charindra chandrasena 00:03 Dana, Dhananath Fernando 00:04 hi Jari, good good joining after the long weekend. charindra chandrasena 00:09 Yeah, how was the long weekend? Dhananath Fernando 00:10 I mean, it was it was good. I I travelled for a couple of countries over the weekend. charindra chandrasena 00:16 Over the weekend. Yeah, yeah. Dhananath Fernando 00:17 I I travel. I mean, not physically, but for work, I had to. I had to look for few countries and meet some of their representatives because I'm I'm moderating a session with chartered accountants, the annual conference. So I had to get myself prepared, and there's a session with some representatives from different countries, so I do look like what's happening on their countries and trade issues and all that. Yes, charindra chandrasena 00:46 but how was how did it go? Dhananath Fernando 00:48 I mean, it was it was good. I I had to meet few of them. I mean, everyone is excited to how they can adjust with the new geopolitical order, and there were also some. I mean, there were suggestions for Sri Lankans as well. So yeah, it it was it was quite interesting than I thought because everyone had different perspectives on the geopolitical order on one side. What are the charindra chandrasena 01:16 perspectives? Dhananath Fernando 01:17 I mean, on the geopolitical order, I think all the countries are actively looking at sort of new building new bridges, so that was interesting because I didn't expect. I thought it's like pretty reactive sort of a thing, or they are like waiting and watching, but actually they are not. All the charindra chandrasena 01:36 other countries, other countries Dhananath Fernando 01:38 are are charindra chandrasena 01:38 not Dhananath Fernando 01:39 are not. They are actively looking at trade integration and like how how you navigate through this, and on the other side, that's why I think we broadly discussed this last at a last last podcast, Sri Lanka strategy because what I gathered was we are still a little like slow and reactive, and we had to take a sort of a more proactive approach because there were there were some thoughts that even there were some invitations extended, but the response rate was poor, and they are waiting to hear back from our side. charindra chandrasena 02:17 Invitations extended to Sri Lanka. Sri Dhananath Fernando 02:19 Lanka, I mean, some casual conversations. I think their engagement. Probably, I don't know what what was the challenge because it may be a capacity issue. It may be a geopolitical challenge because you know sometimes you cannot you know you you you take a slightly a distance approach from certain geopolitical pressures. You want to align with someone, so some you attend neutrally. Likewise, so charindra chandrasena 02:46 you might not respond intentionally. Exactly, you know, Dhananath Fernando 02:49 you might not trend exactly. So you just, you know, it's like you leaving the ball sort of a approach. But I think what I realised was we have to chari. I think it may be the it may be the strategy. It may be a lack of strategy. I don't know what's happening, but I felt that we have to take sort of an active approach, sort of a war room approach on this managing the geopolitical front. I mean, rather when I say geopolitical, not balancing this U.S. China, India. I'm saying you're talking charindra chandrasena 03:19 directly between two countries, Dhananath Fernando 03:21 two countries, and mainly on the trade front because they are interested on trade, very much interested. I mean, they are here like pretty much business nego not the negotiators but facilitators for business. I mean, because if you look at like we are not Israel or Palestinian, like there is no war situation to handle. So the main representation is the trade front. Of course, there are some geopolitics that you have to manage on Indo-Pacific and with India and China, but it's all one front. But it's the trade. But I don't think that we are approaching even like the negotiations of free trade agreements or how can we expand trade. I think that I felt is something missing, and even on the tourism? charindra chandrasena 04:04 Okay. Dhananath Fernando 04:05 Yeah, that was charindra chandrasena 04:06 you. You can't tell us the country's section. No, I I I won't. But Dhananath Fernando 04:10 I think that's a because ultimately, Chari, all these representatives are all sort of a community. You know, they meet. They charindra chandrasena 04:18 talk amongst themselves. They talk amongst themselves. They Dhananath Fernando 04:20 meet for every like their national day. They invite all of them. They meet for dinners. They meet for I mean these business leaders. They host them together. So these pretty much the sentiments are the charindra chandrasena 04:31 same. Like like doses in in offices, they used to have water cooler conversations around the water cooler. When you get go to take water, they used to have conversations about what's happening in the office, so the diplomatic corps is also kind of like that, where they they talk amongst themselves