00:11 hello everyone and thank you for joining 00:12 00:12 us this morning we welcome you to Sri 00:15 00:15 Lanka's economic freedom Summit for the 00:17 00:17 year 2024 which is conducted in 00:20 00:20 collaboration with the Fraser Institute 00:22 00:22 and based on their economic freedom of 00:24 00:24 the World Report the main purpose of 00:26 00:26 this Summit is to improve Sri Lanka's 00:28 00:28 country ranking on the report oh sorry 00:30 00:30 on the index at which we are currently 00:33 00:33 ranked 116 out of 165 countries so 00:37 00:37 through this Summit we hope to bring Sri 00:38 00:38 Lanka to the next stage improving both 00:41 00:41 its ranking and so that its people will 00:43 00:43 be wealthier and more prosperous the 00:46 00:46 summit will consist of three parts uh 00:48 00:48 the breakfast Forum at which we 00:49 00:49 currently find ourselves as well as an 00:52 00:52 economic freedom audit which will be 00:54 00:54 will be conducted right after this uh we 00:57 00:57 also have a concluding session in the 00:59 00:59 evening this year year the audit will be 01:01 01:01 focusing on four main areas namely 01:04 01:04 tariff reforms free movement of people 01:06 01:06 the digitization of qutes as well as the 01:09 01:09 digitization of land 01:11 01:11 registration to open the summit I would 01:13 01:13 like to begin by inviting danad Fernando 01:16 01:16 the Chief Executive Officer of advocat 01:18 01:18 Institute to give the welcome speech 01:21 01:21 thank you very much Aisha first of all 01:23 01:23 welcome all of you for the economic 01:25 01:25 freedom Summit 2024 we are heading to a 01:28 01:28 very important year and we did the same 01:31 01:31 Summit in 01:33 01:33 201718 uh and Fred was here uh with many 01:37 01:37 of our colleagues we' really wanted to 01:39 01:39 push the reform process forward because 01:42 01:42 we know what we have been going through 01:44 01:44 so thank you very much for joining hands 01:47 01:47 with us for this effort and all this 01:50 01:50 effort is to improve the living standard 01:53 01:53 of Sri Lankan people and that's the main 01:56 01:56 objective and as we all know the economy 01:60 01:60 has has to grow for us to overcome this 02:02 02:02 crisis and to grow the economy the only 02:05 02:05 solution is there's fundamental reforms 02:08 02:08 which is holding us back and we have to 02:10 02:10 unleash that potential and this is 02:13 02:13 another effort that we are trying we 02:15 02:15 have invited senior decision makers and 02:17 02:17 influential audience in the morning to 02:19 02:19 discuss and there'll be breakout 02:20 02:20 sessions as Aisha mentioned and we are 02:22 02:22 drafting a set of reforms like we did 02:24 02:24 last time and there's massive impact 02:27 02:27 from what we did last time though the 02:28 02:28 progress was slow and then we are taking 02:31 02:31 it to the policy makers and trying to 02:33 02:33 get the reforms done on the on one side 02:35 02:35 on the other hand in the evening we are 02:37 02:37 having a single event that's for a 02:39 02:39 larger audience at the 02:41 02:41 bmic basically to take the message why 02:44 02:44 economic freedom is important for people 02:46 02:46 of Sri Lanka and for their understanding 02:49 02:49 so then all will support the reform 02:51 02:51 process so then we all can move forward 02:54 02:54 I'm not taking any time because there 02:56 02:56 are very senior and knowledgeable people 02:58 02:58 I'll stop from there but I mean it very 03:00 03:00 sincerely and thank you very much for 03:04 03:04 all of you for joining this effort and 03:06 03:06 as it was said by fedick 03:09 03:09 basard when when goods and services do 03:13 03:13 not cross the borders soldiers will and 03:17 03:17 that's what we want to stop and that's 03:20 03:20 this is the effort as as advokat that we 03:22 03:22 are trying to push forward thank you 03:23 03:23 very much and enjoy the 03:27 03:27 sessions thank you Dan um I would now 03:31 03:31 like to introduce our keynote speaker 03:33 03:33 for the day um he's indeed a familiar 03:36 03:36 face to many of us and he's widely 03:38 03:38 credited as a Pioneer in public private 03:41 03:41 partnership um and tan VI singher has 03:43 03:43 over 26 years of experience in the field 03:46 03:46 working working here today we invite him 03:49 03:49 to share a few sorry a few words with us 03:51 03:51 all merging his many years of experience 03:54 03:54 with this pertinent topic of economic 03:56 03:56 freedom 03:58 03:58 hilan thank you very much I love short 04:01 04:01 introductions uh former 04:04 04:04 Minister uh advocat CEO D distinguished 04:08 04:08 guests when I was invited to speak today 04:12 04:12 obviously I was honored and I thought of 04:15 04:15 picking a topic that's pertinent to the 04:17 04:17 subject matter being discussed today and 04:19 04:19 that's attracting FDI freedom to 04:24 04:24 invest and I thought now I'm old enough 04:27 04:27 having done this business for 30 years 04:30 04:30 of promoting investments in this country 04:33 04:33 both domestic as well as 04:35 04:35 internationally starting my 04:38 04:38 entrepreneurial career as an investment 04:40 04:40 banker in the early 90s when I recall 04:43 04:43 just about 3 weeks after the 04:44 04:44 assassination of President premadasa we 04:46 04:46 executed 04:48 04:48 the uh buide Mandate of transia hotel 04:51 04:51 oberoy hotel and then subsequently 04:54 04:54 InterContinental to foreign 04:56 04:56 investors and then subsequently that 04:60 04:60 resulted in my being invited to run the 05:02 05:02 Boi survived through several bomb blasts 05:07 05:07 uh 05:08 05:08 nevertheless uh we continue to plug the 05:11 05:11 country and then held an honorary 05:14 05:14 position as chairman of the PPP agency 05:15 05:15 the first chairman of the newly 05:17 05:17 constituted PPP agency and today I'm 05:19 05:19 back the last 12 years being an 05:21 05:21 investment banker working with for 05:23 05:23 example deoe India trying to privatize 05:26 05:26 the Hyatt and lro gas so I've been on 05:29 05:29 both sides of the equation running 05:31 05:31 private sector corporates as well as 05:33 05:33 being in government to understand what 05:35 05:35 it means to have freedom to invest and 05:39 05:39 to start with first and foremost we need 05:42 05:42 to have 05:44 05:44 sound macroeconomic management and not 05:48 05:48 be a part yet again of this what I call 05:51 05:51 The unver Virtuous cycle of going back 05:53 05:53 and forth between IMF programs so 05:56 05:56 therefore prudent economic management is 05:58 05:58 an absolute Squan on 06:00 06:00 for investment promotion and attracting 06:03 06:03 investment and that goes hand in glove 06:05 06:05 with policy 06:07 06:07 consistency actually the central theme 06:10 06:10 for this speech I thought I'll base on 06:13 06:13 something that popped out of Statistics 06:14 06:14 when I was doing an analysis for a 06:16 06:16 previous speech I noticed that the 06:18 06:18 period 06:20 06:20 between 06:22 06:22 95 to 200000 it was six-year 06:26 06:26 period during which time I was a 06:28 06:28 full-time employee of the government as 06:30 06:30 chairman of the Boi was the longest 06:33 06:33 period Sri Lanka did not go under an IMF 06:36 06:36 Pro program so I thought it might be per 06:40 06:40 pertinent for me to go into a bit of 06:42 06:42 History uh because I had the privilege 06:44 06:44 of being a part of a very udite economic 06:47 06:47 Think Tank and a team led by Mr as jaad 06:51 06:51 as secret to the treasury and later 06:52 06:52 governor of the Central Bank and Dr LOD 06:55 06:55 who was economic adviser to the then 06:57 06:57 president and the architect of the 06:59 06:59 economic inte migration between India 07:00 07:00 and Sri Lanka and uh also the architect 07:04 07:04 of engineering the Indo Lanka Free Trade 07:07 07:07 Agreement so let's look at what went 07:09 07:09 right because the second part of my 07:11 07:11 speech will look at more recent Trends 07:13 07:13 in FDI and then I'll talk of the future 07:15 07:15 at the end of my speech now yes the 07:18 07:18 economy during that period grew at about 07:22 07:22 5.1% which was higher than the national 07:26 07:26 average and you as you can see in this 07:28 07:28 chart now we have a situation where the 07:31 07:31 wartime GDP growth rate on average was 07:34 07:34 higher than the peacetime GDP growth 07:37 07:37 rate and then I thought I'll focus on 07:42 07:42 1997 when net FDI inflows which in my 07:46 07:46 view is the correct statistic to look at 07:48 07:48 when we talk about FDI net FDI inflow as 07:52 07:52 a percentage of GDP reached an all-time 07:55 07:55 high of 2.8% in 07:58 07:58 1997 now this is a number we should be 08:02 08:02 consistently achieving because most some 08:04 08:04 countries do 3 4 5% of GDP as as net FDI 08:09 08:09 inflows now how did that happen there 08:13 08:13 was things that happened which I will 08:16 08:16 highlight later that actually enhance 08:18 08:18 the country's freedom to invest and in 08:21 08:21 particular I want to highlight the five 08:23 08:23 years between again 1995 and 08:26 08:26 2000 08:28 08:28 where we achieved received an average 08:31 08:31 Equity FDI of $150 million it was 08:34 08:34 actually $155 million to be exact which 08:37 08:37 is 50% higher than the equity FDI of the 08:41 08:41 postwar Sri Lanka era now why is equity 08:45 08:45 FDI important because that's what 08:47 08:47 creates FDI stock in this country that's 08:49 08:49 where new projects come into the country 08:51 08:51 and that's through those new projects is 08:53 08:53 where we have retained earnings being 08:54 08:54 reinvested and expansions happening so 08:57 08:57 there was a greater degree of FD di 08:60 08:60 stock being created prior to the to the 09:03 09:03 conflict then after the 09:05 09:05 conflict now and this is something that 09:08 09:08 I wanted to sort of highlight to Hara uh 09:11 09:11 because one of your I think text 09:13 09:13 messages talked of the fact that U Sri 09:16 09:16 Lanka forgot export promotion after 09:18 09:18 president premadasa I'd like to argue 09:20 09:20 and say Sri Lanka forgot export 09:22 09:22 promotion after president chandria 09:24 09:24 because in 09:25 09:25 2000 we achieved the highest ever level 09:29 09:29 and that was 09:30 09:30 prior to the negative GDP growth in 2001 09:33 09:33 so it was the base was the correct base 09:36 09:36 we achieved the highest ever level of 09:39 09:39 exports as a percentage of GDP of 39% 09:43 09:43 and it has gone down subsequently to 09:45 09:45 15.4% and of course you see a slight 09:47 09:47 Spike coming again because the base is 09:49 09:49 going down due to negative GDP growth 09:53 09:53 now what did we do during that time 96 09:56 09:56 to 2001 I'm willing to argue that the 09:59 09:59 quality of wartime FDI particularly when 10:03 10:03 you consider export orientation was 10:05 10:05 higher than postwar now in terms of 10:08 10:08 direct and indirect exports that was a 10:11 10:11 time where texture Jersey set up in the 10:13 10:13 siaga zone YKK of Japan set up a zipper 10:16 10:16 zipper and button manufacturing facility 10:18 10:18 they took six months to do their due 10:20 10:20 diligence on Sri Lanka loar Sri Lanka's 10:23 10:23 largest rubber export company set up 10:25 10:25 during that time in midigama today it's 10:28 10:28 Michelin and between Mast Industries 10:31 10:31 Martin trust Mas brandix at least 10 10:34 10:34 factories with more than $10 million of 10:37 10:37 investment and by by the way the cut off 10:39 10:39 point for this slide is more than $10 10:40 10:40 million being invested were set up 10:43 10:43 during that that time all of which were 10:44 10:44 export oriented let's look at Services I 10:48 10:48 remember taking Adrien zaka I didn't 10:51 10:51 know who he was the founder of Aman 10:53 10:53 resorts at State expense on a chopper to 10:56 10:56 show him lands for him to start his 10:58 10:58 investment in Aman 11:00 11:00 Resorts Victoria golf course I remember 11:03 11:03 carrying a policy paper to Madame 11:05 11:05 chandria kumaratunga the opening line of 11:07 11:07 the policy paper was Sri Lanka must be 11:10 11:10 the only country in the world where for 11:12 11:12 110 years we have not opened a single 11:15 11:15 new golf course and that's how Victoria 11:17 11:17 Golf Course started vertus sir signed 11:20 11:20 the Boi agreement in 1996 the rest is 11:23 11:23 history I personally went to Sweden to 11:25 11:25 sign the Boi agreement for ifs software 11:29 11:29 he huge company 11:30 11:30 today and personally wrote the cabinet 11:34 11:34 paper got it approved through the 11:36 11:36 cabinet to allow Millennium information 11:38 11:38 technology or MTI which was subsequently 11:39 11:39 owned by the London Stock Exchange to 11:41 11:41 build a campus in malabe Apollo Hospital 11:44 11:44 was stuck for two years we came up with 11:47 11:47 a mechanism to make sure that that 11:49 11:49 investment went through and in 11:51 11:51 infrastructure sagt the first ever Port 11:54 11:54 Terminal PPP in the whole of South 11:57 11:57 Asia AES Corporation one of the biggest 12:00 12:00 US companies invested 100 in 110 12:03 12:03 megawatt Cala project mitsui power khd 12:06 12:06 of Germany shell terminals who built a 12:08 12:08 massive gas terminal in 12:10 12:10 Cara tiia invested in SEL and then 12:14 12:14 subsequently in Mobitel trans Marco 12:16 12:16 invested in lanel and entity bought SLT 12:19 12:19 and Hutchinson also set up a mobile 12:21 12:21 operation and then in non-export 12:23 12:23 manufacturing we had hold a bank coming 12:26 12:26 into cement hung into steel and ETA a 12:29 12:29 large group in the Middle East in the 12:30 12:30 UAE investing in Sri Lanka's second FL 12:33 12:33 Mill serend FL now these are high 12:36 12:36 quality some of which are Fortune 500 12:39 12:39 company names now how was this how did 12:42 12:42 this 12:44 12:44 happen there was a plan 12:47 12:47 firstly let's build industrial 12:50 12:50 zones we found that many of companies 12:53 12:53 were 12:54 12:54 encountering many bottlenecks at the 12:56 12:56 local government level when in the pass 12:59 12:59 the whole island was declared as a free 13:01 13:01 trade zone because we found that the 13:02 13:02 environment approval process land land 13:04 13:04 process was quite cumbersome so between 13:07 13:07 1997 and 2000 we built eight epzs which 13:13 13:13 are listed in red here almost tripling 13:16 13:16 the amount of industrial land available 13:18 13:18 for investors export oriented investors 13:20 13:20 to invest in in hor we came up with a 13:23 13:23 plan where next to the export processing 13:25 13:25 Zone we'll have a power plant and that's 13:27 13:27 how the it consense power plant was 13:29 13:29 built where there would be a separate 13:31 13:31 transmission line brought to the hor EP 13:33 13:33 at where export oriented companies would 13:36 13:36 get preferential tariffs unfortunately 13:38 13:38 after my resignation in 2001 that was 13:40 13:40 not 13:41 13:41 implemented then we provided 13:44 13:44 infrastructure support to investors as I 13:47 13:47 mentioned earlier Apollo Hospital and 13:49 13:49 several other private hospitals such as 13:50 13:50 R surgical were built and we quadruple 13:54 13:54 the number of private hospital beds at 13:55 13:55 that time because Boi obtained a budget 13:58 13:58 to to provide the infrastructure to the 14:01 14:01 periphery of the site so the Transformer 14:03 14:03 the sewage connection the water 14:05 14:05 connection up to the periphery of the 14:06 14:06 site was paid to the line Ministries or 14:09 14:09 the local governments by the Boi through 14:11 14:11 a special budget allocated to the Boi 14:14 14:14 this is what I call Plug and 14:16 14:16 Play same thing happened when we 14:18 14:18 implemented nasura and Millennium city 14:21 14:21 atug which to this date are the largest 14:23 14:23 private housing schemes ever built 14:26 14:26 comprising more than 3,000 houses when 14:28 14:28 vertus are signed their Boi agreement Mr 14:31 14:31 Chris 14:32 14:32 kanarat we don't have a place with high 14:35 14:35 bandwidth I went to my board and got I 14:39 14:39 can't remember the exact allocation and 14:41 14:41 gave a grant to the World Trade Center 14:43 14:43 to lay a fiber optic cable from the top 14:45 14:45 to the bottom of the World Trade Center 14:46 14:46 and that's why vusa started their 14:48 14:48 business at the World Trade Center we 14:51 14:51 declared the whole of malabe as an 14:53 14:53 education and it Zone and today you can 14:55 14:55 see what has happened with the with 14:56 14:56 malbe working together with the UDA 14:59 14:59 created 15:00 15:00 sliit today with 22,000 students the 15:03 15:03 largest not for-profit University in the 15:05 15:05 country bigger than moru bigger than 15:07 15:07 Columbo campus accounting for 50% of it 15:10 15:10 graduates how did it start I went to my 15:13 15:13 board and pleaded with the board to 15:15 15:15 allocate 30 million rupees from the 15:17 15:17 promotion budget of the Boi to provide 15:19 15:19 grant funding to start S 15:21 15:21 SL and then Township 15:24 15:24 development we realize that the mature 15:27 15:27 zones such as katak and be were bursting 15:29 15:29 at the scams so we got a budget from the 15:33 15:33 treasury built soccer fields Playing 15:37 15:37 Fields up upgraded hospitals water 15:40 15:40 supply schemes why because in order to 15:43 15:43 create C to the migrant Workforce that 15:46 15:46 were occupying these areas so so that's 15:48 15:48 pretty much the infrastructure action 15:51 15:51 that we took and what were the 15:52 15:52 administrative action that we took in 15:55 15:55 order to create freedom to invest 15:58 15:58 amongst 16:00 16:00 the top things that in my view allowed 16:03 16:03 me to perform and the team to perform at 16:05 16:05 the