dedicated to it 10:56 10:56 and if they undertake investment they 10:58 10:58 are mindful of the fact that if he's not 11:00 11:00 giving them adequate return they're not 11:02 11:02 going to get into it then there is no 11:04 11:04 way to come and rescue them 11:07 11:07 that view sort of came into prominence 11:09 11:09 in the 1960 middle of next 65 in middle 11:12 11:12 of the 60s in 1965 11:15 11:15 barack all the 11:16 11:16 east asian countries 11:18 11:18 south korea 11:20 11:20 taiwan 11:21 11:21 singapore and hong kong 11:24 11:24 abdicated 11:26 11:26 from the 11:27 11:27 market and said 11:28 11:28 they are on their own we'll help them in 11:31 11:31 an emergency as a government should be 11:33 11:33 otherwise we leave them alone they 11:36 11:36 choose where to invest 11:38 11:38 they choose what to produce 11:40 11:40 they 11:41 11:41 choose know where they are distributing 11:42 11:42 their product inside the country or 11:45 11:45 better even uh exporting 11:47 11:47 so that gave a real boost to the east 11:50 11:50 asian economies 11:52 11:52 east asian economy started growing that 11:54 11:54 that they had never done before right 11:57 11:57 and then what happens is that other 11:59 11:59 countries learn from them 12:01 12:01 also they said look this works for them 12:03 12:03 small countries not very significant but 12:06 12:06 they started doing very well growing 12:07 12:07 seven eight ten percent 12:09 12:09 you know that now some people would say 12:11 12:11 oh you are talking about singapore 12:13 12:13 and 12:15 12:15 hong kong they are small places true 12:16 12:16 there but the issue is not size issue is 12:19 12:19 what worked whether it be go small 12:21 12:21 doesn't matter 12:23 12:23 so i think so because of the 12:25 12:25 demonstration actual demonstration 12:28 12:28 countries looking around who 12:31 12:31 got independence now 12:33 12:33 want to be there on their own 12:35 12:35 and they started 12:37 12:37 partly imitating them and doing well 12:40 12:40 also 12:41 12:41 then the countries that were not 12:43 12:43 allowing the market to allocate 12:45 12:45 resources were in trouble i started the 12:48 12:48 soviet union 12:49 12:49 it it became a very unsuitable 12:54 12:54 system and so soviet union was producing 12:57 12:57 woods 12:58 12:58 sending things up in satellites and all 13:00 13:00 but it was a not a very well to do 13:03 13:03 country outside of the 13:06 13:06 moscow moscow area people who visited 13:09 13:09 you so during that time has told us that 13:12 13:12 outside 13:14 13:14 moscow 13:15 13:15 the living standards are pretty low 13:18 13:18 and they had to sometimes share 13:19 13:19 households in apartments 13:22 13:22 you know you have to ask another family 13:23 13:23 to come and allocate 13:25 13:25 you live there you know so situation 13:27 13:27 like that 13:35 13:35 now if you allow the market to allocate 13:38 13:38 then goods that are going to produce 13:41 13:41 are this that that b could produce 13:43 13:43 easily at cheap cost compared to other 13:45 13:45 countries 13:46 13:46 so right there there's an advantage in a 13:49 13:49 water school lab labor surplus economy 13:51 13:51 like ours compared to capital then we 13:54 13:54 are producing 13:56 13:56 goods that are 13:58 13:58 more labor intensive than capital 13:60 13:60 incentives so ideas we are solving our 14:03 14:03 employment problem 14:04 14:04 now if you solve the implant problem we 14:07 14:07 are solving very important part of 14:09 14:09 poverty problem 14:10 14:10 because people get nobody wants to just 14:12 14:12 stay at home i mean human nature is that 14:15 14:15 we want to do something 14:16 14:16 a 14:18 14:18 man in a family want to earn money for 14:20 14:20 his family so the opportunity should be 14:22 14:22 given 14:23 14:23 and so if you follow 14:25 14:25 if you liberalize the economy you give 14:27 14:27 that opportunity to do it because there 14:29 14:29 are demand for labor and that setup 14:32 14:32 now if you want to control 14:35 14:35 uh and establish industries that are 14:38 14:38 more capital intent intensive 14:42 14:42 then 14:43 14:43 the 14:45 14:45 goods 14:46 14:46 the uh employment that he created uh 14:49 14:49 little for for a labor abandoned 14:51 14:51 becoming like ours so right there we may 14:54 14:54 prob we have problems there not only us 14:56 14:56 any country that followed would have end 14:58 14:58 up ended up in the same place so we need 15:01 15:01 some type of balance between the two for 15:02 15:02 example we got free 15:05 15:05 uh 15:06 15:06 [Music] 15:07 15:07 steel 15:09 15:09 uh factory from the russians 15:13 15:13 and it is said that 15:15 15:15 our people 15:16 15:16 who were hired in that time 15:18 15:18 didn't understand the decimal system so 15:21 15:21 they didn't know how to 15:23 15:23 set the 15:24 15:24 machines properly and the second thing 15:26 15:26 we learned later was their use machinery 15:28 15:28 our friends 15:30 15:30 so 15:31 15:31 so if we had the way you know if you 15:34 15:34 allowed if if 15:37 15:37 steel was not ideal for us because we 15:39 15:39 don't have the resource 15:41 15:41 we don't have technical expertise to use 15:43 15:43 it also 15:45 15:45 this this we came from this idea from 15:47 15:47 the indians 15:48 15:48 indian mahalanobis the famous 15:52 15:52 statistician 15:53 15:53 stroke economics you can say 15:55 15:55 said that if you want to grow fast 15:58 15:58 go and do your heavy industry actually 15:60 15:60 that will be problem for india 16:02 16:02 and india was abandoned later in 1991 16:05 16:05 india completely departed from that type 16:08 16:08 of thinking 16:09 16:09 and so now of course india has very 16:12 16:12 well educated 16:13 16:13 [Music] 16:14 16:14 engineers and people from their payment 16:17 16:17 technical institutes 16:18 16:18 so today actually they are helping the 16:20 16:20 rest of the world 16:22 16:22 they are leading the main 16:26 16:26 activities big comp firms in 16:29 16:29 my like microsoft now 16:32 16:32 and those big firms in the united states 16:35 16:35 so 16:37 16:37 so you know there's a certain 16:40 16:40 way that economics work 16:43 16:43 and 16:45 16:45 our education system was very good then 16:48 16:48 i i think it's still good 16:51 16:51 but the what we were doing did not suit 16:54 16:54 the employment situation then 16:56 16:56 so they are very high unemployment 17:05 17:05 this we have actually a very nice 17:07 17:07 situation 17:09 17:09 to show that because ours is a small 17:11 17:11 country 17:12 17:12 and this experiment was carried on so 17:15 17:15 the experiment starts with mr bhandarna 17:17 17:17 coming to power in 1956. 