and say these guys are not responding or these guys are excellent. I got a prompt response. So generally the sentiment Dhananath Fernando 04:52 generally the sentiment was the same. Absolutely, and and then also you remember when when the what do you call that exposition. Of the temple of the tour, totally. Yeah. So even like the all the diplomats went together. So it's a it's a community. So this word gets passed around very fast. So that's something that we have to keep in mind. How how was your long weekend? charindra chandrasena 05:15 Mine was good. Mine was mine was less less formal than yours. Yeah, yeah, sacrifice a bit more casual. You're working on the weekend, long weekend, awesome. Yeah, travelling between Dhananath Fernando 05:27 countries, but but boring stuff. But this is this charindra chandrasena 05:32 is I mean this is interesting. I I want to just pick up on that. Now, when they say they are not responding, they are not react. I mean, they are. The general idea is that they are not proactive. They are reactive, Speaker 1 05:46 meaning charindra chandrasena 05:46 the Sri Lankan foreign service. Dhananath Fernando 05:48 Correct. Why charindra chandrasena 05:50 do you know why that is, or can you venture a guess as to why that is? Dhananath Fernando 05:55 I think, Shari, what they expect is given the situation the Sri Lanka is in after debt restructuring, they expect. I mean, their expectation levels maybe how the other countries may be responding with their line of communications is more proactive because, I mean, you basically initiate. Okay, can you do something? You know, this is what we need to do. Can you activate? You know, what is what are the trade opportunities? Can you send like a business delegation? Can you invite them? So I think it has sort of a rapid, rapid response sort of a approach is what they expect. And also now other countries they have different clusters. Okay, you there's someone I don't know whether there there is. I beg everyone's pardon. If there is actually a structure at the Ministry of Foreign Affairs, like you know, some people. I mean, there's a separate officer or a department to overlook the African continent. There's a separate, you know, to to overlook the South Asian region. There's you know a separate unit to overlook. Yeah, charindra chandrasena 06:57 but it's almost irrelevant, right, Dana? Because even if they have, if this is the feedback that you know somebody is getting, saying that they are not react. I mean they are reactive and not proactive. They are late with their responses. Sometimes they are not responding at all. I'm guessing that's what that's the kind of thing that you heard. Then it doesn't it doesn't even matter whether they have those segmented like compartmentalised divisions, like one for East Africa, one for East Africa. True, true. It doesn't really matter, right? Dhananath Fernando 07:27 It doesn't really matter, but I think that means charindra chandrasena 07:29 it's dysfunctional. Even even those teams are dysfunctional. Dhananath Fernando 07:32 Correct. That is dysfunctional in if there if there is. But I think what they expect is because there are enough opportunities that they would like to partner with Sri Lanka, and it's also like what we discussed last time. What the Japanese Minister Kandro Taro told me was, you know, it's the countries have a longer memory than their people, so you have to basically constantly even like to come for a free trade negotiation or whatever sort of a business deal, it takes time, but it seems it is not happening. They felt like, okay, you are an ambassador, you are there, we are there. Only when there is a need that we will. It's like a, it's like your agent sort of a thing, but you know, only you approach them whenever which is needed. But that is not the approach, the ideal approach. You basically reach out to them, you invite them. What can be done? You know, you connect with the business community. You ask them for also to explore opportunities in their respective countries. Check what can be brought back to them because there was something interesting told on golf. Because I didn't know actually. Now Singapore, the main the Malaysian one of the main tourists that they attract is from Singapore. So if you look at the tourism numbers from Singapore, it's more than the Singapore's population to Malaysia. The reason is most of the Singaporeans travel to Malaysia because the cost of living or like you know to for this entertainment like golf and everything is very expensive in Singapore. So people can travel to Malaysia because it's in a way a shopping destination and play golf like for for few weeks and then come back. So as a result, you have sort of a even I think than the single that's what I heard. I have to double check the numbers. What they said was you know there's more people travelling from because of their cost effectiveness, and they say it's like you know it's a quite an attractive way of attracting tourists, and the question was like okay Sri Lanka has again some golf course here, but