Boi was its board I remember going 16:08 16:08 to the former president 6 months into my 16:10 16:10 tenure saying Madam I can't work with 16:12 16:12 the current board she asked me why I 16:15 16:15 gave some reasons and said and then she 16:18 16:18 said whom do you 16:19 16:19 want I said I cannot run this 16:22 16:22 organization unless the board becomes a 16:25 16:25 policymaking 16:26 16:26 board I nominated three of the top 16:29 16:29 secretaries at that time Deputy 16:31 16:31 Secretary of the Treasury secretary 16:33 16:33 Industries secretary public policy and 16:36 16:36 the former chair of chairman of 8 cons 16:38 16:38 Spence Michael Mack the president 16:41 16:41 immediately removed the board I 16:43 16:43 inherited and appointed this board 16:45 16:45 that's the day I was able to get the 16:47 16:47 support of the treasury and that has 16:49 16:49 lessons that we can talk about later and 16:52 16:52 of course then creating the PPP unit the 16:54 16:54 Bureau of infrastructure investment 16:56 16:56 through which PPP Investments came about 16:59 16:59 and then that was a time where the 17:01 17:01 public Enterprise Reform Commission that 17:03 17:03 implemented privatizations was created 17:06 17:06 we also created what was then called the 17:08 17:08 private sector infrastructure 17:10 17:10 development company to which World Bank 17:13 17:13 ADB gave long-term funding in order to 17:15 17:15 support PPP projects with debt financing 17:19 17:19 sagt borrowed from it some of the power 17:21 17:21 projects borrowed from the PSID and that 17:23 17:23 gave gave an impetus for the 17:24 17:24 implementation of pbv projects we 17:27 17:27 attracted private sector profession into 17:29 17:29 government created interministerial 17:31 17:31 facilitation committees chaired by 17:34 17:34 myself to which secretaries to 17:36 17:36 Ministries attended today it's a 17:38 17:38 struggle to have a secretary to a 17:39 17:39 Ministry to attend attend attend a 17:41 17:41 particular meeting set up the research 17:42 17:42 Department provided support towards the 17:45 17:45 implementation of the indol Lanka Free 17:47 17:47 Trade 17:48 17:48 Agreement and there was something very 17:51 17:51 important at that time that allowed us 17:52 17:52 to succeed we were able to Market what I 17:56 17:56 call the sanctity of the bo 17:59 17:59 agreement it is no longer that 18:01 18:01 sanctimonious I'm afraid because at that 18:04 18:04 time there were no parat tariffs as we 18:07 18:07 have it now where a major portion of 18:12 18:12 policym was possible where you could 18:14 18:14 wave modify and exempt the application 18:15 18:15 of certain taxes via schedule B of the 18:17 18:17 Boi law so even though excise duties and 18:20 18:20 cessors were not part of schedule B 18:23 18:23 there was sanctity of changes in log 18:26 18:26 embedded in the Boi agreement 18:29 18:29 and then of course we did a process 18:31 18:31 mapping in terms of how we Fast Track 18:33 18:33 Investments and I must tell you the 18:35 18:35 record of us receiving an application 18:38 18:38 approving it signing an agreement 18:41 18:41 renting a old building at the Katona 18:44 18:44 Zone and commencing Commercial operation 18:46 18:46 so from application to commencing 18:47 18:47 commercial operation we did it in 3 18:49 18:49 weeks because this was a company that 18:52 18:52 won a tender to manufacture tents for 18:55 18:55 the Saudi Arabian Government after a 18:56 18:56 major fire uh destroy the tents and 18:59 18:59 dozens of people were killed so he had 19:01 19:01 very little time to actually manufacture 19:04 19:04 these tents so during the 95 to 2001 19:08 19:08 period 750 new private projects were 19:12 19:12 implemented I'm not talking of signing 19:14 19:14 agreements under Section 17 of the bo 19:16 19:16 law and this was a doubling of the 19:20 19:20 number of projects that were set up 19:22 19:22 during the prior 17-year period and that 19:26 19:26 I'm sorry if I'm sounding as as if I'm 19:29 19:29 bragging but I have to give credit to 19:30 19:30 the board to to to to to the team but 19:33 19:33 that's what allowed the team to win for 19:36 19:36 the first time ever to this date 19:38 19:38 International Awards where the Bui won 19:40 19:40 the runnerup of the top National 19:42 19:42 investment agency in Asia awarded by 19:44 19:44 corporate location magazine and by the 19:46 19:46 same magazine 21st best websites out of 19:50 19:50 500 investment promotion agencies and 19:53 19:53 I'm I'm proud to say that the Boi was 19:55 19:55 the first organization to actually have 19:58 19:58 a website and have online applications 19:60 19:60 in all of government agencies now let's 20:03 20:03 look 20:05 20:05 at the last 10 years there has been a 20:09 20:09 fundamental shift in the FDI mix where 20:13 20:13 90% of FDI reported over the last 10 20:16 20:16 years have been either debt or retained 20:19 20:19 earnings reinvested now retained 20:20 20:20 earnings being reinvested is not 20:21 20:21 necessarily a bad thing and I'm not 20:23 20:23 criticizing the definition of FDI but if 20:26 20:26 you look at the mix in terms of this 20:28 20:28 particular slide you can see that almost 20:31 20:31 around 60% of all FDI that came into the 20:35 20:35 country were in the non-tradable sectors 20:37 20:37 such as real estate only 20:40 20:40 25% was or 24% to be exact was from the 20:44 20:44 tradeable manufacturing sector and in 20:46 20:46 these statistics are both export and 20:48 20:48 non-export oriented uh activities so 20:50 20:50 there there's no wonder that the export 20:53 20:53 orientation of Boi approved companies 20:56 20:56 whether it's local or foreign known 20:58 20:58 deter ated in fact it's important to 21:00 21:00 note that in 2000 when I did an analysis 21:04 21:04 we found that 55 to 60% of exports from 21:09 21:09 Boi companies arose from companies that 21:12 21:12 had some Quantum of foreign direct 21:14 21:14 investment either on a minority basis or 21:16 21:16 a majority basis 21:19 21:19 now the next part of my presentation 21:22 21:22 about investment 21:24 21:24 incentives now over the last 10 years we 21:26 21:26 saw the progression of gradually certain 21:30 21:30 statutes being taken out of schedule B 21:32 21:32 of the Boi law which made the 21:35 21:35 Boi less B 21:39 21:39 agreement less powerful in a way where 21:42 21:42 you did investors did not have the 21:43 21:43 sanctity of future taxes impacting their 21:46 21:46 business after they signed the bu 21:48 21:48 agreement and we saw the Advent of what 21:50 21:50 is now called the Strategic development 21:52 21:52 project 21:53 21:53 act which on top of which certain new 21:57 21:57 parat tars and taxes were introduced so 21:60 21:60 whilst the Boi was weakened the 22:04 22:04 sdp ACT allowed for the exemption 22:07 22:07 virtually every tax in the country but 22:09 22:09 it was a non-transparent process of 22:13 22:13 granting investment incentives whereas 22:14 22:14 the bo law clearly spelled out the 22:16 22:16 qualification criteria for you to 22:19 22:19 qualify for an investment there was 22:21 22:21 actually only one criteria in the sdp 22:23 22:23 act that is a minimum investment of so 22:24 22:24 much and for you to prove some nebulous 22:27 22:27 concept of whether this is a Strategic 22:30 22:30 investment or 22:31 22:31 not now I'll actually go to the this 22:34 22:34 slide first so you can see uh the sdp 22:38 22:38 versus the VII tax regime uh by the way 22:40 22:40 on the left side it's supposed to be a 22:41 22:41 tick mark where virtually every tax 22:45 22:45 Under the Sun this is by the way 2018 22:48 22:48 statistics um tax tax rates might have 22:50 22:50 changed can be Exempted under sdp but 22:53 22:53 under the Boi regime it's only one type 22:55 22:55 of tax which is customs 22:57 22:57 duty 23:00 23:00 so let's look at what happened with the 23:04 23:04 sdp act so it was introduced as a 23:07 23:07 Panacea for attracting 23:09 23:09 investment 100% of Investments over 23:11 23:11 10000 million dollar that commenced 23:14 23:14 after 2009 has been under the sdp 23:19 23:19 act of the 25 or so sdp projects 23:22 23:22 approved or implemented not even one is 23:26 23:26 export oriented Manufacturing 23:29 23:29 75% of sdp projects are 23:31 23:31 non-tradable and are in real estate 20% 23:36 23:36 thankfully are in export of Services 23:38 23:38 Port Terminals and the HCL software 23:42 23:42 project and only two foreign companies 23:45 23:45 that started construction after January 23:47 23:47 2015 has invested over $100 million in 23:50 23:50 Sri Lanka hant port and West Container 23:52 23:52 Terminal I could be wrong in this but 23:54 23:54 based on my research it's a rather a 23:56 23:56 sorry statistic at the end of the day 23:58 23:58 and if you exclude hamant as a one-off 24:01 24:01 investment 84% of FDI reported in 2017 24:06 24:06 originated from company signing 24:07 24:07 agreements prior to 2015 sorry I didn't 24:10 24:10 have time to update this statistic but 24:12 24:12 what this says is that we have been 24:14 24:14 primarily counting retained 24:17 24:17 earnings and debt foreign debt or de 24:21 24:21 taken by Foreign own companies as part 24:24 24:24 of our FDI statistics if you take even 24:26 24:26 2017 where $2.1 billion of FDI was 24:30 24:30 reported 80 some per of that was 24:33 24:33 retained earnings plus foreign debt and 24:35 24:35 only a small component was 24:38 24:38 Equity so that's the 24:40 24:40 reality um now what are the deterrence 24:43 24:43 these deterr remain even 24:47 24:47 today when you look at the investment 24:50 24:50 criteria the no go no go no-o decision 24:54 24:54 is not made because of tax holiday or 24:57 24:57 accelerated depreciation it is because 24:60 24:60 of parat tariffs and upfront 25:02 25:02 taxes 25:04 25:04 now when we did this statistic har you 25:06 25:06 were also part of a committee we found 25:08 25:08 that on manufacturing The Upfront taxes 25:11 25:11 before you earn $1 of Revenue is was on 25:14 25:14 at 25:15 25:15 14% And on real estate it was over 25:18 25:18 20% so when you factor in these taxes on 25:22 25:22 a real estate project it had a 7 to 10% 25:25 25:25 impact on Project irr negative impact 25:28 25:28 so no wonder people were searching after 25:30 25:30 sdp 25:31 25:31 status and I'm not singing the praise of 25:33 25:33 sdp status here um and of course then 25:37 25:37 when you factor in at that time the 25:38 25:38 income tax rate was 28% but if you 25:41 25:41 factor in 26% plus the dividend 25:43 25:43 withholding 25:45 25:45 tax it is not surprising that these 25:48 25:48 taxes and the arbitrariness of the sdp 25:51 25:51 ACT has in fact caused a deterioration 25:56 25:56 in investment now now the final part of 25:59 25:59 my presentation is what is the right 26:01 26:01 balance in formulating legislation and 26:04 26:04 investment incentives to 26:06 26:06 facilitate investment now the Boi 26:09 26:09 argument would be and I'm not 26:11 26:11 necessarily agreeing with this fully is 26:13 26:13 that many of companies sorry the 26:15 26:15 statistics are bit hard to read but I'll 26:18 26:18 explain it the Boi has argued in this 26:21 26:21 that out of 1,700 Bui companies that are 26:24 26:24 in operational operations almost 80% of 26:28 26:28 them are paying taxes at the normal rate 26:30 26:30 so we give them the incentives they set 26:32 26:32 up operation and after a while they have 26:35 26:35 to pay all of the normal taxes that are 26:38 26:38 applicable in this country now to some 26:40 26:40 extent I agree with it but I disagree 26:42 26:42 with the aggressive nature of which tax 26:45 26:45 holidays were granted particularly for 26:47 26:47 projects where Sri Lanka is giving up 26:48 26:48 something for example a Port Terminal I 26:51 26:51 saw no justification to give s GT cic or 26:55 26:55 whoever a 20year income tax holiday 26:58 26:58 especially when you make a 40% profit 26:59 26:59 margin on it but I was overruled by the 27:03 27:03 treasury on top of granting a 20-year 27:06 27:06 tax holiday sagt was granted much to my 27:10 27:10 shock when I read the budget of 27:13 27:13 1997 or8 investment relief of onethird 27:18 27:18 of the investment to be set off against 27:20 27:20 the taxes of John 27:22 27:22 KS no wonder that the tax to GDP ratio 27:26 27:26 came down from about 8 18 to 90% 19% 27:29 27:29 that prevailed During the period I was 27:31 27:31 chairman VI in the late '90s to 11% Hara 27:35 27:35 I 27:36 27:36 believe 27:38 27:38 so so there are arguments to be made pro 27:41 27:41 and against incentives but again the 27:44 27:44 question is what is the right balance 27:45 27:45 now let us look at the IMF diagnostic 27:48 27:48 report on sdp now this is important when 27:51 27:51 we plan for the future to quote from par 27:55 27:55 194 the IMF report says this is some 27:58 27:58 September 2023 the department of fiscal 28:00 28:00 policy is a focal point in shaping the 28:02 28:02 tax system guiding the reform of most 28:05 28:05 taxes except for the special commodity 28:07 28:07 Levy Etc so so the Brain Trust for 28:10 28:10 formulating tax policy is the Department 28:12 28:12 of fiscal policy 28:16 28:16 great there is no definition on what 28:19 28:19 criteria needs to be satisfied for a 28:21 28:21 project to be of strategic 28:23 28:23 relevance and the department of fiscal 28:25 28:25 policy is not involved in that 28:27 28:27 particular Val ation 28:29 28:29 agreed to quote from par 20 2011 the sdp 28:34 28:34 ACT should be abolished or suspended 28:36 28:36 until the structures and processes are 28:38 28:38 in place to evaluate the effectiveness 28:41 28:41 of offered incentives fully agreed and 28:45 28:45 it goes on to say that preparing the 28:47 28:47 necessary structures including data 28:49 28:49 sharing protocols and legal documents 28:51 28:51 and assign authority to the Department 28:52 28:52 of fiscal policy will take time and 28:55 28:55 therefore no further projects should be 28:58 28:58 approved until then and in conclusion 29:01 29:01 the IMF said abolish or suspend the sdp 29:04 29:04 ACT until explicit criteria are 29:06 29:06 established to evaluate all proposals 29:09 29:09 including the provision of public 29:12 29:12 information on projected benefits and 29:14 29:14 cost and a transparent process is 29:17 29:17 defined to apply the criteria so the IMF 29:20 29:20 has not shut the window for 29:23 29:23 incentives this is very clear language 29:26 29:26 the IMF is slapping Us in the knuckles 29:28 29:28 and saying be more transparent in the 29:31 29:31 way you 29:32 29:32 formulate investment incentives frame 29:35 29:35 regulations so that investment criteria 29:38 29:38 applies equally whether you're are a 29:39 29:39 local investor a foreign investor or a 29:41 29:41 Fortune 500 company today under the sdp 29:44 29:44 ACT if I don't like a versus B I can 29:47 29:47 give more incentives to a and not 29:49 29:49 B so so if you really where do we go 29:52 29:52 from 29:53 29:53 here I mean I don't want to read this 29:55 29:55 entire slide but the poor FDI 29:57 29:57 performance in manufacturing and the 29:58 29:58 tradable sectors are in particular due 30:00 30:00 to not enough trade agreements line 30:03 30:03 agency approvals lack of coordination 30:05 30:05 between the Boi treasury Etc then there 30:08 30:08 are legal and Regulatory issues uh 30:11 30:11 infrastructure and labor poor transport 30:13 30:13 and social 30:14 30:14 infrastructure uh for 30:17 30:17 Mobility um lack of new industrial Zone 30:20 30:20 capacity with the required social 30:23 30:23 infrastructure bakam Zone does not have 30:26 30:26 that and for the last 20 years we have 30:29 30:29 not built a special economic zone with 30:32 30:32 all of the social and Industrial 30:35 30:35 infrastructure and many of studies done 30:38 30:38 are gathering dust there were some 30:40 30:40 fantastic export strategies that were 30:41 30:41 formulated during the yal government 30:44 30:44 what's happened to the implementation of 30:46 30:46 these there was a deburau rtiz committee 30:49 30:49 set up with top corporate leaders who 30:52 30:52 were involved where is the 30:56 30:56 execution so here are some points 30:59 30:59 for pondering in terms of what do we do 31:02 31:02 about this firstly let's recognize the 31:05 31:05 importance of ppps as a source of 31:08 31:08 FDI 40% 44% to be exact of FDI that came 31:13 31:13 during the time I was chairman of the 31:14 31:14 Boi was due to ppps and today 75% of 31:19 31:19 developing countries have Central PPP 31:21 31:21 units either under the finance ministry 31:23 31:23 or the head of 31:24 31:24 state we've had a checkered record where 31:27 31:27 PPP units were either under the Boi or 31:30 31:30 under the finance 31:31 31:31 ministry I resigned as chairman of the 31:34 31:34 PPP agency about two months after the 31:36 31:36 election of President goab rajap Paka 31:38 31:38 because I was told to do something that 31:41 31:41 I did not agree with the then secretary 31:43 31:43 to the president which was conveyed to 31:45 31:45 me by the then Secretary of the Treasury 31:47 31:47 and then subsequently the PPP agency was 31:49 31:49 shut 31:51 31:51 down 12 or 14 members of Staff who were 31:54 31:54 fully trained received termination 31:56 31:56 notices 31:58 31:58 some of them are part of my team now um 32:01 32:01 and we are exporting our PPP knowledge 32:03 32:03 to other countries Bangladesh and 32:05 32:05 Maldives and soon 32:07 32:07 naal and more importantly more 32:09 32:09 tragically I must say $28 million of 32:13 32:13 technical assistance Dona money 32:15 32:15 allocated to the PPP agency money lying 32:18 32:18 in bank accounts of Sri Lanka adequate 32:21 32:21 for a fiveyear PPP program went 32:24 32:24 back and today we are stuck without that 32:27 32:27 technical 32:29 32:29 assistance and it shows in statistics we 32:32 32:32 have not added to