17:20 17:20 he wanted to have better control of the 17:22 17:22 economy 17:24 17:24 and he also he had a great tutor 17:26 17:26 by the name of uh 17:28 17:28 jawaharlal nehru or his friend 17:31 17:31 and so he wanted to follow 17:34 17:34 india india itself was 17:36 17:36 totally against markets they thought 17:38 17:38 they identified markets as imperialism 17:40 17:40 very sadly at that time 17:43 17:43 and so we followed that and so when mr 17:46 17:46 bandhan became prime minister 17:49 17:49 he 17:51 17:51 used to meet him often 17:53 17:53 [Music] 17:54 17:54 who also advised him to invite some 17:56 17:56 economics to come and advise us on his 17:58 17:58 advice there was 18:00 18:00 seven very famous economists came to sri 18:03 18:03 lanka wrote a book called papers by the 18:06 18:06 publication later 18:08 18:08 called uh 18:09 18:09 papers by visiting economist 18:11 18:11 they included famous john r hicks his 18:14 18:14 wife ursula 18:16 18:16 uh 18:17 18:17 very very electric important 18:20 18:20 people in the world at that time dawn 18:22 18:22 galbraith and 18:24 18:24 they were bit ambiguous they didn't 18:25 18:25 identify with one although one was a 18:28 18:28 very famous minister of poland is 18:31 18:31 clearly a man who believed didn't 18:33 18:33 believe in market 18:35 18:35 and so 18:36 18:36 so at that time 18:38 18:38 we we favored 18:40 18:40 direct intervention in the markets in 18:42 18:42 the form of industrial policy so there 18:45 18:45 is a industry ministry set up and the 18:47 18:47 ministry's idea is to go and 18:52 18:52 look at the areas and 18:54 18:54 undertake certain investments advocate 18:57 18:57 to go through the cabinet and say we 18:59 18:59 should do sugar industry we should do 19:01 19:01 things without a market test 19:03 19:03 so that actually there was no penalty to 19:05 19:05 failure in that system the government is 19:07 19:07 behind you 19:10 19:10 what happened was that it didn't work 19:12 19:12 out well so if you look at the 19:15 19:15 1970-77 period 19:17 19:17 i think for economics is the darkest 19:19 19:19 period for the economy this is under 19:21 19:21 madame underneath 19:24 19:24 created a coalition 19:26 19:26 with the communist party the lssp 19:30 19:30 the people's 19:32 19:32 mahajan exampana of mr philippe 19:36 19:36 which was 19:37 19:37 committed to 19:40 19:40 industrial policy 19:42 19:42 that's the time they started all the 19:44 19:44 public enterprises 19:46 19:46 so public enterprises are a very 19:47 19:47 interesting thing for them to make the 19:49 19:49 point 19:50 19:50 public enterprises were 19:53 19:53 created to 19:54 19:54 see that we can solve the problems 19:55 19:55 market 19:57 19:57 we take this over and get it done turns 19:59 19:59 out 20:00 20:00 as we see later 20:02 20:02 they were the sort of canaries in the 20:04 20:04 mind and that they 20:08 20:08 they perform badly and today the 20:11 20:11 evidence these are the sort of the 20:14 20:14 remaining evidence of that that policy 20:17 20:17 so we are very interested in in this 20:20 20:20 field 20:21 20:21 in in what happened to public 20:22 20:22 enterprises 20:24 20:24 1970-77 period and 78 onwards to 94 20:27 20:27 periods are two very contrasting periods 20:30 20:30 particularly for in in what we are now 20:32 20:32 calling industrial policy where the 20:34 20:34 government intervened the ministry of 20:36 20:36 industries want to promote indus 20:38 20:38 industries actually making investment 20:41 20:41 deciding 20:42 20:42 what to invest in 20:44 20:44 and 20:46 20:46 that period we had great difficulties in 20:48 20:48 fact our foreign exchange problem became 20:52 20:52 more 20:53 20:53 more difficult than before 20:56 20:56 by controlling imports and controlling 20:58 20:58 export in a way 20:60 20:60 that 21:01 21:01 reduced the allocation by the market 21:05 21:05 and so 21:06 21:06 the decisions we have to invest how much 21:09 21:09 universal made by public officials 21:11 21:11 public officials are as good as they may 21:14 21:14 be 21:15 21:15 or may have got very big prices in the 21:17 21:17 university for literature and history 21:19 21:19 and all are not the business people who 21:21 21:21 make that decision properly 21:24 21:24 so uh 21:25 21:25 that's i'm not saying economic food i'm 21:27 21:27 better i don't 21:28 21:28 it should be made by the relationship 21:30 21:30 made by people who are risking their 21:32 21:32 money that is the best test 21:35 21:35 if people private sector does it they 21:36 21:36 are risking their own money so therefore 21:38 21:38 they are not going to get into activity 21:41 21:41 unless 21:42 21:42 it gives them gives them rate of return 21:44 21:44 they have so many choices they can put 21:46 21:46 their money in a deposit account and 21:47 21:47 just stay at home 21:49 21:49 but they they will make an investment 21:52 21:52 in an area in in producing something 21:56 21:56 when it promises a better return than 21:59 21:59 what you can get from the savings time 22:02 22:02 and savings in a commercial bank 22:04 22:04 so 22:05 22:05 so that is in contrast to the 17 22:09 22:09 78 to 94 period when the economy was 22:12 22:12 liberalized 22:13 22:13 now when we say liberalize it is not 22:16 22:16 allowing free goods to come 22:21 22:21 willingly 22:22 22:22 actually it is liberalization