you know what can be done, and are you promoting it in a way that whether it can also attract some tourists to here? No, charindra chandrasena 09:54 I think this tourism packaging again. I think we have spoken about on the show. The tourism packaging for me is pretty poor, right? I think most of the tourists we are getting now are social media generated tourists, and we seem to be relying on these influencer driven campaigns. Some of them are not even campaigns; it's just influencers posting about their experiences and relying on word of mouth, relying on good feedback, and for me that's not a national level policy. So I, when I when we spoke about this last time, also I said that we are going to miss the tourism mark, and now the government themselves are coming out and saying that we are going to hit 2.5 million. Their target is 3 million. Okay, which means the 5 billion revenue target is going to fall short as well. So, I I I know that it's going to be better than any other year this year. But if you are setting a target, Dana, I believe that that should be set with intent, it shouldn't be just like you know. There's a saying: "Aim high, and you'll fall in the middle. For me, that is not a strategy for a country, right? A country's targets should be scientific. A person can say, "I'm going to lose 10 kilos by June, and then end up losing seven kilos or six kilos. That's that's okay, right? But a government can't have these unscientific random targets. Dhananath Fernando 11:31 I think also if the government trying to benchmark themselves with the previous governments, that's not a good idea, because okay, definitely you can do better than the previous governments, or like because of the crises that went through because of COVID and everything. Anyway, the numbers should look better, provided that there will be no any unfortunate events. So we should not exactly what you. I I pretty much echo what you said. You know, you have to you need to check what has to happen for us to reach where we need to be, and then strategize backwards rather than checking. Okay, to exceed the targets set by the previous governments or do better than and charindra chandrasena 12:08 and they are only benchmarking that with the previous government. No, I mean that and a few others. Now with corruption, they are not benchmarking with the previous governments. No, they are not saying they were 90% corrupt. We are only 10% corrupt, so we are better. And then this is complete elimination of corruption that they are going for. And like that, you can't be benchmarking against the government or governments that you say has destroyed the country for 75 years, and say that we are better than that year. For me, that doesn't hold water because Dhananath Fernando 12:42 I, in in particular, I felt this geopolitical topic is important because very likely the next sort of the trigger event, external trigger event, could be a geopolitical event or a climate event. I mean, there can be anything that can happen, but because of what's going on Gaza, I know it's a broader topic. Like you know, what's going on Gaza? What's going between India and US? What's going between India and China? There is no way that we could avoid this. So it can we will get the pressure, and at the same time, the strategy I wasn't sure because as you may have seen, now on the Gaza one, it will also in a way translate to internal pressure, which are like because what's whatever the decision what is going on Hamas and all that, it will translate to your vote base. Already it has been translated not only for Sri Lanka, even in other countries. That's why certain countries said like they are going to accept Palestine as a country and things like that. Yeah. So it is going to translate in the local politics, and it can basically you know raffle certain things internally. And charindra chandrasena 13:52 that that that situation is more complicated now, Dana, than say in the 90s because this has been going on for how long, right? So it I believe it's more complicated now than it was in the 2000s, 90s, 80s, whatever. Because now we have greater relations with Israel due to the migrant worker factor. Before that, the support for Israel from Sri Lanka was mainly on religious grounds, you know. Say Christians may have supported Israel because it's the promised land, and you know for those kind of reasons. I don't know if they did. I'm just saying that that may have been a reason, but now it's a bit beyond that. There are people who are supporting Israel because there are economic ties and their their friends and family are working in Israel or they themselves are working in Israel and they have seen the development of that country. So the the fact that Israel is committing war crimes and genocide. Are sort of brushed aside. So the government, for the government, it's not a clear-cut case anymore. Of because traditionally Sri Lanka has been pro-Palestine, right? Yeah. Now this time it's not a clear-cut case of the government supporting Palestine wholeheartedly. I don't think they can do that