a new power plant for 32:35 32:35 the last seven or eight years a major 32:37 32:37 power plant I mean there are smaller 32:38 32:38 ones in in in hydros and mini hydros 32:40 32:40 being implemented so we will certainly 32:43 32:43 face bottlenecks in power 32:45 32:45 consumption now sorry this has got a 32:48 32:48 little lump here this slide um what are 32:50 32:50 the suggestions going 32:53 32:53 forward introduction of a new PPP law 32:56 32:56 and update PPP guidelines is being done 32:59 32:59 uh we facilitated the process I I have 33:01 33:01 shared draft number 15 of the PPP 33:04 33:04 guidelines that I did at the time I 33:07 33:07 resigned which did not get implemented 33:09 33:09 due to bureaucratic bottlenecks there's 33:11 33:11 a PPP law being drafted today with 33:14 33:14 assistance from a US Don 33:17 33:17 agency rethink investment incentives 33:20 33:20 with external specialist and in 33:22 33:22 consultation with the finance ministry 33:23 33:23 and IMF we really need to do 33:26 33:26 this 33:28 33:28 introduce interim changes to the Boi law 33:32 33:32 before an overarching new law now I know 33:34 33:34 an overarching new law is been 33:36 33:36 contemplated I'm of the view let's 33:39 33:39 Tinker with the current law to have some 33:41 33:41 immediate impacts such as maybe the bu 33:45 33:45 board to be expanded to seven and have 33:47 33:47 ex 33:48 33:48 official at least at a minimum a 33:51 33:51 Secretary of the Treasury or a deputy 33:52 33:52 secretary of the treasury within the Boi 33:54 33:54 board along with the secretary 33:56 33:56 Industries all or the give the Bui the 33:58 33:58 ability to nominate or coopt secretaries 34:01 34:01 of line Ministries such as environment 34:03 34:03 or minerals so that the board becomes a 34:06 34:06 policymaking body and not appoint board 34:10 34:10 members at the whim and fancy of the 34:12 34:12 minister in 34:13 34:13 charge so let's amend the law in terms 34:15 34:15 of tinkering with the rather than 34:18 34:18 bringing an overarching new law by by by 34:21 34:21 amending the current 34:23 34:23 law relook at merging provisions of the 34:26 34:26 sdp act with the bu law schedule B in 34:29 34:29 particular the Boi law to migrate to a 34:32 34:32 special economic zone law particularly 34:34 34:34 to declare hamant and trali as special 34:38 34:38 economic zones because of the importance 34:40 34:40 of social infrastructure because we 34:43 34:43 cannot rely on entirely rely on local 34:46 34:46 governments to provide the social 34:47 34:47 infrastructure and that's one reason why 34:49 34:49 as I mentioned earlier in katay and bag 34:51 34:51 the Boi got money from the treasury and 34:53 34:53 complemented the work of the local 34:55 34:55 governments in upgrading the roads and 34:57 34:57 the work housing and and and social 34:59 34:59 infrastructure such as playgrounds today 35:01 35:01 the katunayaka cricket grounds is is a 35:04 35:04 is is a division one cricket ground 35:06 35:06 which was built by the Bui Pala cricket 35:10 35:10 stadium was 35:12 35:12 donated on my initiative to the Cricket 35:16 35:16 Board carving out from the palak Zone 35:18 35:18 after we won the World Cup because the 35:19 35:19 Candy cricket stadium was not up to 35:21 35:21 scratch as a test venue so we played a 35:25 35:25 bit of part in sports as well um and 35:28 35:28 consider through the new sez law new 35:31 35:31 types of special economic zones because 35:33 35:33 yet the local governments and counil do 35:35 35:35 not have the ability and the finances to 35:38 35:38 support uh large scale investment Agri 35:40 35:40 zones Logistics tourism special economic 35:43 35:43 zones such to include marinas and cruise 35:46 35:46 Terminals and I must also add that 35:48 35:48 special economic zones as PPP structures 35:50 35:50 won't work unless there's considerable 35:53 35:53 government financial support we need to 35:56 35:56 look at revamping the for city law it is 35:58 35:58 discriminatory against local 36:01 36:01 investors then there's a need for 36:03 36:03 greater coordination between the Boi the 36:05 36:05 PPP Agency State Enterprise reform unit 36:08 36:08 Port City commission and the Ministry of 36:10 36:10 Finance there should be board members 36:13 36:13 who are represented who are common 36:15 36:15 Within These uh organizations because 36:17 36:17 they have to work together and these 36:19 36:19 boards must necessarily have both public 36:22 36:22 sector and private sector professionals 36:24 36:24 and and individuals who who are 36:26 36:26 qualified 36:28 36:28 enhance the infrastructure budgets 36:30 36:30 whether it's PPP agency or the Boi for 36:32 36:32 Plug and Play Investments the type I 36:34 36:34 spoke about 36:36 36:36 earlier at the moment when you want a 36:38 36:38 power connection the CB charges you very 36:41 36:41 arbitrarily in terms of your your your 36:43 36:43 your your power connections these are 36:46 36:46 services that must be provided by the 36:48 36:48 government and that's one reason why 36:50 36:50 it's all okay to charge charge income 36:52 36:52 taxes uh from from from 36:55 36:55 investors for Dona linkages for 36:58 36:58 technical assistance in particular and 37:00 37:00 that I must say was one of the great 37:04 37:04 facilitators to attract talent and 37:06 37:06 capability was the usid grant that we 37:09 37:09 received in 1996 for PPP U 37:13 37:13 facilitation strength strengthen 37:15 37:15 research and processes to push through 37:18 37:18 to accelerate the ecta with India and 37:21 37:21 the CH China FDA with 37:24 37:24 China I'm also an advocate of 37:26 37:26 introducing anti-corruption Provisions 37:29 37:29 in all laws pertaining to investment and 37:32 37:32 digitizing the investment approval 37:35 37:35 process it was unheard of in the 37:39 37:39 1990s about briber impacting 37:43 37:43 FDI and I'm sorry to say today it is a 37:47 37:47 problem whether it is at the local 37:50 37:50 government level or whether it is at the 37:53 37:53 highest political 37:56 37:56 levels 37:58 37:58 and finally this is my final Point make 38:01 38:01 Public Service attractive again for 38:03 38:03 capable private sector individuals I'm 38:05 38:05 not saying that the public sector is 38:07 38:07 without the requisite skills I have 38:10 38:10 learned tremendously from the knowledge 38:12 38:12 of season public sector 38:14 38:14 officials but often there is a need to 38:18 38:18 attract private sector officials and 38:20 38:20 it's that public private partnership in 38:23 38:23 people that I believe whether it is in 38:25 38:25 politics or whether it is in public 38:27 38:27 public service that would take this 38:28 38:28 country out of its current moras and in 38:31 38:31 this regard I actually sent a policy 38:33 38:33 paper across to the presidential 38:35 38:35 Secretariat on how we can define a 38:37 38:37 criteria to attract private sector 38:40 38:40 professionals where we would have it 38:43 38:43 formally within the AR and Fs approved 38:45 38:45 by the Management Services Department 38:46 38:46 and the cabinet of ministers where we 38:48 38:48 would Define the required skills 38:51 38:51 precisely and narrowly so that in a 38:53 38:53 given skill area you don't attract more 38:56 38:56 than 25 or 30 or 40 people and and this 38:59 38:59 I wrote when I was told that Sri Lanka 39:01 39:01 was finding it difficult to attract air 39:04 39:04 traffic 39:05 39:05 controllers to remain in the country 39:07 39:07 because people are migrating or the 39:09 39:09 private sector was taking them on at 39:10 39:10 higher salaries so 39:13 39:13 therefore I would Advocate that this 39:15 39:15 becomes part of the public sector 39:17 39:17 process where appointments would be 39:19 39:19 based on contract performance-based 39:22 39:22 contracts and that's how we hired 39:25 39:25 Professionals in the past one out of 39:27 39:27 five people were fired by me for 39:29 39:29 non-performance and of course to seek 39:31 39:31 donor assistance where required so in 39:34 39:34 conclusion moving forward let us be 39:38 39:38 transparent in FDI 39:40 39:40 procurement and I believe that the 39:43 39:43 potential to attract FDI in this country 39:45 39:45 is in the billions whether it is in Agri 39:47 39:47 business ICT 39:49 39:49 tourism renewable energy we have 54 gaws 39:53 39:53 of offshore wind potential the World 39:55 39:55 Bank so tells me the mineral sector 39:57 39:57 which remains vastly 39:60 39:60 untapped we still in 20 years have not 40:02 40:02 withdrawn the Supreme Court case 40:04 40:04 stopping us exploiting the power of 40:05 40:05 phosphate and we can become 40:07 40:07 self-sufficient in fertilizer and Export 40:09 40:09 fertilizer but no minister or Ministry 40:11 40:11 has taken the matter before a full 40:14 40:14 bench to withdraw what was a ridiculous 40:17 40:17 judgment uh in terms of uh moving moving 40:20 40:20 ahead with the power of phosphate 40:22 40:22 project titanium Etc Natural Gas 40:26 40:26 unbundling of the electricity sector 40:28 40:28 creates massive FDI opportunities and 40:30 40:30 investment opportunities the S soe is 40:32 40:32 being privatized and very importantly 40:35 40:35 the recently signed India Sri Lanka 40:37 40:37 economic cooperation pact which I see as 40:39 40:39 a huge opportunity for attracting 40:43 40:43 investments from our neighbors and 40:44 40:44 brothers in the north and for this to 40:47 40:47 happen the Boi the soy Napp agency the 40:51 40:51 special economic zone commissions have 40:53 40:53 to work hand in glove and let us hope 40:56 40:56 they would so that in the short term Sri 40:58 40:58 Lanka would have some quick wins without 41:00 41:00 having to wait too long and thank you 41:02 41:02 very 41:05 41:05 [Applause] 41:07 41:07 much thank you very much tilan your 41:10 41:10 Insight curated over the years is no 41:12 41:12 doubt going to be invaluable to us 41:14 41:14 especially as we move into the audit um 41:17 41:17 now I would like to introduce a very 41:18 41:18 special guest joining us all the way 41:20 41:20 from Canada we have with us today Fred 41:22 41:22 mcmohan a resident fellow of the Fraser 41:25 41:25 Institute um he's also Al a holder of 41:27 41:27 the Dr Michael a walker chair in 41:29 41:29 economic freedom and he also manages the 41:32 41:32 economic freedom of the world project 41:34 41:34 while also coordinating the economic 41:36 41:36 freedom sorry um while also coordinating 41:39 41:39 the economic freedom network uh which is 41:41 41:41 an International Alliance of over 100 41:43 41:43 Think Tank Partners in about 100 Nations 41:46 41:46 and territories his research focuses on 41:49 41:49 global issues such as development trade 41:52 41:52 governance and economic structure uh and 41:55 41:55 he's also an author of numerous research 41:57 41:57 articles and books I would now like to 41:60 41:60 invite Fred to join us on stage to 42:02 42:02 present some of his research on economic 42:04 42:04 freedom well thank you it's a tremendous 42:08 42:08 uh honor uh to uh be here uh as I was 42:13 42:13 flying in in the uh last visit I had 42:16 42:16 here oddly enough I was thinking of 42:20 42:20 Taiwan in an odd sense taiwan's original 42:23 42:23 name was uh not original name but it was 42:26 42:26 for a while known as fosa which just 42:29 42:29 means beautiful in 42:33 42:33 Portuguese and certainly I have seldom 42:36 42:36 seen a place as beautiful as Sarah Lanka 42:41 42:41 you are all very lucky to live 42:44 42:44 here I'd like to 42:47 42:47 thank so many people that are making uh 42:51 42:51 this possible Dan and I had a nice 42:54 42:54 conversation this morning over coffee 42:56 42:56 and he briefed me on the 42:59 42:59 situation uh here you are so very very 43:02 43:02 lucky to have a group like advoca 43:06 43:06 pushing for policies that will make 43:08 43:08 Sarah Lanka prosperous and reduce 43:12 43:12 poverty the potential of Sarah Lanka is 43:18 43:18 amazing the situation where you 43:22 43:22 are could create uh a global here that 43:27 43:27 could 43:28 43:28 spur 43:30 43:30 development in incredible ways and 43:33 43:33 reduce and reduce poverty the problem is 43:37 43:37 as was just 43:38 43:38 noted so many policies stand in the way 43:44 43:44 of Sri Lanka developing its potential 43:48 43:48 and creating immensely Better Lives for 43:51 43:51 its citizens and I will be going through 43:55 43:55 some of those barriers in particular we 43:57 43:57 were just the previous speaker was 43:60 43:60 talking about foreign investment and 44:02 44:02 foreign 44:03 44:03 trade unfortunately the government of 44:06 44:06 Sri 44:07 44:07 Lanka has put barriers between SAR Lanka 44:11 44:11 business and the rest of the world as 44:14 44:14 we'll see that is reducing prosperity 44:17 44:17 and 44:18 44:18 opportunity uh 44:20 44:20 here so what I'm going to discuss is 44:23 44:23 first what is economic freedom secondly 44:26 44:26 why important and then we'll look at Sri 44:30 44:30 Lanka's record on economic 44:33 44:33 freedom economic free what is economic 44:36 44:36 freedom individuals have economic 44:38 44:38 freedom when properly when property they 44:41 44:41 acquire without the use of force fraud 44:42 44:42 or theft is protected from physical 44:45 44:45 invasions by other and they are free to 44:47 44:47 use exchange or give their property so 44:50 44:50 long as our actions do not violate the 44:53 44:53 identical rights of others that's a 44:56 44:56 complicated way of saying economic 44:58 44:58 freedom is simply the ability of 45:01 45:01 individuals and families to make their 45:04 45:04 own economic decisions free of 45:07 45:07 interference by government or powerful 45:09 45:09 crony 45:11 45:11 Elites we look at size of government and 45:14 45:14 Taxation if Government 45:17 45:17 expropriates through taxation or other 45:19 45:19 means too much of your property reduces 45:21 45:21 your economic freedom private property 45:25 45:25 and the rule of law this is the single 45:27 45:27 most important area of economic freedom 45:31 45:31 because without the rule of law 45:33 45:33 protecting the economic freedom of all 45:36 45:36 the rich and the powerful will take 45:37 45:37 advantage of their positions to weaken 45:41 45:41 the freedom and potential of others and 45:44 45:44 this also leads to corruption a big 45:47 45:47 problem in Sri Lanka which I'll discuss 45:49 45:49 later sound money boy has Sri Lanka gone 45:53 45:53 through problems with sound money over 45:55 45:55 the last little while fortunately things 45:58 45:58 seem to uh be getting better uh but the 46:03 46:03 loose and odd monetary policy that was 46:06 46:06 adopted for a while here created great 46:08 46:08 damage hopefully it will never happen 46:10 46:10 again trade regulations and tariffs Sri 46:14 46:14 Lanka doesn't just need Sri Lanka as its 46:17 46:17 Marketplace it needs the world as its 46:20 46:20 Marketplace to grow prosperous and as I 46:23 46:23 mentioned there are too many barriers 46:25 46:25 cutting Lanka off from the world 46:28 46:28 regulation of business labor and capital 46:32 46:32 markets the op zero is not the optimal 46:36 46:36 level of Regulation but complicated 46:42 46:42 discretionary regulations are 46:45 46:45 extremely destructive and feed 46:49 46:49 corruption has noted a big problem in 46:52 46:52 Sri Lanka if your application if your 46:56 46:56 ability to go ahead is at the discretion 46:60 46:60 of a civil servant or anyone else then 47:03 47:03 there's someone to pay off but if you're 47:05 47:05 free to do what you 47:08 47:08 wish if there's no one's permission to 47:12 47:12 ask if the laws are 47:15 47:15 clear then there's no one to pay off 47:18 47:18 they can't alter the laws because 47:20 47:20 they're 47:21 47:21 clear and you're free to make your own 47:25 47:25 decisions very different if there's 47:28 47:28 someone whose permission you need 47:30 47:30 there's someone to pay 47:32 47:32 off if you can go ahead under clear 47:35 47:35 guidelines then there's no one to pay 47:38 47:38 off now the next is a 47:42 47:42 little review of why economic freedom 47:46 47:46 and free markets are so very important I 47:50 47:50 know there's a uh that there's 47:53 47:53 some political parties in Sri Lanka that 47:57 47:57 actually want to shut down even more 47:60 47:60 free markets that may claim that they 48:02 48:02 create 48:04 48:04 great distress and poverty so let's 48:07 48:07 actually look at the history of free 48:11 48:11 markets and what they 48:14 48:14 accomplish the age of global free trade 48:17 48:17 free markets and economic freedom 48:20 48:20 beginning after the second world war 48:22 48:22 most uh in the most pronounced way have 48:25 48:25 brought huge benefits to 48:29 48:29 humankind but the 48:31 48:31 gains were mostly achieved by those 48:34 48:34 living in economically free 48:37 48:37 Nations it is no 48:40 48:40 accident the globe is now in a crisis of 48:44 48:44 migration of people moving from state to 48:47 48:47 state and where are they moving from 48:49 48:49 they're moving from places with low 48:51 48:51 levels of economic freedom to places 48:54 48:54 with high levels of EC economic uh 48:58 48:58 Freedom 48:60 48:60 so you hear from those who oppose free 49:03 49:03 markets the free markets 49:07 49:07 create nothing but poverty and misery 49:11 49:11 well look what's happened over the age 49:14 49:14 of globalization and free charod 49:16 49:16 following the second world war in 49:20 49:20 1950 three qus of the world's 49:25 49:25 population lived in Desperate 49:28 49:28 poverty and despite a huge increase in 49:33 49:33 the 49:34 49:34 population now less than one in 12 live 49:39 49:39 in extreme 49:41 49:41 poverty free markets the age of economic 49:45 49:45 freedom has not brought misery or 49:48 49:48 poverty to those who have opened their 49:50 49:50 markets it has brought prosperity and 49:53 49:53 reduced 