means 22:25 22:25 allowing prices to allocate resources 22:27 22:27 that's the only thing what it means 22:29 22:29 not the sort of freedom of the wild ass 22:31 22:31 you can import anything you can no so 22:34 22:34 under that situation we did much better 22:37 22:37 our growth rate went up to six seven 22:38 22:38 percent eight percent sometimes 22:41 22:41 but more importantly 22:44 22:44 uh our productivity increased 22:46 22:46 and the right b got from that 22:48 22:48 liberalization went out in 94 till the 22:51 22:51 people who legalized them they got tired 22:53 22:53 of it let's see how you can talk about 22:55 22:55 that 22:57 22:57 but we did not continue 22:58 22:58 because ideologically we have a big 23:01 23:01 difference of opinion between one party 23:03 23:03 major party and the other major parties 23:06 23:06 and so 23:07 23:07 and also they 23:09 23:09 we undertook a huge investment program 23:12 23:12 at that time maha valley which 23:15 23:15 would have was helpful in the future 23:18 23:18 but was not a very good investment at 23:20 23:20 that time we had to do it 23:22 23:22 but in the future we sort of rushed it 23:25 23:25 because 23:26 23:26 apparently 23:27 23:27 doesn't thought this was a way to get 23:29 23:29 for inmate without realizing too much 23:31 23:31 foreign also create a problem 23:34 23:34 by 23:35 23:35 kenya relative prices 23:37 23:37 and so 23:38 23:38 we that right that we got didn't 23:41 23:41 continue because of ideological reason 23:43 23:43 and because it could not have material 23:45 23:45 because of good economic research 23:53 23:53 actually it's not a very pleasant time 23:57 23:57 we had three young children at that time 24:00 24:00 and we all were you know 24:03 24:03 one one one year apart mostly and 24:07 24:07 and so we had to get milk food 24:10 24:10 milk infant milk is only given 24:14 24:14 uh 24:15 24:15 one tin one per person whether you have 24:18 24:18 three children of no concern to the 24:20 24:20 bureaucrats they that is the rule 24:22 24:22 so my people who work with me in the 24:24 24:24 central bank so kindly always came with 24:27 24:27 me 24:27 24:27 towards them at least to get a 24:30 24:30 teenage 24:31 24:31 and the moment you 24:33 24:33 buy the tin you pay cash buy that in 24:35 24:35 they smash it on the floor 24:38 24:38 so to distort the tin so that you cannot 24:40 24:40 sell it 24:41 24:41 so it shows the level of control 24:44 24:44 and so everybody wasted time in there 24:46 24:46 were long queues prices didn't change 24:48 24:48 and people nominal prices did not change 24:51 24:51 because the goods are now allocated not 24:54 24:54 during the prices but there were long 24:56 24:56 queues 24:57 24:57 so what you don't see in the inflation 24:59 24:59 index you can buy measure by seeing how 25:02 25:02 many people are 25:04 25:04 queuing against getting rice getting a 25:07 25:07 pound of bread at that time 25:09 25:09 so some friends who visited us from the 25:11 25:11 u.s my classmates were visiting us they 25:14 25:14 sit in the 25:16 25:16 sand in the queue and get bread 25:18 25:18 for themselves also to come to bring to 25:21 25:21 our house 25:22 25:22 so it was a very difficult time and it 25:25 25:25 could not continue 25:27 25:27 it could not have continued because 25:29 25:29 people are really sick of it 25:31 25:31 and so when you start on this control 25:34 25:34 journey 25:36 25:36 very difficult i mean we know where it's 25:38 25:38 going to end 25:41 25:41 and sometimes the domestic problems in 25:44 25:44 the economy 25:45 25:45 cannot be changed by changing foreign 25:48 25:48 foreign 25:49 25:49 foreign economic relations 25:52 25:52 he had to address the problem 25:53 25:53 domestically to go to the target the 25:56 25:56 place where the problem is then deal 25:58 25:58 with it rather than put import controls 26:02 26:02 every import control is a tax on exports 26:04 26:04 people don't seem to understand that in 26:06 26:06 this country 26:07 26:07 if you put import control what do you do 26:09 26:09 is that you make the domestic prices 26:12 26:12 that good that you control go up 26:15 26:15 right and where do the research where 26:18 26:18 does the resources go to to support that 26:21 26:21 to 26:22 26:22 profit-seeking entrepreneurs 26:25 26:25 will invest in that area and where do 26:27 26:27 you think they get they got money from 26:29 26:29 they get the resources from the 26:31 26:31 non-tradeable sector right like services 26:33 26:33 electricity articulate that they're not 26:35 26:35 imported or exported 26:37 26:37 and 26:39 26:39 resources are moving into the import 26:41 26:41 substitution area 26:44 26:44 so if you at the very same breath you 26:46 26:46 can say we are doing both 26:48 26:48 we are 26:50 26:50 saving the country from losing reserves 26:54 26:54 import control by itself cannot be the 26:57 26:57 answer 26:58 26:58 so what we say is that is in economic 27:01 27:01 theory is very well established now 27:03 27:03 now if the problem is internal to the 27:05 27:05 country then solution must be through 27:08 27:08 policy change internally you cannot 27:10 27:10 bring in 27:12 27:12 foreign 27:14 27:14 controlling the foreign 27:15 27:15 uh foreign aid is not going to be the 27:17 27:17 answer because that can be sustained so 27:20 27:20 the point that the economic theory has 27:22 27:22 come to 27:24 27:24 is that if there's the problem is 27:27 27:27 in the domestic economy 27:29 27:29 the answer has to be 27:32 27:32 through changes in policy in the 27:33 27:33 domestic economy and not by trying to 27:37 27:37 influence foreign trade or foreign 27:39 27:39 capital flows 27:41 27:41 uh because that doesn't get at the root 27:43 27:43 cause you have to get to the root cause 27:45 27:45 of it 27:46 27:46 and 27:47 27:47 the for example if you go to import 27:50 27:50 control 27:52 27:52 uh 27:53 27:53 in order to 27:55 27:55 improve a balance of payments you could 27:57 27:57 not then forget the fact that 27:59 27:59 import price