anymore. So it's a it's a bit more complicated than previous exactly, Dhananath Fernando 15:21 and also ultimately we understand this. All our foreign service has to be on economic diplomacy. In our case, there are other things, but it's more on the economic front. So I'm not sure to what extent. While there was a success, like on the U.S. trade negotiations, that the tariff case that we managed to at least get into the regionally accepted tariff rates. So likewise, I think we had to give a little bit more focus. Even but charindra chandrasena 15:49 on that front, do we know what concessions we had to make for that reduction in the tariff? Dhananath Fernando 15:56 Not. I think details are not yet out. I'm sure there must be some level of agreement. But we really do not, as public or users, we really do not know. But at least there was, we know that it's 20% Of course, we don't know the what we agreed to. What the charindra chandrasena 16:08 quid pro quo is, right? What we are offering in return for that reduction. We don't know. We don't know. We don't. I think we can we can be happy that it's reduced, but then it has to be reduced without affecting even greater some of the other sectors. Correct. No agree. Right. Dhananath Fernando 16:24 Yeah. That that is. We we yeah. I think we we don't know which we should know. Yeah. We should know. We charindra chandrasena 16:30 should know. I think that transparency is important. Dhananath Fernando 16:32 Correct. And the other matter is yes. Moving from there since our last conversation also from Japan. Now Japan has, they have appointed a new prime minister. I think the first female prime minister. Yes, first female prime minister. I think she's not yet appointed. I think she had to get the parliamentary consensus. I think in few weeks' time, but that's also important because as we discuss Japan, everyone knows how important Japan is. So ideally, we have to have, I mean, a new strategy in my view with Japanese relationships because we don't know because she's the first female prime minister and and also on the gender parity front, we haven't really done well from 2006. So. in that front, I mean, we have to have a very active because things evolve. It's not the same Japan that when President Jawad Dana delivered that speech on sanctions. So things have evolved. So we have to look at look at on the gender charindra chandrasena 17:39 parity front. I think it's it's an interesting case in Sri Lanka because the ones who have broken through that that last ceiling or gone to that extent of like national leadership have been both from the same family, right? Mother and daughter. Dhananath Fernando 17:52 Yeah. charindra chandrasena 17:53 Beyond that, possibly the the most powerful female politician is Harini. Yeah. the current prime minister? But I'm. I wonder when we are going to have a sort of a politician who will be able to rally everybody around them, take a presidential kind of figure, and I also wonder how much of that is down to the political culture. How much of it is down to, you know, women's participation in politics also, meaning forgetting the political culture for the political culture to affect women, it has to. They have to come in. Dhananath Fernando 18:38 Yeah, charindra chandrasena 18:39 women coming in also, what the ambition levels are, then do you have any thoughts on that? Like I, I don't, I haven't really seen, you know, women coming up strongly enough, and that maybe that they don't want to get into that mud pit and you know get themselves also muddied up, but I mean it is not a pleasant environment in most countries politics, right? But then you see more women. So what do you think in Sri Lanka? The reason Dhananath Fernando 19:14 is I may be biassed, biassed in the sense because I'll I'm looking at more on the economic point of I feel the while I mean only a political approach to bring women into politics may not work because ultimately it's the poor women female participation at an overall level because our I mean that economy is one of the main determinants on that because our labour force participation is 30% so when your labour force part female labour force participation is about 30% 40% there is no way that you can expect politicians on the political front it can be 50% because it's ultimately coming overall. Because when women take part in the labour force, then they get exposure, then they get experience, then they can contribute better. Politics and then they earn better. Then they have financial independence. If you're only looking at only bringing female, I mean, making 70% female representation or 50% in parliament, it won't work. So that's why it's critical that we bring. I mean, improve the female labour force participation. That's chary more. Those are regulatory challenges. That has to basically remove those regulatory barriers, mainly on work hours on one front, flexible work hours, and on the maternity leave matter, which I think Verity Research has has excellent proposal on covering the maternity. Yeah, basically charindra chandrasena 