49:55 49:55 poverty 49:57 49:57 and where is that reduction the 50:02 50:02 strongest on 50:06 50:06 the right side of your screen it shows 50:10 50:10 the level of poverty in the quarter 50:13 50:13 least free Nations on the right no on 50:18 50:18 the right side of your screen it shows 50:21 50:21 the reu it shows the least free Nations 50:24 50:24 and on the left side of the screen the 50:26 50:26 most free Nations what you see well if 50:29 50:29 the critics of free markets and economic 50:32 50:32 freedom were correct where would poverty 50:34 50:34 be concentrated it' be concentrated in 50:37 50:37 Nations that have economic freedom that 50:39 50:39 have free markets if they created 50:41 50:41 poverty in 50:42 50:42 fact looking at the left side of your 50:45 50:45 screen extreme poverty has almost 50:49 50:49 disappeared in nations with free 50:53 50:53 markets and if you look on the right 50:56 50:56 right side of your screen you'll see 50:58 50:58 that almost 30% of the population in 51:03 51:03 Nations without economic freedom live in 51:06 51:06 extreme poverty it's markets that reduce 51:10 51:10 poverty not government control and 51:13 51:13 here's another way to look at it this is 51:17 51:17 the income of the poorest 10% adjusted 51:22 51:22 for purchasing power parity and this is 51:25 51:25 going to astonish some people but the 51:28 51:28 poorest 51:32 51:32 10% in the most economically free 51:35 51:35 Nations have an income of over 51:39 51:39 $133,000 us a 51:42 51:42 year so the poorest 10% in economically 51:45 51:45 free Nations the poorest 10% earned two 51:49 51:49 three four times the average income in 51:52 51:52 sh 51:53 51:53 Lanka and what in in places that don't 51:56 51:56 have free 51:59 51:59 markets in places 52:03 52:03 like which some politicians in this 52:07 52:07 country want to impose on Sri Lanka the 52:10 52:10 average income of the poorest 10% is 52:14 52:14 about $1,000 a 52:17 52:17 year Global per capita GDP has soared 52:21 52:21 during the era of free trade and open 52:24 52:24 markets and again 52:26 52:26 the benefits are concentrated in the 52:28 52:28 Nations that have free 52:31 52:31 markets so the average income in the 52:35 52:35 freest Nations is nearly $50,000 us a 52:39 52:39 year in the least free Nations about a 52:42 52:42 tenth of 52:43 52:43 that literacy it's the same story again 52:48 52:48 critics claim that it's free markets 52:50 52:50 that suppress uh education and 52:54 52:54 opportunity well during this time we've 52:57 52:57 gone from a world in which 53:02 53:02 2third of the population of the planet 53:04 53:04 was illiterate to a Time despite huge 53:08 53:08 population growth where it's about one 53:10 53:10 in eight people that's still too much 53:13 53:13 and where do those one in eight 53:14 53:14 illiterate people live unfortunately in 53:17 53:17 places that don't have free markets so 53:21 53:21 in the most free 53:24 53:24 Nations 9 5% of the population is 53:28 53:28 literate in the least free 53:32 53:32 Nations only about 60% of women and 75% 53:37 53:37 of men are literate one of the amazing 53:41 53:41 things about nations with economic 53:45 53:45 freedom is that the gap between men and 53:49 53:49 women boys and girls has virtually 53:52 53:52 disappeared while in least free Nations 53:56 53:56 that Gap remains wide and dangerous and 53:60 53:60 problematic for those Nations and that's 54:03 54:03 because in a place where there's 54:04 54:04 economic 54:06 54:06 freedom people get ahead by their 54:10 54:10 abilities and abilities include of 54:12 54:12 course Literacy for both and they get 54:15 54:15 and that's a key 54:18 54:18 reason why economically free Nations do 54:22 54:22 much better in education life expectancy 54:26 54:26 years has grown 54:28 54:28 immensely uh over this period and 54:31 54:31 again the uh nations with the highest 54:35 54:35 level of economic 54:38 54:38 freedom have the longest lived people 54:42 54:42 and I'm awfully glad I was born in 54:45 54:45 Canada which is an economically free 54:48 54:48 Nation because if you uh look to your 54:51 54:51 right I've already surpassed the average 54:54 54:54 age of people grow who live in 54:56 54:56 non-economically free Nations so I'm 54:59 54:59 grateful for that and one last 55:05 55:05 thing those who oppose free 55:09 55:09 markets may have given up to some extent 55:13 55:13 on the economic arguments you know they 55:15 55:15 go oh well maybe economically free 55:19 55:19 Nations or free markets produce more 55:22 55:22 Prosperity but really who cares about 55:25 55:25 prosperity what we care about is 55:27 55:27 happiness and how can anybody be happy 55:30 55:30 in a free market well as it turns out 55:34 55:34 research by sociologists who are not 55:36 55:36 known for their friendliness to uh free 55:39 55:39 markets have done a lot of research on 55:41 55:41 what causes happiness and one of the few 55:45 55:45 variables that actually has a causal 55:48 55:48 link to happiness is economic freedom as 55:53 55:53 you can see from this as it turns out 55:57 55:57 people like to be in charge of their own 55:59 55:59 lives it makes them happier when they 56:01 56:01 have or more have higher life 56:03 56:03 satisfaction when they make their own 56:05 56:05 decisions rather than have a government 56:08 56:08 official make the decisions for them now 56:11 56:11 let's look at Sri 56:16 56:16 Lanka Sri Lanka ranks 56:21 56:21 116th out of 165 nations in economic 56:26 56:26 freedom now I wanted to compare Sri 56:30 56:30 Lanka to 56:32 56:32 Singapore because to some 56:35 56:35 extent Sri Lanka has the same 56:38 56:38 opportunities given its 56:40 56:40 location it's potential to be both a 56:44 56:44 transportation and a financial Hub 56:46 56:46 because of its location so I wanted to 56:49 56:49 compare Sri 56:52 56:52 Lanka to Singapore and I also wanted to 56:55 56:55 compare it to 56:58 56:58 Denmark you often hear people who oppose 57:01 57:01 free markets say oh but look at the 57:05 57:05 Socialist Nordic uh Nations they're a 57:08 57:08 great success aren't they well they are 57:11 57:11 great success but they aren't socialist 57:14 57:14 in fact leaders of the the Nordic 57:17 57:17 Nations have pushed back hard when 57:19 57:19 they've been called socialist what's 57:21 57:21 going on in the Nordic Nations is that 57:23 57:23 yes they have big government but in 57:26 57:26 every single other area they're at the 57:30 57:30 top of the 57:32 57:32 class for economic 57:35 57:35 freedom by our 57:37 57:37 index 57:39 57:39 Denmark the poster Nation for the Nordic 57:43 57:43 Nations Denmark has the seventh most 57:46 57:46 capitalist economy in the 57:51 57:51 world 57:53 57:53 so looking at over all economic freedom 57:57 57:57 and we all know the great story that 57:58 57:58 Singapore is Singapore is now number one 58:01 58:01 in the world in economic freedom Denmark 58:03 58:03 is number seven if you look next at the 58:06 58:06 size of government you'll see yeah 58:08 58:08 Denmark has a huge 58:10 58:10 government Singapore has a larger 58:13 58:13 government and SAR Lanka actually ranks 58:17 58:17 high in size of government now I've had 58:21 58:21 some discussions with people and there's 58:23 58:23 some 58:23 58:23 skepticism uh over that 58:28 58:28 uh and that may be founded because there 58:31 58:31 are things that we do not have data to 58:33 58:33 measure including internationally the 58:36 58:36 number of government employees and you 58:38 58:38 have a huge number of government 58:40 58:40 employees in Sri Lanka and we can't put 58:44 58:44 that in our 58:45 58:45 index another factor that may be at play 58:49 58:49 here is we look 58:52 58:52 at what's affecting economic freedom 58:55 58:55 today in other words your situation 58:58 58:58 right now rather than trying to project 59:01 59:01 into the future so we don't 59:04 59:04 measure debts and 59:07 59:07 deficits money you will have to pay off 59:10 59:10 in the future that will reduce your 59:12 59:12 prosperity and economic freedom in the 59:15 59:15 future but not a burden you're bearing 59:19 59:19 now and the other big factor is the only 59:22 59:22 taxation levels that we have 59:24 59:24 international data to measure our income 59:27 59:27 tax and income tax in Sri Lanka is very 59:31 59:31 low but as we just heard from the 59:32 59:32 previous speaker there are whole bunches 59:35 59:35 of other taxation that interfere now I 59:39 59:39 actually think our measure is pretty uh 59:43 59:43 accurate uh despite the 59:46 59:46 skepticism uh I think one of the reasons 59:48 59:48 that people in Sri Lanka feel that 59:51 59:51 government is bigger because it 59:53 59:53 interferes in so many things that don't 59:56 59:56 require money to interfere in it 59:58 59:58 interferes in uh the regulatory in 60:03 60:03 environment immensely lowering 60:06 60:06 opportunity anyway I accept that there's 60:09 60:09 some controversy over that but I don't 60:12 60:12 think there will be controversy over 60:14 60:14 anything else that we have here in legal 60:17 60:17 system the most important aspect of 60:19 60:19 economic freedom Sri Lanka ranks 60:24 60:24 87th 60:27 60:27 Singapore 11 and Denmark 12 and one of 60:32 60:32 the interesting things about Nordic 60:34 60:34 Nations is not only do they have a good 60:36 60:36 and impartial legal system but it's one 60:39 60:39 that's very friendly to 60:41 60:41 entrepreneurship to investment to free 60:45 60:45 markets unfortunately in gender 60:49 60:49 disparity and we saw what we saw in an 60:53 60:53 earlier Slide the gap between men and 60:56 60:56 women boys and girls in non-economically 60:59 60:59 free uh markets and that Gap is 61:03 61:03 reflected in Sri Lanka which comes 61:08 61:08 91st in equal legal rights related to 61:13 61:13 economic freedom for men and uh for 61:17 61:17 women and 61:19 61:19 men this you're this cuts out half of 61:22 61:22 the population it's like entering a 61:25 61:25 unicycle and a bicycle raise it's not 61:27 61:27 going to work very well uh sound money 61:31 61:31 uh as you would guess given the recent 61:33 61:33 history Sri Lanka rates very 61:37 61:37 lowly uh Singapore and Denmark much 61:41 61:41 higher trade Freedom this is what I was 61:45 61:45 talking about before and related to the 61:47 61:47 previous speaker 61:49 61:49 comments your regulations the 61:53 61:53 government's regulations here and the 61:55 61:55 way they're implemented and 61:58 61:58 enforced cut Sher Lanka off from the 62:01 62:01 rest of the world and the 62:04 62:04 potential to do what the previous 62:06 62:06 speaker was talking about under the 165 62:09 62:09 jurisdictions that we measure Sri Lanka 62:13 62:13 comes in 62:15 62:15 156 right down at the 62:18 62:18 bottom and that's important in another 62:21 62:21 way I'm going to talk about corruption a 62:23 62:23 little while but when you set up a whole 62:26 62:26 bunch of barriers between your nation 62:29 62:29 and the rest of the 62:30 62:30 world and it's difficult to get anything 62:33 62:33 in or out or done at the border then my 62:37 62:37 goodness there's someone to pay off to 62:39 62:39 get things across the 62:43 62:43 border and these 62:46 62:46 regulations this this these 62:50 62:50 regulatory official and unofficial 62:53 62:53 barriers 62:55 62:55 are a source of fuel for 62:57 62:57 corruption regulation is another source 62:60 62:60 of fuel for the exact same reason if you 63:05 63:05 have 63:07 63:07 complicated 63:11 63:11 unclear discretionary 63:14 63:14 regulations then there's someone to pay 63:16 63:16 off to get through Sri Lanka 63:22 63:22 ranks fifth in the World in 63:26 63:26 regulation uh on certainty this is an 63:30 63:30 area that desperately needs reform L 63:33 63:33 labor regulation in particular needs 63:37 63:37 reform labor regulation is 63:40 63:40 promoted to help protect 63:44 63:44 workers in fact it does just the 63:48 63:48 opposite except for a privileged few for 63:53 63:53 example 63:55 63:55 High hiring costs and the inability to 63:60 63:60 dismiss someone in other words the 64:02 64:02 inability to dismiss 64:04 64:04 someone 64:06 64:06 keep the least 64:09 64:09 skilled the dispossessed or to the labor 64:14 64:14 market if you are unable to lay someone 64:18 64:18 off if economic conditions decline or 64:21 64:21 that person just doesn't work out then 64:24 64:24 you're going to be afraid to hire that 64:26 64:26 person now you'll hire somebody who has 64:28 64:28 a record who has an 64:30 64:30 education where you have a where you 64:33 64:33 know the past and can predict the future 64:36 64:36 so it protects fine those who are 64:39 64:39 already privileged the problem 64:42 64:42 is it means that you aren't going to 64:44 64:44 hire somebody that has a low skill level 64:49 64:49 because it's just not worth the risk and 64:52 64:52 this creates an expanded informal sector 64:56 64:56 where workers are unprotected and more 64:58 64:58 lowly paid few things could do better to 65:01 65:01 generate prosperity in Sri 65:05 65:05 Lanka then 65:07 65:07 improving labor regulations and I 65:10 65:10 believe there's an effort underway to do 65:12 65:12 that now and if you move sh Lanka up 65:15 65:15 from its very low position to a much 65:18 65:18 higher position you'll see the labor 65:20 65:20 market expand employment increase and 65:24 65:24 poverty 65:27 65:27 decrease okay I've been through 65:31 65:31 that now I just want to show you the 65:36 65:36 relationship between economic freedom 65:39 65:39 and 65:41 65:41 prosperity so Pakistan is 65:44 65:44 103d in the world in economic 65:48 65:48 freedom really close to the uh Bottom 65:53 65:53 now by the way 65:55 65:55 these 65:56 65:56 ranks are the average over the period 70 66:00 66:00 to 66:01 66:01 21 so they will differ somewhat from 66:06 66:06 that so they will differ from the ranks 66:08 66:08 that you just saw which are just for the 66:10 66:10 year 66:12 66:12 2021 so over so it's the average over 66:16 66:16 that period not in a single year that 66:19 66:19 will determine 66:22 66:22 Prosperity so Pakistan has averaged 66:26 66:26 103 over that period and has an income 66:30 66:30 of 66:31 66:31 $1,500 per person Sri Lanka has averaged 66:36 66:36 75th over the same 66:39 66:39 period and you can 66:41 66:41 see that sh Lanka has declined in 66:44 66:44 economic freedom you ranked 75th on 66:47 66:47 average but you're 66:49 66:49 116th this year so things have gotten 66:52 66:52 worse rather than better Sri Lanka's 66:55 66:55 income is 66:58 66:58 $4,400 a year rounded up and you can see 67:03 67:03 the higher the level of economic freedom 67:06 67:06 the higher the 67:08 67:08 income ending up with Denmark which 67:10 67:10 averaged 13th over the full period and 67:15 67:15 Singapore which average sixth over the 67:17 67:17 period this just focuses on the uh uh 67:21 67:21 Asian uh Nations uh so you can see the 67:25 67:25 pattern more 67:27 67:27 clearly and it is 67:30 67:30 interesting Singapore as I mentioned has 67:33 67:33 a much higher level of economic freedom 67:37 67:37 is one of the highest levels of economic 67:38 67:38 freedom in the 67:41 67:41 world and Denmark also has a higher has 67:44 67:44 a high level of economic freedom but 67:47 67:47 look at this in 67:50 67:50 1960 Singapore started roughly where 67:53 67:53 Sher lka is now in per capita 67:59 67:59 GDP but it opens its markets it became 68:04 68:04 today the most economically free nation 68:06 68:06 in the world and look at that growth 68:10 68:10 rate so Singapore went from 68:15 68:15 roughly s Lanka's average per capita GDP 68:20 68:20 to about 68:22 68:22 $70,000 a year us per person and I put 68:26 68:26 in Denmark 68:28 68:28 there because even though Denmark has a 68:31 68:31 very high level of economic freedom and 68:34 68:34 it's growing rapidly Singapore's even 68:37 68:37 higher level has enabled Singapore to 68:40 68:40 overtake I mean it would be 68:42 68:42 unimaginable to think today in Shar 68:45 68:45 Lanka that you could have an average per 68:47 68:47 capita income of $70,000 per person but 68:51 68:51 that's exactly what Singapore did 68:53 68:53 starting from a base of a boat where 68:55 68:55 Sanka is 68:57 68:57 now I want to turn to corruption which 69:00 69:00 is a big issue uh 69:02 69:02 here as I mentioned 69:06 69:06 before lack of economic freedom lack of 69:10 69:10 the your ability to make your own 69:12 69:12 choices is the raw material of 69:15 69:15 corruption when there's someone to pay 69:18 69:18 off corruption is he is intensely 69:22 69:22 related to 69:25 69:25 lack of economic freedom and weak rule 69:28 69:28 of 69:30 69:30 law 69:31 69:31 so on the um vertical scale is economic 69:37 69:37 freedom and on the horizontal scale is 69:41 69:41 corruption is measured by 69:45 69:45 um is corruption is measured by 69:48 69:48 Transparency International and you can 69:51 69:51 see there's an immense I mean it's 69:54 69:54 obvious a huge 69:56 69:56 relationship between economic freedom 69:59 69:59 and lack of corruption the most 70:01 70:01 economically free Nations have the 70:04 70:04 lowest levels of corruption and that's 70:07 70:07 pretty much without 70:09 70:09 exception the nations with weak levels 70:12 70:12 of economic freedom including Sri Lanka 70:15 70:15 have very high levels of corruption 70:17 70:17 because there's always someone to pay 70:21 70:21 off and same with the rule of law where 70:24 70:24 Sri Lanka is also very weak it's 70:27 70:27 interesting I've got a trend line in 70:29 70:29 there Sri Lanka is almost exactly in 70:32 70:32 both instances on the trend line the 70:34 70:34 exact relationship between lack of 70:37 70:37 economic freedom and 70:42 70:42 Corruption just going to quickly go 70:44 70:44 through sh Lanka's scores uh compared to 70:48 70:48 India Malaysia and Singapore and as you 70:51 70:51 can see Shar Lanka started out better 70:53 70:53 than IND India