increase in import price 28:02 28:02 the tax on exports also why because they 28:05 28:05 are both operating the same market 28:07 28:07 getting 28:08 28:08 labor and capital that is competing five 28:10 28:10 so when you make 28:12 28:12 uh import substitutes more profitable 28:15 28:15 resources travel to that area 28:18 28:18 starving 28:19 28:19 nontradable goods like electricity 28:23 28:23 and 28:23 28:23 exports 28:26 28:26 so we have to be very careful about 28:27 28:27 policy that when view it's a very 28:31 28:31 appealing to reduce for imports 28:34 28:34 but the the 28:36 28:36 the 28:37 28:37 impact of wheat on exports is not 28:39 28:39 appreciated because at the end of the 28:42 28:42 day 28:42 28:42 international trade is a macroeconomic 28:44 28:44 problem also it's macroeconomics if you 28:47 28:47 do something 28:48 28:48 one side of the economy that will impact 28:50 28:50 on the other side of the economy and i 28:52 28:52 don't want to use the term it's called 28:53 28:53 the learner theorem 28:55 28:55 abba learner a night school student at 28:57 28:57 the university of london saw this 29:00 29:00 and wrote a paper 29:02 29:02 called became known as the 29:04 29:04 learn of the era that is a tax import 29:07 29:07 duty the tax on exports 29:10 29:10 so if you uh want to increase exports at 29:14 29:14 the same time 29:15 29:15 we are no nobody again good economies 29:18 29:18 are not taking import substitution not 29:20 29:20 again certainly not and people who 29:22 29:22 understand it that means the point 29:24 29:24 you can make both profitable socially 29:27 29:27 profitable 29:28 29:28 by 29:29 29:29 uh people investing in import substrates 29:33 29:33 on the one hand 29:34 29:34 and on promoting doing exports on the 29:36 29:36 hand ideally 29:38 29:38 although this is the theory that we have 29:39 29:39 come to because of the work of 29:41 29:41 douglas bhagavati and ann krieger of the 29:43 29:43 1978 for what is called the for the 29:46 29:46 american 29:48 29:48 sponsored under the american 29:51 29:51 uh 29:54 29:54 research group 29:57 29:57 that found that the ideal situation is 29:59 29:59 where the return 30:01 30:01 to impose subtraction is equal to return 30:04 30:04 for export promotion 30:06 30:06 so when they are balanced then you are 30:07 30:07 in the optimum area 30:10 30:10 when they are not balanced so 30:12 30:12 so if you tax people in order to 30:14 30:14 increase export then work that way you 30:16 30:16 have to have 30:18 30:18 what return 30:20 30:20 to both of them 30:22 30:22 are close to equal or close to equal is 30:24 30:24 the best allocation so that is where you 30:27 30:27 are 30:28 30:28 you are optimizing your 30:30 30:30 output also in the gdp also in that 30:33 30:33 that way 30:40 30:40 actually it gives us as i said before a 30:42 30:42 very interesting experiment 30:44 30:44 because the economists can't do physical 30:47 30:47 experiment like what you do in a 30:49 30:49 laboratory or a physics 30:51 30:51 lab so we had to watch what has happened 30:53 30:53 in the world and interpret it in a way 30:56 30:56 in a 30:57 30:57 good scientific way to see what is the 30:60 30:60 so-called natural experiment that took 31:01 31:01 place so we had such a good experiment 31:04 31:04 between 70 77 and 78 to say 94 shall we 31:07 31:07 say 31:08 31:08 so 70s so 720 to 94 31:12 31:12 they liberalize the economy by which we 31:14 31:14 mean they allow prices to allocate goods 31:16 31:16 and services 31:18 31:18 not the bureaucrat sitting in air 31:19 31:19 condition 31:20 31:20 uh if i remember tenth flow 31:23 31:23 deciding 31:25 31:25 what people should 31:27 31:27 import export consume not consume is 31:29 31:29 done by through the market now market is 31:31 31:31 not always right there are places where 31:34 31:34 marketers don't work with 31:36 31:36 you know what i call 31:37 31:37 non-rival goods 31:40 31:40 not 31:42 31:42 by public goods that only the government 31:44 31:44 can provide defense police services 31:48 31:48 disease control government should be 31:49 31:49 involved in the middle of it no problem 31:52 31:52 so 31:54 31:54 so between these two period you see 31:56 31:56 higher growth rate 31:58 31:58 but more important than the higher 31:59 31:59 growth rate long term growth is assured 32:02 32:02 through 32:03 32:03 through the rising productivity increase 32:06 32:06 in productivity 32:08 32:08 so we saw that period the economy going 32:11 32:11 back growing very fast productively 32:13 32:13 increasing but something happened 32:17 32:17 after sort of a 89 there was another 32:20 32:20 little uh liberalized in 89 after that 32:24 32:24 um 32:26 32:26 the the people who are running the 32:28 32:28 country at that time 32:30 32:30 uh 32:30 32:30 started 32:32 32:32 uh mahavali 32:33 32:33 which we should have done 32:35 32:35 but maybe it came too early for us 32:39 32:39 and so that 32:40 32:40 because of the price increase cement and 32:43 32:43 all those prices went up 32:45 32:45 then it again 32:46 32:46 uh 32:48 32:48 while we were liberalized the economy 32:50 32:50 allowing market to allocate to be 32:51 32:51 interfered in a way 32:53 32:53 that 32:55 32:55 reduce the rate of return although 32:57 32:57 mammalia should have been done the 32:58 32:58 election is very important it should not 32:60 33:00 have happened as fast as 33:03 33:03 it happened because 33:05 33:05 they 33:06 33:06 reduce 33:07 33:07 a long term over 20 year program to few 33:10 33:10 years 33:11 33:11 and then 33:13 33:13 those prices relative prices change 33:16 33:16 and the impact of the 33:19 33:19 liberalization 33:20 33:20 sort of fitted down pretty 33:29 33:29 actually it is not what i recommend 33:32 33:32 it is that in the literature now people 33:34 33:34 agreed on 33:35 33:35 it comes from the work of very famous 33:37 33:37 economists looking at various definite 33:39 33:39 countries specific countries the famous 33:42 33:42 project that are run by 33:44 33:44 by the national bureau of economic 