20:40 to provide it, I mean, to take the burden entirely onto the government, so that the private sector isn't, I mean, the reluctance in the private sector to hire women, especially women of the child-bearing age, Dhananath Fernando 20:57 correct, charindra chandrasena 20:58 and that is a real problem, Dana. So, and I'm, I'm, I'm glad that we are now. So that might be addressed in the budget. It might not be, but I'm glad that that's now coming to the forefront. And so, Verita Research has been working on that for for many years now. Dhananath Fernando 21:18 Yeah, charindra chandrasena 21:18 and the cost of it is actually not as much as people assume it to be, you know. So at the end of the day, I I I hope that that gets passed. So I think I I agree with you in the sense that this is not just a political issue; it has to be a widespread Dhananath Fernando 21:37 widespread issue. That's the challenge on these policies. You now even look at on this female thing. I think we are not deviating from the other issues. No, no. The now even if you look at chari the the child care because it's all interconnected. Yes. Because women have to leave their jobs because of the child care issue. You really do not have proper child care. And even if for schooling, your office hours and school hours completely clash it together. It doesn't mean that the kids should also be from nine to five at school, but because of those challenges, like you know, you have to have a separate person to drop them at 730 and pick them up at. I mean, it would charindra chandrasena 22:13 be helpful if the fathers also you know contributed a bit more. Absolutely. To like, there are certain things that only a mother can do, especially in the early, maybe the first two years of a child's life. But then a father can get with like surely picking the child up from school. Dhananath Fernando 22:31 Absolutely, or or else, sorry. Or the think of a structure. I'm just speaking of the think of a structure where you can have a different like child's unit after school because ultimately like a day kia charindra chandrasena 22:46 yeah Dhananath Fernando 22:46 because ultimately your capex like if you look at the utility of our fixes it's on schools generally schools are closed three months a year right additional to the weekends so if you look at one year basically 25% is anyway close for school holidays, and also even a given day, it only operates about six to seven hours, from 730 to let's say 230. So afterwards, so if you look at like the utility of that fixed asset after investing so much of money, you are not utilising that asset at all. That's right. So as a result, either you, I mean, you can monetize it now because these are, I mean, billions and billions of rupees invested over a period of time. So if you look at how you can utilise it in a better way, of course, it doesn't mean that all schools should run like day care centres or something. But if there's a structure, you open it up for someone else, you open it for school, you know, to take care. So then, the because if the kid is safe at school from 730 to 130, probably they should be, you know, safe if there is a structure. And but it doesn't mean that you should teach them, you know, nonstop. I'm not an educational. No, no, no. You know what else can be done because of these child protection issues and you know so think on that structure because then it it removes the barrier of like you know someone having you know again picking up from kids at like 130 or 230 at school and there are extracurricular activities so there can be ways that we can restructure so that's my point broadly if you need to really get women into politics, and starting from what you discussed on Prime Minister Harini's context, I think the Japanese Prime Minister is also not coming from a political background, and she is known for standing up for issues, and it's challenging given the Japan's economic challenges on the other side, but I think broadly we are entering a new geopolitical order. But also with our close allies, things are evolving. I am not sure whether we have identified it right and whether we are, you know, involved. I don't know how much charindra chandrasena 24:55 of that lack of identification or the. The reactive nature of our foreign policy or the foreign service-how much of it is down to? I'm going to ask this question bluntly from you. There's a school of thought in Sri Lanka that this government lacks English, okay, and therefore on the world stage they are going to be having a handicap compared to previous governments, Dhananath Fernando 25:24 how much of that do you agree with, and how much of that do you not? Definitely, English is needed for geopolitical relationship. Chari, I do not think it's a. It has a bearing, but it is not the prime factor. I think it's the intention what matters because if you look at Japanese, they don't also speak English, so language is not the barrier. So charindra chandrasena 25:44 now, when the Japanese example is brought in, some people say, "How can you compare Sri Lanka