and India caught up and 70:56 70:56 Sher Lanka is now uh going downwards but 70:60 70:60 of course that has something to do with 71:02 71:02 your recent economic crisis size of 71:05 71:05 government rule of law sound money 71:08 71:08 freedom to trade regulation labor oh 71:11 71:11 yeah labor 71:13 71:13 regulations 71:15 71:15 uh a huge disadvantage to the poor and 71:18 71:18 the dispossessed and Sri Lanka is way at 71:22 71:22 the bottom of our comp parison Nations 71:25 71:25 there 71:26 71:26 um horrible horrible for the PE for the 71:30 71:30 low skilled and the poor business 71:34 71:34 regulations I'm running out of time I 71:37 71:37 was given 35 minutes and I'm nearly at 71:39 71:39 the end of it so I wanted to run through 71:42 71:42 that quickly to show you what happens 71:45 71:45 when Nations turn to economic freedom I 71:47 71:47 call them rocket 71:50 71:50 Nations this is where perhaps most 71:54 71:54 interesting to you the East Asia average 71:58 71:58 of economic freedom Indonesia Korean 72:03 72:03 Republic uh which as you can see uh 72:06 72:06 moved up to second place amongst our 72:09 72:09 sample Nations but wasn't always 72:11 72:11 economically free and of course 72:13 72:13 Singapore at the top Sri Lanka is green 72:17 72:17 at the uh bottom so as you can see it 72:20 72:20 has amongst our sample Nations the 72:22 72:22 lowest level of econom IC freedom and in 72:25 72:25 recent years due to the economic crisis 72:28 72:28 uh has gotten even 72:30 72:30 lower and look what happens how 72:33 72:33 closely growth is related to economic 72:37 72:37 freedom Singapore the fastest growth is 72:40 72:40 already 72:41 72:41 noted South Korea which has a middling 72:45 72:45 high level of economic freedom not 72:48 72:48 nearly as high as Singapore but it too 72:50 72:50 is taken off like a rocket Nations well 72:53 72:53 those without economic freedom 72:56 72:56 unfortunately including SAR Lanka have 72:59 72:59 Lang have languished at the bottom of 73:02 73:02 the 73:03 73:03 growth uh 73:06 73:06 charts same is true in Western Europe 73:10 73:10 Ireland was once thought of as an 73:14 73:14 immensely poor Nation uh as one 73:19 73:19 interestingly enough when Ireland 73:21 73:21 shifted to economic freedom the Union 73:23 73:23 ions supported the move and one Union 73:26 73:26 Leader told me that it used to be in 73:29 73:29 Ireland before they opened their markets 73:32 73:32 that as soon as somebody graduated from 73:34 73:34 a university and these are almost his 73:36 73:36 exact words soon as somebody graduated 73:39 73:39 from a university in Ireland they took a 73:43 73:43 taxi to the airport to go to the United 73:45 73:45 States or Great Britain because that's 73:48 73:48 where the opportunities were because 73:51 73:51 Ireland and again this is a union leader 73:53 73:53 because Ireland had a 73:55 73:55 lowlevel relatively low level of 73:58 73:58 economic freedom as you can see here 74:01 74:01 Ireland undertook a massive reform 74:04 74:04 program supported all across society as 74:06 74:06 noted by including the unions to 74:10 74:10 increase uh economic freedom there this 74:13 74:13 is something Sri Lanka could do and look 74:16 74:16 at what happened 74:19 74:19 Ireland basically 74:22 74:22 had a lower 74:24 74:24 income than the EU average and when it 74:29 74:29 shifted in the late 80s and early 90s to 74:33 74:33 increased economic freedom what you just 74:35 74:35 saw it took off like a rocket 74:38 74:38 ship it is now one of the richest 74:41 74:41 nations in the world same holds in sub 74:45 74:45 Sahara Africa Botswana has consistently 74:48 74:48 had the highest level of economic 74:50 74:50 freedom in sub Sahara Africa not in 74:52 74:52 every year but cons consistently over 74:54 74:54 time it is high another Nation May 74:57 74:57 temporarily jump up but bwan is always 74:60 74:60 at the top look at the difference 75:02 75:02 batswana started oath in 75:06 75:06 1960 as one of the poorest nations in 75:09 75:09 sub Sahara Africa about half the average 75:13 75:13 income in sub Sahara 75:16 75:16 Africa sub Sahara Africa which as you 75:19 75:19 saw from this chart lacks economic 75:22 75:22 freedom is hardly growing at all all but 75:24 75:24 like Singapore like Ireland with a high 75:27 75:27 level of economic freedom batswana took 75:30 75:30 off like a rocket ship too now you can 75:33 75:33 tell me Well Botswana has diamonds and 75:35 75:35 that's just look lots of sub Sahara 75:38 75:38 African nations have lots of uh 75:41 75:41 resources the Congo is one of the 75:43 75:43 richest places in resources in the 75:47 75:47 world it's what you do with the 75:50 75:50 resources which is in part deter 75:53 75:53 determined by economic freedom so B 75:56 75:56 swana took off like a rocket ship South 75:58 75:58 America no one is going to particularly 76:00 76:00 like the way uh Chile moved to economic 76:03 76:03 freedom under a 76:06 76:06 dictatorship but here we can see Chile 76:09 76:09 move from a low level of economic 76:12 76:12 freedom to the highest in Latin America 76:15 76:15 where Venezuela once the richest nation 76:18 76:18 in Latin America went in the opposite 76:20 76:20 direction and there are people I think 76:24 76:24 who want to adopt pretty much the 76:25 76:25 Venezuelan model here Bolivian Socialism 76:29 76:29 or some sort of Marxism and this is the 76:32 76:32 disaster that 76:34 76:34 happened and now Chile has the highest 76:37 76:37 level 76:39 76:39 of income in Latin America while people 76:43 76:43 are 76:45 76:45 fleeing Venezuela which was once by far 76:49 76:49 the richest nation in Latin 76:52 76:52 America so with the right policies the 76:55 76:55 future could be bright for SAR Lanka and 76:59 76:59 it could become a rocket Nation so thank 77:02 77:02 you very much I have gone 10 seconds 77:04 77:04 over my time but so I appreciate your 77:07 77:07 patience for that thank 77:16 77:16 you um so we will now be moving into the 77:19 77:19 panel discussion and I'd now like to 77:20 77:20 introduce our panelists onto the podium 77:23 77:23 sorry the stage um as our first panelist 77:26 77:26 I would like to reintroduce Fred mcmm uh 77:29 77:29 and invite him back to the stage as well 77:32 77:32 um 77:33 77:33 Fred I believe he's outside so we'll 77:35 77:35 just give him a moment for now um I 77:38 77:38 would also now like to invite um Dr Hara 77:42 77:42 de Silva uh who began his professional 77:44 77:44 career as a chief Economist and 77:46 77:46 Treasurer at a leading Sri Lankan bank 77:50 77:50 so Dr Hara please join us on stage 77:54 77:54 um as our second panelist I would also 77:57 77:57 like to invite Daniel alonsus who was an 77:59 77:59 advisor to Sri Lanka's foreign and 78:01 78:01 finance Ministries uh he read philosophy 78:05 78:05 politics and economics at balol College 78:08 78:08 Oxford and public policy at Harvard 78:10 78:10 Kennedy School where he was also a full 78:12 78:12 bride scholar um third on the panel we 78:15 78:15 have with us again thand V singer um and 78:19 78:19 finally on our panel we have with us uh 78:21 78:21 Dr Tom Palmer who is ex Executive Vice 78:24 78:24 President for international programs at 78:26 78:26 Atlas Network where he also holds the 78:28 78:28 George M Jager chair for advancing 78:30 78:30 Liberty uh Dr Palmer is also a senior 78:33 78:33 fellow at Kato Institute prior to which 78:35 78:35 he was a vice president of the institute 78:37 78:37 for human studies at George Mason 78:39 78:39 University uh welcome Dr Palmer and 78:41 78:41 thank you for taking your time to travel 78:44 78:44 um over here to engage with us uh this 78:46 78:46 panel will be moderated by Rohan Samara 78:49 78:49 who is the founder of learn Asia and an 78:51 78:51 adviser to the sorry to the advocat 78:53 78:53 Institute over to you 78:56 78:56 Professor I'm going to privilege I'm 78:58 78:58 going to give more time for interactive 79:00 79:00 interactions and 79:02 79:02 discussion uh what I'm going to do is 79:06 79:06 ask the two people who have not spoken 79:09 79:09 to 79:11 79:11 essentially uh well there are three 79:13 79:13 people who haven't spoken uh but I'm 79:15 79:15 going to ask two of them to present 79:18 79:18 their views in about 10 to 15 79:21 79:21 minutes um and then get started on 79:25 79:25 questions with uh questions primarily 79:29 79:29 directed to Dr har Silva because he has 79:32 79:32 to leave at 79:34 79:34 11: uh and then we'll go on till about 79:38 79:38 10:20 uh so that's the game 79:42 79:42 plan uh Tom would you like to get 79:46 79:46 started with say about 10 minutes 15 79:49 79:49 minutes I'll be I'll bet I'll be shorter 79:51 79:51 than that 79:54 79:54 I've been spending a fair amount of time 79:55 79:55 recently bouncing back and forth between 79:57 79:57 Greece and Ukraine and dealing with the 80:00 80:00 governments there on economic policy and 80:03 80:03 I think it's an interesting comparison 80:05 80:05 if you look at Singapore versus Sri 80:08 80:08 Lanka the the distinction is quite 80:11 80:11 obvious but there's pretty been pretty 80:13 80:13 continuous growth more interesting to 80:16 80:16 look at countries that experien 80:18 80:18 staggering crisis so Greece and the 80:21 80:21 Greek economic crisis and then the way 80:23 80:23 that they were hit by covid being a very 80:26 80:26 tourism dependent country it was a 80:28 80:28 disproportionate hit that the Greeks 80:30 80:30 took and then Ukraine with the War uh 80:34 80:34 the inheritance of a posts Soviet 80:36 80:36 economy all the corruption and then the 80:38 80:38 invasion and genocide that is being 80:41 80:41 experienced right 80:43 80:43 now the fact is you can recover from a 80:47 80:47 crisis if you get your house in order 80:50 80:50 and I think Greece is a very good case 80:53 80:53 study of this they went through the uh 80:56 80:56 financial crisis was really devastating 80:58 80:58 to Greece especially devastating for to 81:01 81:01 Greece in comparison to other European 81:04 81:04 Union countries and then they ended up 81:07 81:07 with the center devastated politically 81:11 81:11 virtually 81:12 81:12 eliminated and you had the rise of the 81:15 81:15 extremes populist extremes on both the 81:18 81:18 left and the right and when I say 81:21 81:21 populist extremes I don't mean just like 81:24 81:24 normal moderate extremes I mean maoists 81:27 81:27 trotskyists and stalinists who formed 81:31 81:31 the Coalition of the radical left and 81:34 81:34 National socialists or 81:36 81:36 neo-nazis anti-semites and fascists on 81:39 81:39 the right panel and Golden Dawn party 81:42 81:42 this was a really terrifying time in 81:45 81:45 Greek political life to see the center 81:49 81:49 eviscerated and the rise of extreme 81:52 81:52 violent aggress aggressive populist 81:54 81:54 parties on both 81:56 81:56 sides uh their policies didn't work the 81:60 81:60 country continued to snagger and finally 82:03 82:03 there was a response the new Democracy 82:07 82:07 party which is a moderate what is called 82:10 82:10 in Europe a center right policy uh 82:13 82:13 party uh one election uh quite con uh uh 82:18 82:18 uh convincingly and began implementing 82:21 82:21 the right reforms 82:23 82:23 so Greece was in a deep fiscal crisis 82:27 82:27 their Bonds were virtually worthless uh 82:30 82:30 government debt and they began 82:33 82:33 systematically pairing back pointless 82:37 82:37 expenditures they brought down their 82:39 82:39 debt to GDP ratio from 82:43 82:43 222% is really kind of Staggering number 82:47 82:47 it's still high it's much too high it's 82:50 82:50 about 160% but the direction of change 82:53 82:53 is extremely important and very positive 82:57 82:57 and it continues to go down and they did 82:59 82:59 so while reducing the tax burden on 83:02 83:02 Greeks so this is a very important point 83:04 83:04 to understand and here I disagree with 83:06 83:06 some of our green ey shade friends at 83:09 83:09 the IMF their focus is raise taxes to 83:13 83:13 pay off the loans that we've made the 83:17 83:17 problem is you raise taxes you drive 83:19 83:19 people out of the formal 83:21 83:21 economy and the Greeks understood this 83:24 83:24 they lowered the tax burden and they 83:26 83:26 broadened the tax base they got rid of 83:29 83:29 the complexities of the tax code The 83:32 83:32 Unbelievable number of exemptions and 83:34 83:34 special rates brought it down to a more 83:37 83:37 fair evenhanded basis and more people 83:40 83:40 were brought into the tax 83:42 83:42 system in addition the digi digitization 83:46 83:46 is palpable that is to say you can see 83:48 83:48 the Improvement in government services 83:51 83:51 uh such things as drivers licenses which 83:53 83:53 were very cumbersome the driver's 83:55 83:55 license was a huge paper document you 83:58 83:58 could not fit in your wallet was must 84:00 84:00 have been in uh somehow invented in 84:04 84:04 1905 and they turn it over it's digital 84:06 84:06 now they digitized car inspection huge 84:10 84:10 number of things and what you find is 84:13 84:13 the touch points for corruption are 84:16 84:16 eliminated when I met the prime minister 84:18 84:18 mitsotakis in a previous government when 84:20 84:20 he was on the way out he was minister of 84:24 84:24 uh I think labor at the time and he said 84:27 84:27 you know what I've been doing today Tom 84:29 84:29 I spent all day with my colleagues 84:31 84:31 eliminating the number of government 84:34 84:34 agencies charged with inspecting your 84:37 84:37 fire extinguisher there were 84:40 84:40 11 11 different agencies that could come 84:44 84:44 into your business and say do you have a 84:46 84:46 fire extinguisher show it to me we need 84:48 84:48 to test it so why do we need 11 we 84:52 84:52 understand you should have a fire 84:53 84:53 extinguisher but maybe one inspector 84:56 84:56 would be enough but instead the Greeks 84:58 84:58 got 11 and that meant 11 requests for a 85:01 85:01 little bit of 85:02 85:02 help uh with the retirement fund of the 85:06 85:06 inspector they were able to reduce that 85:08 85:08 to one it's the fire department they 85:11 85:11 come in they look you have a fire 85:12 85:12 extinguisher it works you're fine that's 85:15 85:15 all you need for public health you don't 85:17 85:17 need 11 of 85:19 85:19 them let's turn then to Ukraine which is 85:23 85:23 still in a very serious crisis as we 85:25 85:25 know the Russian invasion is 85:28 85:28 ongoing uh we had in March of last year 85:31 85:31 the anti the tax reform and 85:34 85:34 anti-corruption Summit and there's a 85:36 85:36 lesson here it's very important 85:38 85:38 ukrainians have come to understand as 85:41 85:41 the Greeks did before corruption is not 85:44 85:44 the cause of the problem it is the 85:48 85:48 symptom and this a very difficult thing 85:50 85:50 to get our heads around when we see 85:52 85:52 corrupt government officials and the 85:55 85:55 criminality we want to punish them fine 85:58 85:58 punish them but that will not solve your 86:01 86:01 problem if you do not address the cause 86:04 86:04 you'll just get another group of corrupt 86:07 86:07 politicians you have to go to the cause 86:11 86:11 so in Ukraine they have a I learned a 86:13 86:13 new word a new term tax 86:17 86:17 optimization every company pays its own 86:20 86:20 unique tax rate you optimize you you 86:24 86:24 negotiate with the tax authorities they 86:28 86:28 start out by saying we're taking 100% 86:30 86:30 now negotiate us 86:32 86:32 down and of course the cronies get very 86:36 86:36 low tax rates and the non- cronies get 86:39 86:39 taxed to the 86:41 86:41 max they are have just pushed through 86:44 86:44 and it hasn't been formalized by 86:46 86:46 Parliament but it's being introduced 455 86:50 86:50 pages of amendments to the the tax code 86:54 86:54 one simple rate 10% 10% vat 10% personal 86:59 86:59 income and 10% on uh distributed 87:03 87:03 corporate profits that's it eliminate 87:06 87:06 about 27 other insane 87:09 87:09 taxes and bring in more people into the 87:12 87:12 tax system currently the estimate is 87:15 87:15 nearly 60% of Ukrainian employees are 87:18 87:18 paid with an envelope of cash because 87:21 87:21 the tax system is so 87:23 87:23 complicated well as they finally 87:25 87:25 convinced the IMF they said look you 87:28 87:28 tell us raise taxes to pay off the debt 87:33 87:33 that percentage will just go up lower 87:36 87:36 the tax rate and more people will say 87:38 87:38 okay I'll be part of the taxpaying 87:42 87:42 class one of the insanities of the 87:45 87:45 Ukrainian system the largest single 87:47 87:47 contributor to the state budget on the 87:50 87:50 tax side is government employees that 87:53 87:53 makes no sense you pay them money and 87:55 87:55 then you take back some as tax why 87:58 87:58 they're the only ones you can 88:00 88:00 catch whereas the average employee 88:03 88:03 manages to go around the system so let 88:05 88:05 me conclude then with a a thought what 88:09 88:09 we need to do in Ukraine and I've been 88:10 88:10 working with our colleagues there we're 88:12 88:12 hopeful that this will rescue and save 88:14 88:14 the country in Greece it worked and I 88:18 88:18 was involved in 2015 with the emergency 88:21 88:21 economic Summit for Greece Greece now in 88:24 88:24 2023 had the record 88:26 88:26 tourist uh uh visitations in its history 88:30 88:30 reached an absolute Peak uh in the last 88:34 88:34 year tourism industry is booming when I 88:37 88:37 was there in 2015 it was shut down and 88:40 88:40 then the covid situation of course was 88:43 88:43 simply devastating they are now 88:45 88:45 outperforming the European Union and 88:47 88:47 economic growth they're outperforming 88:49 88:49 Germany as an example and the econ Eon 88:52 88:52 omist uh named them the star performer 88:56 88:56 for 2022 and 88:58 88:58 2023 we'll see what 2024 will bring but 89:02 89:02 there's almost no question