33:45 33:45 research out of in you know the united 33:48 33:48 states 33:49 33:49 they 33:50 33:50 doug this bhagavati 33:53 33:53 looked at this area of 33:55 33:55 uh 33:57 33:57 special trade 33:58 33:58 trade is very important specially for 33:60 33:60 small country like ours 34:01 34:01 we cannot hope to do very well in the 34:03 34:03 world 34:04 34:04 uh if you don't engage with the rest of 34:06 34:06 the world we have to do trade we should 34:08 34:08 invite people to come and invest here so 34:11 34:11 my first thing would be to say 34:13 34:13 to do two important thing first of all 34:16 34:16 make sure that the macroeconomic 34:18 34:18 situation in this country is stable by 34:20 34:20 which i mean 34:22 34:22 inflation 34:23 34:23 does not exceed the rest of the world 34:26 34:26 okay 34:27 34:27 we try to keep inflation to to our rest 34:29 34:29 of the world if not possible to our 34:31 34:31 major trading partners number one 34:35 34:35 number two then we have what is called a 34:38 34:38 sustainable 34:39 34:39 balance of payment situation 34:41 34:41 so but we are not today in that 34:43 34:43 situation in the sense that we have a 34:45 34:45 huge debt that we have to pay repay it's 34:48 34:48 not easy it's a difficult thing any 34:50 34:50 government confronting that we'll have 34:51 34:51 to deal with it 34:53 34:53 and there are countries that have done 34:54 34:54 that in the past in in countries in 34:57 34:57 recent past 34:58 34:58 guyana 34:60 34:60 i had a 35:01 35:01 800 percent debt to gdp ratio 35:05 35:05 and the work of the imf and the world 35:08 35:08 bank and others together 35:10 35:10 the uh latin american development bank 35:12 35:12 worked together and helped them 35:14 35:14 how did they help them by 35:16 35:16 saying we are going to mend our ways 35:20 35:20 we are not going to repeat policy that 35:23 35:23 led to such an accommodation large 35:25 35:25 amount of debt 35:26 35:26 but 35:27 35:27 we will be helped 35:28 35:28 will be able to help you if you indicate 35:31 35:31 that you are going to change your 35:32 35:32 policies 35:34 35:34 so that we will be able to give some 35:36 35:36 little more accommodation to get rid of 35:38 35:38 the problem that they are facing 35:41 35:41 so the my my idea would be to say what 35:44 35:44 is the actual situation in the countries 35:47 35:47 right if you will understand 35:50 35:50 uh 35:51 35:51 this government for example our 35:53 35:53 government inherited most of these 35:54 35:54 problems then we had kovid 35:57 35:57 so there must not be a way of 35:60 35:60 accepted way of going forward now what 36:03 36:03 we talked all this time helps to this 36:05 36:05 situation have a real 36:08 36:08 return to impose substitution and 36:11 36:11 exploration must be close to each other 36:13 36:13 or 36:14 36:14 that is 36:15 36:15 they use a different concept the 36:17 36:17 exchange rate 36:19 36:19 in terms of the converting the goods in 36:22 36:22 uh 36:23 36:23 into goods 36:24 36:24 for import substitution and by export 36:27 36:27 mumbi in a similar 36:29 36:29 close to each other if not equal equal 36:32 36:32 is beyond better 36:33 36:33 so that is the first thing i would say i 36:36 36:36 say give confidence to the market thing 36:38 36:38 we are taking care of it 36:41 36:41 this way and explain how we are going to 36:43 36:43 do it 36:44 36:44 i would say 36:45 36:45 and a lot of people are saying that go 36:47 36:47 to the imf not for the money 36:50 36:50 it's not the money but the discipline 36:52 36:52 that the signal we are giving to the our 36:54 36:54 creators 36:55 36:55 now and future creators that we are 36:58 36:58 going to have a program in which 37:01 37:01 there is a responsible ability to deal 37:04 37:04 with the 37:06 37:06 the situation that we are confronting 37:09 37:09 our reserves are not 37:11 37:11 uh 37:13 37:13 high enough 37:14 37:14 as i see it 37:16 37:16 uh to pay off our debt and 37:19 37:19 in a sort of organized way of course you 37:23 37:23 know we also know one monday morning 37:25 37:25 they are not giving you your your bill 37:27 37:27 and here's what you have to pay no 37:29 37:29 if we have to pay they want the way at 37:31 37:31 our tena or for borrowings in the past 37:34 37:34 it's sometime in in dc unfortunately 37:37 37:37 they also 37:38 37:38 bulge 37:39 37:39 so for that we have to be careful about 37:41 37:41 you know getting people then you can do 37:43 37:43 do swap agreement swaps and all that 37:46 37:46 but for a medium term the single group 37:49 37:49 that is only a 37:50 37:50 short-term thing for medium term we have 37:52 37:52 to change the incentive structure so 37:56 37:56 not only keep the 37:57 37:57 uh macrogram situation stable balanced 38:00 38:00 through avoiding inflation and having 38:03 38:03 sustainable 38:05 38:05 balance of payment current account 38:06 38:06 situation 38:07 38:07 but change our incentives our incentives 38:10 38:10 are 38:10 38:10 not well aligned 38:12 38:12 uh 38:13 38:13 you know in our situation 38:16 38:16 so 38:17 38:17 get relative prices to begin to work in 38:19 38:19 other words 38:20 38:20 uh 38:21 38:21 it's sometimes difficult at this time to 38:23 38:23 say to do reform but we have to reform 38:26 38:26 we have to give a program is this what 38:27 38:27 we are going to do and people will come 38:29 38:29 a public 38:30 38:30 private enterprises will see what the 38:32 38:32 government is going to do and they will 38:35 38:35 change their behavior in a way 38:37 38:37 that is going to be good for them 38:38 38:38 therefore good for the country also 38:40 38:40 and so i that's what i would do i will 38:43 38:43 say a program of recovery 38:45 38:45 will have well understood 38:47 38:47 well agreed upon program recovery let 38:50 38:50 the politics get out of the way and say 38:52 38:52 that anybody coming into power or now as 38:55 38:55 in power 38:56 38:56 should address these issues nobody can 38:59 38:59 be 38:60 38:60 free of that now 39:01 39:01 so i