it will bring 89:05 89:05 additional positive economic growth and 89:07 89:07 the government is now rolling out 89:10 89:10 additional reductions in that oppressive 89:13 89:13 regulatory burden when that happens by 89:18 89:18 reducing all these touch points between 89:20 89:20 the citizen the Enterprise and the state 89:23 89:23 you are reducing the 89:25 89:25 corruption that brings about so much 89:28 89:28 public anger but if you spend all of 89:31 89:31 your time saying we're going to punish 89:32 89:32 the 89:34 89:34 wrongdoers you'll fail because you'll 89:36 89:36 just get a new class of corruption in 89:39 89:39 the future thank you very much uh Daniel 89:43 89:43 the the general purpose of what I'm 89:46 89:46 doing now is to sort of lay the 89:48 89:48 groundwork so that people have hooks to 89:52 89:52 to 89:52 89:52 initiate the discussion could you lay 89:54 89:54 out your argument in about 10 minutes 89:59 89:59 sure so I'm with the economic freedom 90:02 90:02 Summit and I'm going to focus on one 90:05 90:05 very very specific aspect of economic 90:08 90:08 freedom which relates to the mobility of 90:10 90:10 people or labor and I think there's a 90:14 90:14 couple of ironies that Sri Lanka faces 90:17 90:17 which is that if you're a Sri Lankan 90:19 90:19 company today compared to a company 90:23 90:23 based in a much richer country than Sri 90:25 90:25 Lanka you actually find it much harder 90:27 90:27 to import the talent you need um in the 90:30 90:30 it sector in the tourism sector across 90:34 90:34 the the economy the companies need 90:37 90:37 specialized talent that they want to 90:39 90:39 bring into the country but which they 90:41 90:41 find it difficult to do so it's 90:44 90:44 difficult I a because if they're not of 90:46 90:46 a particular size they may not be able 90:47 90:47 to get the necessary quotas B even if 90:50 90:50 they of a particular size is just very 90:52 90:52 costly and cumbersome and and T takes 90:55 90:55 time as well and time is money so that's 90:58 90:58 one irony the second irony is that if 91:05 91:05 countries much richer than Sri Lanka 91:07 91:07 have a route to becoming a citizen of 91:09 91:09 that country in Sri Lanka today there is 91:12 91:12 no way you can become a Sri Lankan if 91:14 91:14 you marry a Sri Lankan you live here you 91:16 91:16 have kids who are SRI Duncans there's no 91:18 91:18 path to that and I think even though the 91:20 91:20 economic impact of this may not be 91:22 91:22 massive at least right now because we 91:24 91:24 don't have many people who want to 91:25 91:25 migrate here it could be in the future A 91:28 91:28 and B it characterizes a way of thinking 91:30 91:30 about the migration of Labor and this 91:33 91:33 idea of of a very insular zero some um 91:38 91:38 where where we don't grow together 91:40 91:40 rather we we we protect things uh that 91:43 91:43 are as they are so we we protect the pie 91:45 91:45 we don't grow the 91:47 91:47 pie and then the third irony I think is 91:51 91:51 countries much richer than Sri Lanka 91:54 91:54 have integrated their their border 91:56 91:56 systems and allow much freed movement of 91:59 91:59 uh people and labor so if you look at 92:02 92:02 the EU for example countries like 92:04 92:04 Denmark and uh Holland and so on and so 92:08 92:08 forth have completely free um movement 92:11 92:11 of Labor with countries like Bulgaria 92:14 92:14 and Romania which are much much poorer 92:16 92:16 um or in the case of the United States 92:18 92:18 with NAFTA there's it makes it easy for 92:20 92:20 labor to move in Asia you've got the uh 92:24 92:24 the aan single Market that again 92:26 92:26 facilitates the movement it's not 92:28 92:28 completely free like in the EU um but it 92:31 92:31 facilitates that process and then if you 92:33 92:33 look at Singapore specifically since 92:34 92:34 Singapore is being discussed today uh 92:36 92:36 just a couple of weeks back Singapore 92:38 92:38 announced that it will enable QR based 92:41 92:41 movement between Malaysia and Singapore 92:44 92:44 they're completely facilitating the 92:46 92:46 process of short-term movement of people 92:49 92:49 across the border and making it as 92:50 92:50 seamless as possible possible so in 92:53 92:53 these three cases countries that are 92:55 92:55 much much richer and have much greater 92:58 92:58 gaps with their neighbors so we're 92:59 92:59 talking about Singapore Malaysia um the 93:02 93:02 Netherlands Bulgaria the US and Mexico 93:05 93:05 if we compare with our neighbors for 93:06 93:06 example in the region the gaps are much 93:08 93:08 smaller uh in terms of per capita income 93:11 93:11 yet even in these cases it is much much 93:14 93:14 uh easier for for for people to move 93:17 93:17 people are free to 93:19 93:19 move and so I think I want to make I say 93:23 93:23 three points today the first is we are 93:26 93:26 just coming out of a crisis we are still 93:28 93:28 in a sense in crisis we we remain in 93:32 93:32 default and we need a quick boost to our 93:36 93:36 economy tourism is one of the fastest 93:38 93:38 ways we can 93:40 93:40 stabilize and even in when it comes to 93:43 93:43 tourism we place barriers on tourists 93:45 93:45 coming to Sri Lanka we place barriers in 93:48 93:48 two ways first is we make friction you 93:52 93:52 you have to get a Visa you have to sign 93:54 93:54 up for an ETA you have to fill out 27 93:57 93:57 form Fields not forms 27 form Fields you 94:00 94:00 then have to wait for the thing you have 94:02 94:02 to make a payment using a credit card 94:04 94:04 not everyone has a credit card 94:05 94:05 especially in parts of the world which 94:07 94:07 have moved on to digital wallets uh and 94:10 94:10 and the payment success rates of these 94:12 94:12 mechanisms are often quite low so you 94:15 94:15 have at least a couple of percentage 94:17 94:17 points of probably drop off or rising 94:20 94:20 and if you look at uh uh that we're 94:22 94:22 talking about tens of millions of 94:24 94:24 dollars in foregone Revenue 94:27 94:27 here the second is friction in terms of 94:31 94:31 forms but also in terms of fees we 94:33 94:33 charge to take uh to get a Visa in Sri 94:36 94:36 Lanka now generally in almost any 94:38 94:38 consumer industry you try and make the 94:41 94:41 top of the funnel as easy as possible 94:43 94:43 and monetize down the funnel you get the 94:45 94:45 person into the country and then you you 94:48 94:48 provide goods and services and get tax 94:50 94:50 revenue off that Services I very very 94:52 94:52 rough estimate back of the envelope if 94:54 94:54 even 3 percentage of people don't come 94:57 94:57 to Sri Lanka because of the visa fee 94:59 94:59 it'll cover um as as in the the fee will 95:04 95:04 be greater than the tax revenue that 95:05 95:05 they would the government would have 95:06 95:06 gained so it doesn't make even sense 95:08 95:08 from a tax point of view much the less 95:10 95:10 the welfare of people because of the 95:12 95:12 business that's generated so that's one 95:14 95:14 short-term visit visas tourism um is is 95:18 95:18 one point the second Point relates to 95:22 95:22 labor markets and brain drain Sri Lanka 95:24 95:24 is losing tons and tons of specialized 95:27 95:27 skills almost on a daily basis 95:29 95:29 especially over the last couple of years 95:31 95:31 and it's happening now so we need to 95:33 95:33 replace some of that talent and of 95:34 95:34 course we need talent in to help make 95:37 95:37 our current Talent even more effective 95:39 95:39 the second you add someone who is more 95:41 95:41 productive than the average worker in 95:43 95:43 your economy you're improving your 95:45 95:45 average productivity one two is such a 95:49 95:49 person is also going to transfer their 95:51 95:51 skills to other people and make the 95:53 95:53 other other workers more productive so 95:56 95:56 for example if you if you have somebody 95:59 95:59 who who who has a particular specialist 96:02 96:02 let's say they know how to engage 96:03 96:03 particularly well with uh with Japanese 96:06 96:06 investors the entire team of people 96:08 96:08 working with Japanese investors will be 96:10 96:10 better placed because they have that one 96:12 96:12 resource they can get advice from and so 96:14 96:14 on and so forth and this relates to 96:15 96:15 skills as well of 96:18 96:18 course then in addition to that 96:23 96:23 it's it's also the case where the whole 96:25 96:25 is greater than it's some of its parts 96:27 96:27 if we take the the example I just 96:29 96:29 mentioned a team which has this person 96:32 96:32 um also works more efficiently as a 96:34 96:34 whole not only because skills are 96:36 96:36 transferred but because as a team they 96:39 96:39 have a their skills complement each 96:40 96:40 other and can be more effective so we 96:43 96:43 need to bring this talent in and we need 96:45 96:45 to make it 96:46 96:46 easy I think there is no I think the 96:49 96:49 burden of proof is on those who who who 96:52 96:52 who reject the proposal of offering on 96:55 96:55 arrival a two-year residence visa for 96:58 96:58 anyone who has who comes from a country 97:00 97:00 with a per capita GDP four times that of 97:03 97:03 Sri Lanka we can discuss the exact 97:04 97:04 threshold but I think the principle here 97:06 97:06 is what is important because if you're 97:08 97:08 from a country that is significantly 97:10 97:10 more productive than Sri Lanka coming to 97:12 97:12 Sri Lanka probably is a net value 97:15 97:15 addition to our productivity uh and this 97:17 97:17 a very easy way to help us gain higher 97:20 97:20 productivity levels in our economy so 97:22 97:22 the really I think the burden of proof 97:23 97:23 is on those who say no we shouldn't do 97:25 97:25 this and what their argument 97:28 97:28 is before I finish uh just a final point 97:33 97:33 on this and then a a slightly tangential 97:35 97:35 point which is just as much as you make 97:38 97:38 it easy for talent to come to Sri Lanka 97:41 97:41 you need to make it easy for them to 97:42 97:42 work in Sri Lanka currently the 97:45 97:45 restrictions of of uh qualification 97:48 97:48 migration is much greater in Sri Lanka 97:51 97:51 than in many rich countries in the EU 97:53 97:53 across the EU people have uh Mutual 97:56 97:56 recognition of of qualifications across 97:58 97:58 the developing World there are a number 97:60 97:60 of different mechanisms that are used in 98:02 98:02 Sri Lanka actually it's much harder um 98:04 98:04 to to get a foreign lawyer a foreign 98:06 98:06 doctor a foreign Specialist of some sort 98:08 98:08 or the other to to work here and that's 98:10 98:10 something that we can change at the 98:11 98:11 stroke of a pen so again I would submit 98:14 98:14 that the argument has to be made for 98:17 98:17 those who say we shouldn't do this and I 98:20 98:20 would say that any country 98:22 98:22 who has a per capita GDP four times Sri 98:24 98:24 Lanka their qualifications should be 98:27 98:27 recognized in Sri Lanka um because if 98:29 98:29 they can build a bridge in that country 98:30 98:30 if they can heal somebody in that 98:32 98:32 country it doesn't make any sense that 98:34 98:34 they can't practice and work here and 98:36 98:36 it's it's really getting quite 98:37 98:37 ridiculous at this point that 98:39 98:39 Singaporean doctors can't practice here 98:41 98:41 when our health Minister goes there for 98:42 98:42 treatment it's it's really getting quite 98:45 98:45 absurd so on that note um yeah I I I I I 98:50 98:50 think the time is really here and the 98:52 98:52 the the goal posts have shifted those 98:55 98:55 who say that people shouldn't be able to 98:57 98:57 move have to make the case rather than 98:58 98:58 the other way 98:59 98:59 around you didn't hear the full 99:01 99:01 introduction ARA but I think everybody 99:03 99:03 knows he's a legislator in the 99:06 99:06 opposition so I want to pose some very 99:09 99:09 specific 99:11 99:11 questions uh to get some insights from 99:14 99:14 Hara before he leaves now Tan's 99:18 99:18 presentation I found a little 99:20 99:20 interesting 99:22 99:22 section like many of us tilan was also 99:25 99:25 unhappy about the Strategic development 99:27 99:27 projects act but you said that that is 99:32 99:32 tied to par the imposition of parat 99:35 99:35 tariffs so is it possible to get rid of 99:38 99:38 the 99:40 99:40 sdp while the parat tariffs are in place 99:43 99:43 or do we have to to articulate the two 99:47 99:47 it's a question for both of you Hara and 99:50 99:50 tilan so mangala started it but it was 99:53 99:53 aled now it has started again uh but 99:57 99:57 there is a major powerful Lobby uh to 100:02 100:02 stop that from uh going through so as 100:05 100:05 chairman of the committee uh it's been a 100:08 100:08 struggle for me because on the one hand 100:11 100:11 some days they'll send us legislation uh 100:14 100:14 amendments to remove parat Taris then 100:17 100:17 the next day they'll send something to 100:20 100:20 impose parats 100:22 100:22 um so there is a contradiction in the 100:25 100:25 system so I have actually been fighting 100:29 100:29 very hard telling the government tell me 100:33 100:33 what your policy is because I have the 100:35 100:35 secretary sitting here of the Ministry 100:38 100:38 of Finance another the secretary 100:40 100:40 Ministry of uh industry sitting there 100:43 100:43 and they don't see I to I so Industries 100:47 100:47 has some other agenda Finance has 100:50 100:50 another agenda 100:52 100:52 so one of the reasons that I get 100:56 100:56 hammered sometimes mercilessly in the 100:58 100:58 Press is when I try to ask these 101:01 101:01 questions as to what is your policy so 101:04 101:04 recently something that happened I took 101:07 101:07 it to the Privileges committee also is 101:10 101:10 that the industries Ministry wanted 101:13 101:13 paratos a whole bunch of things uh 101:16 101:16 whereas just uh you know previous 101:20 101:20 business was to remove parat tars of 300 101:24 101:24 items so so there's obvious 101:27 101:27 contradiction right so there there has 101:30 101:30 to be 101:32 101:32 alignment Ministries can't have 101:34 101:34 different policies parari policy is one 101:38 101:38 that has to be articulated by the top 101:40 101:40 and the Ministry of Finance and once the 101:42 101:42 Minister of Finance articulates that 101:44 101:44 policy Ministry of Industries or whoever 101:47 101:47 else it is Ministry of Health 101:48 101:48 Pharmaceuticals whatever will have to 101:50 101:50 abide by right the issue Rohan with the 101:54 101:54 the sdp act as tan very correctly 101:57 101:57 pointed out is there are no real uh 102:01 102:01 guidelines uh another issue that uh 102:04 102:04 probably most of you will saw of the 102:07 102:07 video clip when HCL Technologies came 102:09 102:09 for a 16-year tax holiday and a 12 years 102:13 102:13 after that 50% of ex uh whatever tax 102:17 102:17 that would exist at time I ask a simple 102:20 102:20 question what is the tax expenditure and 102:22 102:22 the chairman of the Boi had absolutely 102:24 102:24 no idea and he said I'll check with them 102:26 102:26 and come back to you and I said you know 102:29 102:29 what and that that's what happened and 102:32 102:32 then subsequently he got fired I also 102:34 102:34 got fired I got Reed he didn't but 102:37 102:37 nevertheless the good thing is the the 102:39 102:39 IMF has now imposed a condition that the 102:43 102:43 tax expense has to be calculated right 102:46 102:46 once the tax expense is calculated then 102:48 102:48 there can be some uh debate whether it 102:51 102:51 should be given or not and another uh 102:55 102:55 another recommendation is to you know 102:57 102:57 sort of you know clear the regulatory 103:00 103:00 model and Corruption is that the gaset 103:04 103:04 cannot be imposed unless uh it is first 103:08 103:08 approved in Parliament which now is the 103:11 103:11 other way around the gaset is imposed 103:13 103:13 then it gets into uh it it is 103:17 103:17 implemented and without prejudice if 103:19 103:19 Parliament uh uh resolves to take it 103:23 103:23 away then it stops at that point you see 103:27 103:27 so it is not that the the the the the 103:31 103:31 legislature first approves it and then 103:34 103:34 implements it it's the other way around 103:36 103:36 which is kind of crazy and the last 103:38 103:38 point that I will I will bring to your 103:41 103:41 attention is who has the power uh to to 103:45 103:45 change tax rates or remove or impose 103:49 103:49 taxes or Duty or levies it is the 103:53 103:53 legislature in the Constitution Article 103:56 103:56 148 very clearly says that full powers 103:59 103:59 of Public Finance lies with the 104:01 104:01 legislature now recent um event has 104:05 104:05 questioned this uh the Constitutional 104:09 104:09 power uh where I have actually you know 104:13 104:13 stopped this thing from going through is 104:16 104:16 that the PO City commission uh listed 104:20 104:20 out a about 2300 items that would be 104:24 104:24 made 104:25 104:25 dutyfree uh to be sold at the the new 104:30 104:30 downtown Dy free complex which should 104:32 104:32 also have a 25% tax holiday and also no 104:37 104:37 pay Etc no taxes at all plus duty free 104:41 104:41 so my question to the commission was who 104:44 104:44 made this 104:46 104:46 list they said we made the list I said 104:50 104:50 who gave you the power to to make this 104:52 104:52 list well the parliament has given us 104:55 104:55 Authority Under the the Port City uh act 104:59 104:59 uh to to to make rules 105:03 105:03 and with that authority to make rules we 105:06 105:06 have made a rule and that rule is 105:09 105:09 whether it be Watchers uh washing 105:12 105:12 machines uh 105:14 105:14 refrigerators all of these things can be 105:16 105:16 sold dutyfree up to $5,000 per year for 105:20 105:20 every every Sri Lankan who comes from 105:23 105:23 abroad can go to chenai and come back or 105:26 105:26 foreigners who come and want to buy 105:28 105:28 these items without a limit which like 105:32 105:32 you said would create a distortion in 105:34 105:34 the marketplace now then we found out we 105:39 105:39 read the rules and rules referred to 105:41 105:41 community rules I said that means 105:45 105:45 whether you coming to my club after 6:00 105:47 105:47 whether you had to wear uh collar 105:49 105:49 t-shirts now the golf club has a new 105:51 105:51 rule that you can't wear Chinese SCH I 105:53 105:53 mean those are the types of rules 105:56 105:56 that that that they can but not remove 106:01 106:01 uh taxes by uh sort of writing up their 106:05 106:05 own rules which created a big you know 106:09 106:09 complication because the agency has 106:12 106:12 already signed up with uh 106:17 106:17 operators now what has happened is that 106:21 106:21 is in 106:22 106:22 limbo so when we wrote to the ag ag 106:25 106:25 wrote me a four page letter saying who 106:27 106:27 gave these people the authority to uh 106:30 106:30 take out taxes of all these uh you know 106:34 106:34 200 106:35 106:35 items so they so we have now uh directed 106:40 106:40 them to uh resin the the gaset which 106:45 106:45 they did without coming to 106:47 106:47 Parliament so now that gaset will be 106:49 106:49 resented in the next we or that creates 106:53 106:53 a sort of a 106:54 106:54 legal business continuity issue uh that 106:58 106:58 needs to be resolved so ran the problem 107:01 107:01 is with this sdp there are no 107:04 107:04 guidelines and it is under the stdp that 107:08 107:08 even the PO City commission gets its 107:10 107:10 powers uh to to remove all these 107:14 107:14 existing taxes and it is up to the 107:16 107:16 politician to decide how long right I'm 107:20 107:20 you know I'm not I'm just referring to 107:23 107:23 these companies because they've been in 107:25 107:25 you know it is public knowledge right a 107:28 107:28 software company should it be given 16 107:30 107:30 years tax 107:31 107:31 solid right or or some other company uh 107:35 107:35 like uhan said should it be given 25 107:38 107:38 years tax all day new logistics company 107:40 107:40 in the port who decides on what 107:44 107:44 basis right so it is utterly complicated 107:48 107:48 and I totally agree with Tila that we 107:51 107:51 need to go to a 107:53 107:53 simple uh and and very clear transparent 107:58 107:58 mechanism where these people know what 108:01 108:01 kind of benefits they are getting or not 108:03 108:03 getting it is not up to the discretion 108:05 108:05 of the politician to 108:07 108:07 decide so uh I think that's very uh 108:11 108:11 nitty-gritty from the trenchers view of 108:14 108:14 the kinds of abstract principles that 108:15 108:15 are being discussed here uh tan you have 108:18 108:18 any any responses to that I mean very 108:21 108:21 quickly the the issue that investors 108:25 108:25 constantly put pressure on governments 108:28 108:28 to qualify for either sdp status or have 108:30 108:30 this sanctity of a Boi agreement is the 108:33 108:33 propensity of governments to constantly 108:35 108:35 keep changing policies and taxes so they 108:38 108:38 want stability so there are companies 108:40 108:40 for example let's say that takes them 108:41 108:41 four years to construct during those 108:44 108:44 four years par tariffs and taxes are 108:45 108:45 introduced that changes the entire 108:47 108:47 equation of 108:48 108:48 investment so so what is the right right 108:50 108:50 balance that that's why I'm saying it's 108:52 108:52 not a question I can answer in a forum 108:54 108:54 of this nature let's look at what's 108:57 108:57 prevailing at the moment we on one 108:58 108:58 extrem you can say okay we don't need a 109:00 109:00 Boi we don't need sdp we are like 109:03 109:03 Singapore the entire country is a 109:04 109:04 special economic zone everything is 109:07 109:07 transparent and open are we ready for 109:09 109:09 that as yet probably not and that's the 109:11 109:11 reason for the Advent of the Boi law way 109:13 109:13 back in 78 where areas of authority were 109:16 109:16 created under the Bui law where you can 109:18 109:18 wave modify exempt and not apply the min 109:20 109:20 wey related 109:22 109:22 rules um I I think that we have to 109:25 109:25 gradually migrate to the whole country 109:27 109:27 being you know one not even economic 109:29 109:29 zone where anybody can invest anywhere 109:32 109:32 under the same same sort of rules but at 109:36 109:36 this juncture when we are coming out of 109:37 109:37 this whole investment moras I think it's 109:40 109:40 important that whatever laws and rules 109:42 109:42 we frame that that changes in law do not 109:48 109:48 result in you know ad hoc policy changes 109:51 109:51 that impact investor confidence so 109:52 109:52 that's that's really my my point so Hara 109:56 109:56 I want to get a discussion on movement 109:59 109:59 of people across borders going with 110:01 110:01 everybody's participation you want to 110:03 110:03 participate in it or you want to leave 110:06 110:06 it's l no I I will just you want to stay 110:09 110:09 yeah I yeah last one I'll so one of the 110:11 110:11 most controversial aspects uh some of 110:14 110:14 you may know I've been on the firing 110:17 110:17 line uh on trade matters and and I get 110:21 110:21 hit the most when I talk about Mode 4 uh 110:25 110:25 Services trade which is law governed 110:29 110:29 specified ability for professionals to 110:32 110:32 move between countries right and I get 110:36 110:36 Hammer right vimal wans has portrayed me 110:40 110:40 as I think in the pay of I don't know 110:42 110:42 which government I mean depending on the 110:44 110:44 day he'll complain that I'm in the pay 110:46 110:46 of some 110:47 110:47 government right so now 110:51 110:51 I'm happy to see uh another candidate 110:54 110:54 coming up to the firing line Daniel so I 110:57 110:57 can retire 110:59 110:59 gracefully U so the question is there 111:02 111:02 seems to be some huge emotional power 111:04 111:04 associated with this now what I'm going 111:06 111:06 to do is I'm going to post a question a 111:09 111:09 a case study and I'm going to ask all of 111:12 111:12 you to 111:15 111:15 react in hiku there are 111:18 111:18 Russians running businesses 111:21 111:21 there are Russians who come on tourist 111:23 111:23 visas and who are delivering 111:25 111:25 pizza should this be allowed or is this 111:29 111:29 something that should be liberalized or 111:31 111:31 not I believe that four times rule of 111:34 111:34 yours the Russians would be would be I 111:37 111:37 assume allowed let's assume that 111:40 111:40 Russians have four times GDP right so 111:45 111:45 that's the question now I'm going to ask 111:50 111:50 any or all of you to take a run at that 111:53 111:53 in terms of whatever the argument that 111:56 111:56 was laid out by Daniel you want to start 111:59 111:59 Daniel sure I I'd argue that they should 112:01 112:01 be able to I assume that they are doing 112:03 112:03 delivery because they're providing a 112:05 112:05 service that is is somehow um a value 112:10 112:10 add to somebody else providing a a 112:12 112:12 delivery I'm assuming they're not 112:14 112:14 actually on a regular basis doing 112:16 112:16 deliveries um they're running a pizza 112:18 112:18 shop and on occasion they're doing 112:19 112:19 delivery when the local staff are 112:22 112:22 unavailable but let's even bite the 112:24 112:24 bullet and say even doing deliveries um 112:27 112:27 that maybe because they can communicate 112:29 112:29 with the buyer um so there's a Russian 112:31 112:31 tourist they're placing a pizza order on 112:33 112:33 their phone and they need to give 112:34 112:34 directions on where to uh deliver the 112:37 112:37 product because as a business owner why 112:39 112:39 would you pay x amount more to a Russian 112:43 112:43 in Sri Lanka then you would pay to a Sri 112:45 112:45 Lankan it's because you see you're able 112:47 112:47 to charge a higher price and that 112:50 112:50 basically means you're providing a value 112:52 112:52 added service so I think there's no 112:54 112:54 issue at all um with with a Russian 112:58 112:58 delivering pizza in Sri Lanka anyone 113:00 113:00 else join long as they pay tax exactly 113:04 113:04 what I was going to say the only issue 113:05 113:05 is that they not getting caught up in 113:07 113:07 the tax net because we have a I don't 113:09 113:09 want to call it a ridiculous but a rule 113:11 113:11 that says that um you have to bring what 113:14 113:14 $1 million to open a m Pop shop for 113:16 113:16 anybody getting into 113:17 113:17 retail um and then there was a provision 113:21 113:21 what is what is called section 16 of the 113:24 113:24 Boi law which should be automatic in 113:26 113:26 other words you you have an automatic 113:28 113:28 window through which where you don't 113:29 113:29 have to sign an agreement to enter into 113:32 113:32 a business year which is not on some 113:34 113:34 negative list you can't manufacture arms 113:36 113:36 you can't do drugs or whatever the case 113:38 113:38 may be but that negative list should be 113:41 113:41 understood very clearly and if you're in 113:43 113:43 that automatic 113:45 113:45 route many years ago there there was a 113:48 113:48 monetary limit of $50,000 113:51 113:51 so during my the time I was at the bo I 113:53 113:53 was criticized that there are Chinese 113:55 113:55 own acupuncture centers coming up which 113:58 113:58 are functioning as potentially broel the 114:01 114:01 point is they did qualify to set up a a 114:05 114:05 Chinese medical facility but if any 114:07 114:07 anyone of those are breaking the law the 114:09 114:09 land law of the land should apply so the 114:11 114:11 point is that to me the automatic route 114:14 114:14 should very be very clear and they 114:15 114:15 should be allowed to incorporate a 114:16 114:16 company get caught up in the tax net and 114:19 114:19 and run a business and compete with all 114:20 114:20 of us okay Tom we for me a little bit 114:24 114:24 controversial because I come in a 114:26 114:26 country where Russians come to murder 114:28 114:28 you and wipe out your Villages but the 114:31 114:31 Russians coming here don't do that and I 114:35 114:35 I would question one small point on the 114:37 114:37 GDP relationship because Russia is a 114:40 114:40 state dominated petrol economy the 114:43 114:43 private economy is quite small in Russia 114:45 114:45 the actual productive economy as opposed 114:47 114:47 to a state-owned extractive econ economy 114:50 114:50 so it's probably a little bit more 114:52 114:52 comparable if you go to rural Russia it 114:54 114:54 is staggeringly poor country but because 114:58 114:58 of the dictatorship there 115:01 115:01 700,000 qualified Russians have left wow 115:05 115:05 what an opportunity for Sri Lanka 115:08 115:08 because these are people in it Finance 115:11 115:11 engineering and so on uh there's an 115:14 115:14 opportunity there for countries that are 115:15 115:15 open to but notice that I talk about 115:18 115:18 pizza delivery we trust me everything 115:21 115:21 across the board and even having an IT 115:23 115:23 person coming to deliver pizzas might be 115:26 115:26 getting more income than they were 115:28 115:28 getting in Russia which is the option of 115:31 115:31 going to prison at the moment but they 115:34 115:34 are going to enrich your economy there's 115:36 115:36 just no question about it okay any other 115:39 115:39 responses yes Hara I remember delivering 115:42 115:42 pizza as an undergraduate so you know in 115:45 115:45 Pizza is a very respectable job if 115:48 115:48 you're a kid but um my point is I don't 115:51 115:51 necessarily agree with Daniel on that 115:54 115:54 times 4 uh formula um I think it has to 115:59 115:59 be um sort of a more at an individual 116:03 116:03 level so you need to apply and then you 116:08 116:08 know you need to meet certain criteria 116:11 116:11 um so I am not for completely opening uh 116:14 116:14 based on GDP but I'm certainly uh open 116:18 116:18 to discussing now we can find a way 116:22 116:22 because this problem needs to be 116:23 116:23 resolved and uh you know KN how comes 116:26 116:26 all of that comes in in in when you 116:29 116:29 bring uh uh Talent here um so that's 116:33 116:33 that's where where I'm not open for 116:37 116:37 the times for times for sort of 116:42 116:42 start just to clarify uh the trade 116:45 116:45 agreements route where in the schedule 116:48 116:48 we can specify 116:50 116:50 is close to where Hara wants to go right 116:53 116:53 we can specify this many professionals 116:55 116:55 this many 116:57 116:57 managers uh salary levels Etc not the 117:01 117:01 kind of open liberalization that you're 117:03 117:03 talking about so that's the one that I'm 117:05 117:05 getting crucified for right for the 117:07 117:07 trade agreement so I can tell you your 117:10 117:10 life is going to be much harder can I 117:12 117:12 quickly respond to Har quickly um so two 117:14 117:14 points on that one is if the threshold 117:17 117:17 were 10x would you accept it second 117:20 117:20 question is in a conditions where State 117:23 117:23 capacity is weak you're anywh going to 117:25 117:25 have a lot of false positives using your 117:27 117:27 method so the question is are the false 117:30 117:30 positives greater on a 10x or false 117:32 117:32 positives greater on a discretion based 117:35 117:35 based on criteria but there's still a 117:37 117:37 subjective element there and I would 117:39 117:39 submit that with ourstate capacity and 117:41 117:41 current levels of corruption actually uh 117:44 117:44 a threshold of X whatever that X may be 117:46 117:46 actually will have fewer false positives 117:49 117:49 than a individual Case by case entry 117:50 117:50 basis in agre to bring well I don't 117:53 117:53 necessarily agree I expect govern 117:57 117:57 governance to get better I expect 118:00 118:00 digitalization and all that coming in to 118:03 118:03 reduce the discretionary power of 118:06 118:06 Customs officials to Grant a person a 118:08 118:08 Visa uh based on some payment payment 118:12 118:12 under the table so I'm going to go on 118:14 118:14 that assumption that I'm hoping this 118:16 118:16 country will get better once you do that 118:19 118:19 I'm not not in favor of the ex I'm in 118:23 118:23 favor of uh uh uh individual application 118:28 118:28 uh that ought to be uh evaluated that's 118:31 118:31 how it happens I I'm not sure you've 118:33 118:33 been researching this Daniel but whether 118:35 118:35 it is in Singapore whether it is in 118:37 118:37 America whether it is in Australia New 118:39 118:39 Zealand I think it's the individual I 118:42 118:42 don't know how it works in EU or or 118:44 118:44 Mexico that you meant whether anybody 118:47 118:47 can just come in uh so particularly in 118:50 118:50 this country given the the ecosystem 118:53 118:53 that exists the sociopolitical structure 118:56 118:56 that we got to deal with you know I'm 118:59 118:59 just saying what could be practical Fred 119:02 119:02 last comment I'd very like to the 119:06 119:06 totality of barriers that separate Sri 119:09 119:09 Lanka from the world which are not just 119:12 119:12 travel barriers but vares for everything 119:15 119:15 I had a marvelous conversation with a 119:17 119:17 very talented gentleman during the 119:19 119:19 coffee break who runs projects uh here 119:23 119:23 he was telling me about a building 119:25 119:25 project where his costs for raw 119:27 119:27 materials like steel and concrete were 119:31 119:31 50 40 119:33 119:33 30% above the market costs of above the 119:38 119:38 market price of those things and that's 119:41 119:41 because of the various trade barriers 119:44 119:44 that Sri Lanka has enacted and the 119:46 119:46 corruption of getting things across the 119:49 119:49 border so just imagine yes you need 119:51 119:51 people but you also need concrete you 119:53 119:53 need steel uh you need many components 119:56 119:56 so just imagine what a barrier that is 119:60 119:60 not just to trade but to Sher Link's 120:03 120:03 future prospects it cripples sh Lanka 120:07 120:07 businesses because the costs uh are out 120:10 120:10 of control due to these barriers it 120:13 120:13 means foreign investors which are a 120:16 120:16 great uh strength uh which are a great 120:19 120:19 driver of economic activity have little 120:22 120:22 incentive to come in this gentleman was 120:24 120:24 telling me that his bu that the 120:26 120:26 buildings in shanka per square foot cost 120:31 120:31 more than building in the developed 120:33 120:33 World itself why come to a place where 120:37 120:37 it's more costly to build here than in 120:41 120:41 Vancouver uh Canada because the barriers 120:44 120:44 make it more expensive a huge thing it's 120:47 120:47 not just people it's all this all these 120:50 120:50 barriers that are choking sheril Lanka's 120:53 120:53 ability to grow now we have 15 minutes 120:58 120:58 to the end uh I'm going to open it up to 121:01 121:01 the audience yes can you get a mic to 121:04 121:04 this gentleman ah you go thank you and 121:09 121:09 i' I'd like to thank every um all the 121:11 121:11 panel for a very um deep and aidite uh 121:17 121:17 dissertation um I I have to plead guilt 121:19 121:19 to uh the building project um you can 121:22 121:22 see it out of the window 121:27 121:27 but what I even we have only 15 minutes 121:30 121:30 I would plead with you to yeah what I 121:33 121:33 compress it and have a question okay 121:36 121:36 what I want to say is is somewhat 121:38 121:38 complicated I was at the G literary 121:40 121:40 festival and fortunate enough to meet 121:42 121:42 Franco pan and Mary beard and