would say 39:03 39:03 microeconomic stability incentive reform 39:06 39:06 and inform people a very 39:09 39:09 well understood program of recovery for 39:12 39:12 the economy 39:20 39:20 actually as economists we can only one 39:22 39:22 of the things we can use is do 39:23 39:23 competitive studies 39:25 39:25 so for example why did taiwan grow as a 39:28 39:28 magnificent rate in the 1960s 70s and 39:31 39:31 became the uh out 39:34 39:34 low income or developed developed 39:35 39:35 country and and that is exactly what 39:37 39:37 vietnam is doing i had a lot of work 39:39 39:39 from vietnam i have been there many 39:41 39:41 times 39:42 39:42 they 39:43 39:43 they said what we are doing is not good 39:46 39:46 now we are going to change it and they 39:48 39:48 did 39:49 39:49 so we helped the meaning when the bank 39:51 39:51 world bank helped to enter the world 39:53 39:53 trade organization the main uh 39:58 39:58 leader of the 39:59 39:59 the 39:60 40:00 negotiation with the wto we were helping 40:03 40:03 the 40:04 40:04 the 40:06 40:06 vietnamese government at that time 40:08 40:08 actually they are very good at getting 40:11 40:11 getting something done and so 40:14 40:14 they said actually when i met later 40:16 40:16 after that reform he said you know 40:18 40:18 sarath we should have done even more we 40:20 40:20 should have gained even more because now 40:22 40:22 they are complaining with china 40:24 40:24 which what happened china's real wages 40:26 40:26 have gone up certain goods china cannot 40:28 40:28 produce 40:30 40:30 at 40:30 40:30 lower cost than vietnam now and vietnam 40:34 40:34 became magnificent i mean 40:36 40:36 vietnam became second largest coffee 40:38 40:38 exporter in the world 40:40 40:40 from nothing right then i mean very 40:43 40:43 growing very fast second 40:46 40:46 in 40:46 40:46 price production 40:48 40:48 and industry 40:50 40:50 most of the foreign direct investment 40:52 40:52 now going to vietnam 40:60 40:60 how did certain industries that were 41:01 41:01 functioning 41:03 41:03 lose out because of liberalization we 41:05 41:05 are given the example of steel 41:07 41:07 cooperation 41:08 41:08 and you are giving 41:10 41:10 fabric to tool area two very good 41:12 41:12 questions the answers are not very 41:14 41:14 difficult 41:16 41:16 still 41:17 41:17 if we would produce steel at competitive 41:19 41:19 prices then we don't we can export we 41:22 41:22 have no problem the thing is that there 41:24 41:24 was no hope we can do it because first 41:27 41:27 of all the technology we had is so old 41:30 41:30 so all 41:31 41:31 it costs so much 41:33 41:33 in order to produce what is but the 41:36 41:36 market but the world market for steel 41:39 41:39 period some countries have done it i 41:41 41:41 mean because 41:42 41:42 they have the technology they have the 41:44 41:44 people to do it 41:45 41:45 and 41:46 41:46 and believe it or not it's not been the 41:48 41:48 in the government look at the united st 41:52 41:52 india steel industries 41:54 41:54 about at least 200 years old but they 41:57 41:57 are still going on i mean they had very 41:58 41:58 good uh 41:60 41:60 tatas to start arguing and so 42:03 42:03 we are not in the same that league 42:06 42:06 might feel is that we could never make 42:08 42:08 steel competitive 42:10 42:10 given our situation 42:12 42:12 so 42:13 42:13 still unfortunately 42:17 42:17 live much longer 42:19 42:19 economic life 42:21 42:21 because it has support on the government 42:23 42:23 support it was not the government 42:25 42:25 enterprise 42:27 42:27 steel would not have lasted 42:29 42:29 maximum maybe three years now it's a lot 42:31 42:31 of some 50 plus if i am right right 42:35 42:35 that is the enterprise we are talking 42:37 42:37 about state-owned enterprises 42:41 42:41 sometimes it's very important to realize 42:43 42:43 that capitalist system which we have 42:47 42:47 uh 42:49 42:49 is a profit and loss system 42:51 42:51 losses give equal message like profit 42:53 42:53 profit says you can do it you can sell 42:55 42:55 it you can increase the scale you can do 42:58 42:58 various improvements 42:59 42:59 but losses tell you hey this is not 43:01 43:01 something you can continue to do 43:03 43:03 somebody has to 43:05 43:05 bail you out each year and don't make 43:06 43:06 any sense to continue 43:08 43:08 what do we do 43:10 43:10 when we 43:11 43:11 sustain these things 43:13 43:13 much over their time they are really 43:15 43:15 taxing 43:16 43:16 the economy 43:17 43:17 that we could build three schools 43:20 43:20 five hospitals with the money that we 43:22 43:22 have paid for these 43:25 43:25 enterprises that could not survive on 43:28 43:28 their own 43:29 43:29 so that's very turalyon textile also 43:32 43:32 similar case 43:33 43:33 then you know the thing is that look at 43:36 43:36 our textile industry outside 43:39 43:39 look at uh 43:40 43:40 we are world leaders in textile 43:43 43:43 technology 43:44 43:44 mass and brandeis they are very well 43:47 43:47 recognized 43:48 43:48 they have revolutionized the way of 43:50 43:50 making 43:52 43:52 garments and say for example they are in 43:55 43:55 they are 43:56 43:56 introducing 43:58 43:58 textile technology for shoes 43:60 44:00 and they are five places around that 44:03 44:03 they are really invested and teaching 44:06 44:06 teaching the same technology and they 44:08 44:08 have place in mexico they are placed in 44:10 44:10 cambodia 44:11 44:11 in vietnam other places so what is the 44:14 44:14 difference between the two 44:17 44:17 same people 44:19 44:19 we went to same schools 44:21 44:21 difference is the ownership 44:23 44:23 now they have at one stage 44:25 44:25 public some financial institutions like 44:27 44:27 the world bank also believe that 44:29 44:29 ownership does not matter their learned 44:32 44:32 later 44:32 44:32 lesson 44:34 44:34 when i joined the world bank they you're 44:36 44:36 thinking well time i said what doesn't 44:38 44:38 matter 44:39 44:39 i said never matter what hey if you want 44:42 44:42 to make profit it matter it matters 44:44 44:44 because there is a i 44:47 44:47 you want to survive if you are a private 44:49 44:49 enterprise you want to get a return on 44:51 44:51 the money that you have borrowed most of 44:53 44:53 the time and so therefore you do the 44:55 44:55 best you can 44:56 44:56 if for example the decision to continue 44:60 44:60 with a 45:01 45:01 dead duck institution enterprise 45:04 45:04 remember the poor workers are also 45:07 45:07 they lose their jobs 45:09 45:09 uh 45:10 45:10 even 45:11 45:11 when the 45:12 45:12 that decision is made by people who are 45:14 45:14 not affected by it 45:17 45:17 then then it's a bad situation 45:26 45:26 i think the work that was that like this 45:28 45:28 bhagavati and angry goddess in 1978 45:32 45:32 uh there are two 45:35 45:35 they wrote two books 45:36 45:36 on the same topic to taking different 45:39 45:39 areas 45:41 45:41 1978 published by karim the name but if 45:45 45:45 you put your name put these two names 45:47 45:47 there'll be new list of books that they 45:49 45:49 have written among them there is this 45:52 45:52 project what is called the national 45:54 45:54 beauty of economic research project on 45:55 45:55 international trade very good book 45:59 45:59 then you can read ann's latest book 46:01 46:01 called what everybody should know about 46:03 46:03 it is a fantastic book 46:05 46:05 i got a chance to look at it in raft 46:08 46:08 i told her if you have a real winner 46:10 46:10 here is a no no no one 46:12 46:12 so it's it's very simply only she can do 46:15 46:15 explain 46:16 46:16 what we have just discussed 46:18 46:18 actually i had i don't have hardcore 46:20 46:20 which is supposed to send send it to me 46:23 46:23 but i haven't got it that happens here 46:25 46:25 you know that happened project so i had 46:27 46:27 downloaded through amazon and i actually 46:30 46:30 i have already six of the chapters i had 46:32 46:32 another six which i read to this thing 46:35 46:35 it's it's a very good book then you can 46:37 46:37 read for example people like bella 46:39 46:39 balasa who's unfortunately no more 46:43 46:43 imb little 46:47 46:47 people who have max gordon 46:50 46:50 those are the books that really 46:53 46:53 change the way we have looked at but 46:55 46:55 look at what happened to in the world 46:57 46:57 look at the countries that are doing so 46:59 46:59 well people who gave up the whole 47:01 47:01 industrial 47:03 47:03 industrial policy china 47:05 47:05 vietnam 47:06 47:06 cambodia 47:09 47:09 philippines now and all these countries 47:12 47:12 that we were doing better than all those 47:14 47:14 countries in the night when we got 47:16 47:16 independent 47:17 47:17 in the 1950s we kept figures for 47:20 47:20 national income only after 51.52 47:23 47:23 we be only second in the world after 47:25 47:25 japan 47:27 47:27 and 47:28 47:28 maybe closely followed by 47:30 47:30 malaysia 47:31 47:31 so our position is different today 47:34 47:34 today uh 47:39 47:39 uh 47:40 47:40 most of those countries 47:42 47:42 have incomes that are 47:44 47:44 closer to the 47:47 47:47 rich country developing developed 47:48 47:48 countries 47:50 47:50 so we waste a lot of time one of the 47:52 47:52 things is our politics also because we 47:54 47:54 are a democracy we are remain a 47:56 47:56 democracy 47:57 47:57 we have what was the indirectness of 47:59 47:59 industry called that tomorrow system 48:01 48:01 that is 48:02 48:02 one government 48:08 48:08 five years and other government comes 48:09 48:09 just something opposite 48:11 48:11 something different so it is 48:14 48:14 so we have no consistent policy 48:16 48:16 throughout unfortunately 48:24 48:24 none of these is a constraints for us 48:27 48:27 there's the opposite question i want to 48:29 48:29 be answered saying that some countries 48:31 48:31 have what is called curse of resources 48:34 48:34 because of the cursor resource a country 48:36 48:36 like nigeria is in real trouble 48:39 48:39 country that huge oil resources are in 48:42 48:42 get into huge trouble we don't have that 48:44 48:44 problem you know because we are small 48:46 48:46 number one i think you know that are we 48:49 48:49 playing raga that to be quick is the 48:51 48:51 thing not the not the weight right 48:54 48:54 so we have to be 48:55 48:55 understanding the market world markets 48:57 48:57 and working with it actually we have no 48:60 48:60 confidence that way in my belief because 49:02 49:02 i can cite so many examples you know 49:05 49:05 small countries are doing so well 49:08 49:08 because they have been moving with the 49:10 49:10 pressure they have studied the situation 49:12 49:12 so other thing is that what has happened 49:15 49:15 and our friend lord rajasthan is the 49:18 49:18 real world class expert on it is that 49:20 49:20 because of the fragmentation production 49:22 49:22 nobody produces final good anymore 49:25 49:25 so we can produce i think i may have 49:26 49:26 said this before we used to produce i i 49:29 49:29 don't know things you may do the rubber 49:31 49:31 band for the wi-fi the bmw i love bmws 49:35 49:35 and i tell people hey this we produce 49:38 49:38 parts of this car 49:40 49:40 right 49:41 49:41 that because we specialized in it we 49:43 49:43 didn't try to produce but now we want to 49:45 49:45 produce a car which is so silly 49:48 49:48 because 49:49 49:49 we can get do you know that what is 49:51 49:51 called 49:52 49:52 if you want to assemble that what we do 49:54 49:54 here why do people assemble cloth 49:56 49:56 because we have 300 duty a car that is 49:59 49:59 say 15 000 dollars in the united states 50:03 50:03 so there are low tariffs you understand 50:06 50:06 study fun is three percent right three 50:09 50:09 percent 50:10 50:10 compared to our hundred percent so when 50:12 50:12 we buy a car for ten thousand dollars 50:14 50:14 shall we say for the sake of argument 50:16 50:16 that is going to be four times home 50:18 50:18 because three