history as 121:46 121:46 you well know for a longest time was the 121:49 121:49 story story of powerful white men 121:52 121:52 working their way on the system you know 121:55 121:55 when I listen to this discussion I think 121:58 121:58 we are not talking enough about the 122:01 122:01 systems you know Mr dilva has a certain 122:05 122:05 Panacea tan you have 122:08 122:08 a a very analyzed thing the system is 122:12 122:12 absolutely crap here it's broken beyond 122:14 122:14 belief um I'm I'm I'm Canadian Sri 122:18 122:18 Lankan and I can see the jvp on the 122:21 122:21 horizon you know I think what we need is 122:25 122:25 um a cultural change um if you buy a 122:29 122:29 company you can fix the balance sheet 122:32 122:32 but until you get uh um uh a uh until 122:37 122:37 you do social engineering you're not 122:39 122:39 going to go anywhere that's what we need 122:41 122:41 here and my suggestion for social 122:43 122:43 engineering is let's have some pilot 122:46 122:46 projects around the country say up north 122:48 122:48 and all that where uh all these holidays 122:51 122:51 don't apply the labor laws don't apply 122:54 122:54 because I think it's too big a change to 122:56 122:56 try and impose on the country you know 122:59 122:59 um it's a sort of Boi idea but why 123:03 123:03 didn't beond numbers thank you right so 123:07 123:07 the idea that instead of doing 123:08 123:08 Countrywide reforms we do zones I mean 123:12 123:12 we did develop tourism that way we did 123:15 123:15 the Boi zones that way and when I was 123:18 123:18 asked to comment on the port city I said 123:21 123:21 because the Boi model hasn't worked we 123:24 123:24 are now creating it for the service 123:25 123:25 industry same One Stop Shop single 123:28 123:28 window that whole idea so what is the 123:32 123:32 response to that 123:34 123:34 question um yeah so that was the 123:37 123:37 original idea of the port city law was 123:40 123:40 for it to be a special economic zone and 123:42 123:42 this was not the current law that is 123:45 123:45 implemented at the moment which is a 123:47 123:47 aberration of the original vision 123:50 123:50 um was to make it a policy lab for 123:54 123:54 introducing ease of doing business 123:56 123:56 policies and procedures and then rolling 123:58 123:58 it out in the rest of the country so 123:60 123:60 that you and that can need not be 124:02 124:02 limited to Port it can be limited to I 124:04 124:04 mean that's the reason I'm advocating 124:05 124:05 why the Port City Bui law should be 124:08 124:08 expanded to being a special economic 124:10 124:10 zone law and that is not intended to you 124:12 124:12 know deprive this nation of taxes it 124:14 124:14 just to gradually take us to the higher 124:18 124:18 echelons of the ease of business index 124:20 124:20 so yes uh but the but the version of the 124:23 124:23 law that we have at the moment you know 124:25 124:25 is is is not the uh uh as I mentioned I 124:29 124:29 don't want to get into that subject but 124:30 124:30 it needs to be relooked 124:32 124:32 at Tom very quick point about this 124:36 124:36 cultural 124:37 124:37 context uh cultures change much more 124:40 124:40 rapidly than we think along the margins 124:42 124:42 that are important to us I was in 124:44 124:44 Pakistan years ago and the uh very 124:46 124:46 distinguished Imam spoke uh on this 124:49 124:49 question he says pakistanis are not 124:51 124:51 honest we all know that dishonesty 124:53 124:53 corruption is right here he says you 124:55 124:55 take a Pakistani business person who's 124:58 124:58 paying bribes and being corrupt in 124:60 124:60 Pakistan flies to England shows the 125:03 125:03 passport steps across and stops being 125:06 125:06 corrupt why he's still the same 125:09 125:09 Pakistani it's because the context is 125:12 125:12 different it's the rules are different 125:14 125:14 he didn't change so you like zones or 125:16 125:16 not well in some sense the with 125:19 125:19 proliferating zones is you end up with a 125:22 125:22 a complex legal structure and people 125:24 125:24 will game it I much prefer same rule for 125:27 125:27 everyone as the default I understand the 125:30 125:30 role of special economic zones but the 125:33 125:33 default should be everyone gets the same 125:35 125:35 rule so I'll give you one last example 125:37 125:37 of a transformation of culture that took 125:40 125:40 place in about three months the Georgia 125:43 125:43 Republic of Georgia was the most corrupt 125:45 125:45 post-soviet state which is saying a lot 125:48 125:48 the police were just criminals they 125:51 125:51 would stop you and just demand money 125:53 125:53 from you so everyone carried two wallets 125:55 125:55 the bribery wallet and the real 125:58 125:58 wallet they fired the policeman 126:00 126:00 instituted a new rule policeman had a 126:03 126:03 new uniform they fire they hired all new 126:05 126:05 police force the requirement was you've 126:08 126:08 never been a policeman 126:10 126:10 before they got them proper police 126:12 126:12 training different uniform different 126:15 126:15 Automobiles and then they bulldo the 126:17 126:17 police stations and built ones of 126:20 126:20 glass they used to take you in and beat 126:23 126:23 you in the police station now everyone 126:25 126:25 has a cell phone within three months 126:28 126:28 they went from one of the most brutal 126:30 126:30 corrupt really warlord states in the 126:34 126:34 post Soviet area 126:37 126:37 to a moderate rule of law state not 126:40 126:40 Perfection but the transformation was 126:43 126:43 stunning and this is a 3mon forgive me 126:46 126:46 Tom I do not believe this happened in 3 126:48 126:48 months you can't hi hire new people you 126:50 126:50 can't train them you can't build new 126:53 126:53 police stations made of glass in 3 126:55 126:55 months the police stations took longer 126:57 126:57 so it's like once all that was done it 126:59 126:59 took 3 months for the results to show 127:02 127:02 not quite it was a 3-month period to 127:04 127:04 Institute the new police force so that 127:07 127:07 was three months of training getting 127:09 127:09 Danish police trainers and so on the 127:12 127:12 changing of the police stations took 127:15 127:15 longer it turns out blowing up police 127:16 127:16 stations is timec consuming and then 127:19 127:19 building new glass ones so that was over 127:21 127:21 about a 2 and 1/ half year threee period 127:23 127:23 so I'd like everybody to think about 127:25 127:25 this time question because I think there 127:27 127:27 were some very uh I would say to this 127:30 127:30 audience very attractive proposals about 127:32 127:32 a 10% tax which most of the people here 127:35 127:35 would love love to to pay uh instead of 127:39 127:39 uh the 20 30% that we are paying now uh 127:43 127:43 nobody's ping 36 by the way yeah uh so 127:47 127:47 you know all of these things there's a 127:50 127:50 time scale issue that a lot of people 127:52 127:52 don't take into to account when they 127:54 127:54 discuss your question Madam um actually 127:57 127:57 it's not a question I'm Shanti just 127:60 127:60 sharing thought as a strategy free 128:02 128:02 movement of people is essential for 128:05 128:05 economic freedom but the country needs 128:07 128:07 to have a skills acquisition framework 128:11 128:11 even Malaysia Singapore like they insist 128:14 128:14 that the uh skilled migrants have local 128:16 128:16 language like Bahasa Malaysia so we need 128:19 128:19 to have a language nvq level for the 128:21 128:21 temporary work permit maybe you know e 128:24 128:24 ease up the rules but have a nvq level 128:27 128:27 so that the conversations become uh you 128:30 128:30 know in local language otherwise the 128:31 128:31 system rejects uh so you're saying 128:34 128:34 Singapore doctor coming here will have 128:37 128:37 to speak singular uh I'm just saying 128:39 128:39 some nvq level for I'm not saying the 128:43 128:43 upper cross right me mid supervisory 128:45 128:45 level technicians uh Craftsmen Tradesmen 128:48 128:48 people which we need are also like nvq 128:50 128:50 skills that can come into the country uh 128:53 128:53 I do not see much difference of Russian 128:55 128:55 it professionals delivering piz versus 128:57 128:57 Sri Lankan doctors being dog workers in 128:59 128:59 London the only difference is UK has a 129:02 129:02 tax system they pay tax we don't and 129:05 129:05 these become informal workers and if 129:08 129:08 they are operating in down south before 129:10 129:10 long they can be contracted to do other 129:13 129:13 uh below the line illegal activities as 129:16 129:16 well uh you know given the status of our 129:18 129:18 country right now now the strategy is 129:21 129:21 you said you don't have a question but 129:23 129:23 I'm going to ask you to wrap it up I'm 129:25 129:25 wrapping it up culture will eat strategy 129:27 129:27 for breakfast what we need to do is 129:30 129:30 while we roll out the strategy engage 129:32 129:32 the unions engage the political parties 129:35 129:35 otherwise the strategy will get ripped 129:37 129:37 apart in political stages uh we take 129:39 129:39 Pilots uh if you look at Sri Lankan 129:41 129:41 Airlines foreign Pilots are paid in a 129:43 129:43 higher uh pay scale and there's 129:45 129:45 dissension there you get Cricket coaches 129:48 129:48 what happened to Micky Arthur and his 129:50 129:50 entire team they got kicked out because 129:52 129:52 the team huddles the players started 129:55 129:55 saying we don't understand English so 129:57 129:57 diversity of talent is good but 129:59 129:59 inclusion strategy and inclusion uh 130:02 130:02 through engagement becomes really 130:03 130:03 essential for economic freedom right 130:06 130:06 reactions from the panel so I think the 130:11 130:11 point is very well made but the question 130:13 130:13 is State capacity we have a state which 130:16 130:16 can't train its own civil servants to 130:18 130:18 speak in the two national languages we 130:21 130:21 have a state who in the case of most 130:23 130:23 English teachers can't even speak 130:25 130:25 English properly so in this context I 130:28 130:28 think it's a bit much to really try and 130:30 130:30 tell the market what to do the market is 130:33 130:33 any way going to respond if somebody 130:35 130:35 can't speak the the language of the 130:37 130:37 consumer that that will be reflected in 130:39 130:39 the price of that labor so I think we 130:41 130:41 should let the market handle this for 130:42 130:42 now until the state develops bigger 130:44 130:44 capacity to start interfering in all 130:46 130:46 these things okay uh I have a question 130:49 130:49 um it's on labor regulation and the link 130:52 130:52 with economic freedom which I think is 130:53 130:53 very valid my question is to Mr vij 130:56 130:56 singher uh you've attracted so much 130:58 130:58 foreign investment to the country when 130:59 130:59 you were at the Boi how did you sell the 131:01 131:01 termination act because I have dealt 131:04 131:04 with these ease of doing business one of 131:06 131:06 the main stumbling blocks is the 131:07 131:07 termination act now we are in a 131:09 131:09 situation we are looking at um amending 131:12 131:12 the label law replacing 13 Acts 131:14 131:14 including the termination act but it's 131:15 131:15 getting Whitt down and it's slower and 131:17 131:17 due to the economic climate I don't 131:18 131:18 think it's going to happen so how did 131:20 131:20 you sell it sell the country despite 131:22 131:22 that and the second one is since you had 131:24 131:24 such a good relationship with uh I mean 131:26 131:26 you were able to change the Boi board 131:28 131:28 why didn't you persuade Mrs kumaran 131:30 131:30 Tunga to get rid of this act because her 131:31 131:31 mother brought it in you had a wonderful 131:33 131:33 opportunity to get rid of it thank 131:37 131:37 you um quick answer was that when I took 131:43 131:43 up office within months the government 131:45 131:45 wanted to introduce a workers Charter 131:49 131:49 and I took one look at it and went to 131:54 131:54 ramani what's her ILO I forget the last 131:57 131:57 name r because I didn't know much about 132:00 132:00 labor law I got her to teach me 132:02 132:02 everything there is about labor law and 132:04 132:04 I decided that the employment 132:06 132:06 termination Act is the lesser of the 132:08 132:08 evil because there are and I pushed I I 132:11 132:11 can't remember whether I had any role to 132:13 132:13 play in that but but to make sure that 132:15 132:15 there have a formula introduced in the 132:17 132:17 termination of Employment Act so that it 132:20 132:20 is fairly clear that if a worker has 132:23 132:23 worked X number of months or years there 132:24 132:24 is a particular formula that is applied 132:26 132:26 and in private sector positions of 132:28 132:28 companies I've been managing director of 132:30 132:30 I have used the termination of 132:31 132:31 Employment Act in one particular company 132:33 132:33 to reduce the staff by 26% at all levels 132:37 132:37 senior to uh labor level without a hint 132:40 132:40 of a strike so it does work uh as far as 132:43 132:43 the termination Employment Act but I 132:45 132:45 wrote a discourse with the help of 132:47 132:47 ramani against the workers Charter and 132:50 132:50 highlighting some refinements to other 132:52 132:52 laws which cbk took note of circulated 132:56 132:56 the cabinet and that killed the workers 132:57 132:57 Charter so so the point is that we need 133:01 133:01 to engage with the government and 133:02 133:02 educate them and and and and ensure but 133:04 133:04 but but to me I don't have a problem 133:06 133:06 with the termination of Employment Act 133:09 133:09 at that time at least I don't know 133:10 133:10 whether whether and I'm talking uh 2081 133:13 133:13 I've applied the applied the law so so 133:15 133:15 I'm not an expert but I leave it at that 133:18 133:18 right 133:18 133:18 so I believe we are at the end of the 1 133:20 133:20 hour I've been given signals that we 133:24 133:24 should wrap up uh thank you for to the 133:28 133:28 panel I think we've managed to have a 133:31 133:31 decent discussion uh thought has been 133:34 133:34 provoked even if I don't agree with the 133:37 133:37 10% tax rate which is an immediate 133:41 133:41 problem that we have which is I think uh 133:44 133:44 for our foreign guests we have to tell 133:45 133:45 you 133:47 133:47 that when we have to give salary 133:50 133:50 increases to our government servants 133:53 133:53 they have been demanding salary 133:55 133:55 increases there are three ways to get 133:57 133:57 the money one is from taxes the other is 134:01 134:01 by you know colloquially printing money 134:03 134:03 monetary financing which is no longer 134:05 134:05 possible the third is to take loans from 134:08 134:08 somebody and that is also not possible 134:11 134:11 so we have a immediate cash flow problem 134:14 134:14 in this country which would make your 134:16 134:16 10% proposal somewhat unrealistic at the 134:19 134:19 present 134:21 134:21 time given that in 20 just for your 134:25 134:25 information in the Years 2020 and 134:28 134:28 2021 of the totality of all the tax 134:31 134:31 revenues totality that is Inc corporate 134:36 134:36 uh income taxes personal income taxes 134:38 134:38 taxes on foreign trade and value added 134:42 134:42 taxes various kinds of excise taxes 86% 134:49 134:49 went to 134:50 134:50 salaries and pensions 86% there was 134:54 134:54 nothing left right now it's down to 50 134:58 134:58 because we have raised the 135:01 135:01 taxes so I have to see I have to 135:05 135:05 unfortunately tell you the basis for my 135:09 135:09 my uh disagreement on the tax question 135:13 135:13 at least in the short term we have a 135:15 135:15 serious cash flow problem in government 135:17 135:17 we've had for a long time but it's 135:19 135:19 extraordinar serious right now so with 135:23 135:23 that let's wrap up can can you want to 135:25 135:25 respond one one quick Point while you 135:27 135:27 were talking I just received a text 135:29 135:29 message on a point that you mentioned 135:31 135:31 where an investor who's been a business 135:33 135:33 partner with me in four or five 135:35 135:35 businesses including in in in sonon t 135:38 135:38 trails with Dilma he has just been told 135:40 135:40 by the Boi that the level of Defense 135:43 135:43 Ministry approval for his visa extension 135:46 135:46 at the Deo level is not suff and there's 135:48 135:48 another approval level required and this 135:50 135:50 is a man who has invested in this 135:51 135:51 country for 25 years and that really 135:54 135:54 gets me unless we stop the corruption in 135:58 135:58 the immigration department I'm sorry 135:59 135:59 this country doesn't have hope right 136:02 136:02 okay there are action items plenty from 136:05 136:05 this morning I hope our government 136:08 136:08 officials here will take notice of it I 136:10 136:10 hope others will also take notice of it 136:12 136:12 and let's get something done thank you 136:14 136:14 very 136:17 136:17 much thank you everyone uh thank you to 136:19 136:19 Dr Professor Samara and the panels for 136:22 136:22 that wonderful and engaging discussion 136:24 136:24 and thank you so much for listening to 136:26 136:26 us and putting in your questions as well 136:28 136:28 um so we now come to a close of the 136:30 136:30 morning session of this Summit uh we'll 136:32 136:32 now be moving on into the audit um I 136:35 136:35 would like to thank you all for joining 136:36 136:36 this morning this morning session of the 136:39 136:39 the opening of Sri Lanka's economic 136:40 136:40 freedom Summit 2024 I hope you have a 136:43 136:43 lovely rest of your day and we will see 136:45 136:45 you hopefully at the evening session 136:47 136:47 thank you