percent four times more 50:21 50:21 so 50:23 50:23 so we don't be silly for us to try to 50:25 50:25 produce cars but we can produce so many 50:27 50:27 things for the car we are good at it 50:30 50:30 you know like that same part of thing 50:32 50:32 there is a sri lankan guy the famous man 50:35 50:35 who produce software 50:37 50:37 and keeps that eye that he takes in a 50:40 50:40 suitcase to japan 50:41 50:41 and he's worth 30 million or something 50:44 50:44 right so we can there are people who can 50:46 50:46 do it 50:47 50:47 they should have the opportunity to do 50:49 50:49 it so size is no barrier 50:52 50:52 you know as a fast-moving 50:55 50:55 game 50:56 50:56 uh 50:58 50:58 to not introduce constraints to it 51:01 51:01 give the people the freedom to make 51:03 51:03 those decisions in a 51:05 51:05 following what is called 51:08 51:08 police towards industry rather than 51:10 51:10 industry party industry policy you 51:12 51:12 create a ministry of industry they want 51:14 51:14 to produce things 51:16 51:16 they 51:18 51:18 there's no proper 51:21 51:21 evaluation 51:22 51:22 whether it is going to win or not 51:25 51:25 now if you did a proper evaluation i can 51:27 51:27 tell you myself for the reason of mataka 51:30 51:30 assembly is one of the worst activities 51:32 51:32 we can ever do 51:34 51:34 why 51:35 51:35 because we don't have the competence 51:38 51:38 we don't have the material we have to 51:41 51:41 import what you call ckd completely 51:43 51:43 knocked down vehicles they cost more 51:45 51:45 than a full car 51:47 51:47 if you can buy the car full at cost 51:49 51:49 prices as world prices will be much less 51:52 51:52 than the ckd 51:54 51:54 that's all known well known now 51:57 51:57 now just because we can tell people oh 51:59 51:59 we are producing a car here 52:02 52:02 how much resources we are using the 52:04 52:04 resource costs are very high 52:06 52:06 compared to the import in the car 52:09 52:09 so 52:11 52:11 so i i see great opportunity opening 52:13 52:13 towards the rv educated 52:15 52:15 uh 52:18 52:18 population children are 52:20 52:20 kids are smart 52:22 52:22 they can need little bits hand holding 52:24 52:24 ah 52:26 52:26 and they can come out to be 52:28 52:28 you know can be can be 52:30 52:30 a 52:31 52:31 very well developed country 52:34 52:34 if we are prepared to bite the bullet 52:37 52:37 and make the changes that need to be 52:39 52:39 changed 52:46 52:46 actually i under british talk about it 52:48 52:48 without reform we have no future period 52:52 52:52 let's be grown up and say we have to 52:54 52:54 bite the bullet and do you i would come 52:57 52:57 out and say go back to the earlier point 52:60 52:60 that 53:02 53:02 we have a recovery program 53:04 53:04 there are people reasonable people from 53:06 53:06 either side of the victim can agree this 53:09 53:09 is what we should do 53:10 53:10 look at look at around you you know look 53:13 53:13 at around you and you will you will see 53:15 53:15 the country that didn't have anything 53:18 53:18 for example what is the resources that 53:19 53:19 singapore has 53:21 53:21 nothing 53:22 53:22 population educated population was 53:25 53:25 very very friendly to foreign take 53:27 53:27 investment 53:30 53:30 maybe 53:31 53:31 singapore you can call an exception but 53:34 53:34 i have worked in many poor countries in 53:35 53:35 the world 53:36 53:36 that came from nowhere to to be very 53:39 53:39 well vietnam is a very good example 53:41 53:41 boring you know 53:44 53:44 a very low level of per capita income 53:46 53:46 compared to us come up now passed us 53:49 53:49 now it's about 53:50 53:50 eight to nine thousand dollars per year 53:52 53:52 compared to our 53:54 53:54 just before copied three thousand 53:56 53:56 four thousand three dollars per capita 53:59 53:59 it's fallen now obviously 54:01 54:01 because of the problem that we have 54:03 54:03 so i am very optimistic 54:06 54:06 because i have seen countries going from 54:09 54:09 more difficult situation than but we 54:11 54:11 have had and doing very well because 54:14 54:14 they understood the situation they got 54:17 54:17 help from rest of the world to help them 54:19 54:19 because if we say we are going to do 54:21 54:21 these things and people looking around 54:23 54:23 the world see there are opportunities 54:24 54:24 for them to come and 54:26 54:26 locate here 54:27 54:27 we have two large uh 54:31 54:31 zones we can have 54:33 54:33 city colombo city project the hambantar 54:35 54:35 project 54:37 54:37 and make use of this project anybody can 54:39 54:39 invest 54:40 54:40 chinese 54:42 54:42 australians brits americans anybody can 54:45 54:45 invest here 54:47 54:47 so you'll have to get rid of that coffee 54:50 54:50 yeah 54:51 54:51 so i am very hopeful with the 54:55 54:55 bit proper way we should be other we 54:58 54:58 actually we have no alternative 54:60 54:60 we have no alternative we see easy to 55:02 55:02 make decisions when there's no 55:03 55:03 alternative there's nothing to weigh 55:06 55:06 here it's pretty obvious the alternative 55:08 55:08 is to promise people 55:10 55:10 we are going to we are going to tell our 55:12 55:12 creditors 55:13 55:13 this is what many latin american 55:15 55:15 countries did when they really got into 55:18 55:18 much bigger hole than us 55:19 55:19 they came and said the argentina 55:21 55:21 southwark they have huge resources 55:24 55:24 unlike us 55:25 55:25 they said we are going to change our 55:26 55:26 ways 55:27 55:27 uh they got very good people 55:31 55:31 uh running the country after that they 55:34 55:34 they were able to come back 55:36 55:36 because they are again going in other 55:38 55:38 cycles that's another structure though 55:40 55:40 there are countries who have been our 55:42 55:42 states and done very well because 55:44 55:44 they identified the problem they have a 55:46 55:46 consensus these programs that we should 55:49 55:49 do and we do we have no other choice 55:53 55:53 we have no other choice