to countries like Japan or even China? Because they are established nations. Sri Lanka is still looking. I mean, trying to find its feet on the global stage, and therefore it's important for Sri Lanka to have English, and that traditionally Sri Lanka has been functioning in English. Yeah, Dhananath Fernando 26:10 no, I I do not think it's a factor. It's mat it's a matter of under. I mean, be pragmatic. I mean, if you have a language skill, I mean, if you have a challenge with the language skill, you use the proper translators. That's the protocol. I mean, if you look at the Russian Prime Minister or the Chinese Prime Minister, they also don't speak English. But of course, they are established. But they are using the way. I mean, they are using the tools that is available to communicate. But I think what is lacking is rather than the English language, it's the intention. I mean, you have to basically-it's a more a PR like a-you become a likeable person because ultimately it's that personal connection that basically you know builds that bridge. So that's what we need to do. In my view, English-I mean, if you have it, it's an advantage. Like the diplomats that we had, like mr. Kadira Gandal, I mean even for that matter, Ali Sabri to Mangala Samaraveer, GLP. But it's rather than having that English skills, also while may have like slow success, maybe it's the intention and the rapport that we needed to build. Because even China, Japan, while they are established countries, Charlie. Don't forget, like they all need us. Look at the relationship that we have with Japan. Look at the relationship with all with all the challenges with India. Look at what we have with China, to that matter. So they we are important, but I do. I mean, as we all know, we are not capitalising the importance because we are very reactive. And when you become reactive, they are trying to make use of you rather than because then we have to you know go up front and basically have those economic build those bridges because that's what is crucial. So charindra chandrasena 27:52 for me, actually, more than the language, I am with you on that. I I don't believe that English is the most important element of foreign policy, a country's foreign policy. I think it comes more down to lack of experience because now that remember that example of Sunil Handunati going to that forum and answering that question in a very muddled and you know almost incomprehensible Way for me, there is inexperience there on two fronts. One is why send him there, right, when he is not equipped to handle those questions in English, right? Because otherwise he could have just used an interpreter. Now the president doesn't try to speak in English, right? He speaks the way he's comfortable, but off camera and with the mics off, he does speak to these people in English, and that might be broken English, but there is a communication. So when Hanuneti goes in and you know paints that picture of the country, it's not just a lack of English; it's the fact that he didn't even understand the question. So for me, it's lack of experience in sending him there, and then secondly, his lack of experience in in actually handling that smartly. So I believe that we are not right. You have to play the field that you're on. Dhananath Fernando 29:23 Yeah, no, agree to an extent. But I think it's also very understanding now, especially when you're on that international league, sort of you political international league. It is these questions are becoming more and more complicated now. It is not you just going and answering a question because you should have a overall idea of what's happening. You can be you know a minister on a certain discipline, but that is not required to manage a question in that calibre because there are so many variables that are moving, which you may basically. Struggle with if you really do not get it. So it's important that you have a trained team, or like at least appoint one or two people who who are well read, who are up to date with these geopolitical matters and economic issues. Because ultimately, what they it's not sort of public intellectual sort of a thing. No, you should be equipped with a little bit of economics, a little bit of geopolitics, a little bit of environment. I mean, climate issues, and a charindra chandrasena 30:26 little bit of communication. A little bit of communication. So not not somebody who habitually puts their foot in their mouth, right? So because I mean this case of Hanuneti, it's not just in English, it's in Singapore also, where he just keeps saying things which embarrass the president and and the government as a whole. So when you bring in English into the mix, which is not comfortable in, then it's even worse. So just about sending now, for example, Minister Vijayhera is not particularly fluent in English, but he seems to manage because he has these street smarts and he just has better communication than Dhananath Fernando 31:05 yeah. In in that case, if you really go to the root causes, that again it ultimately boils down to the you know when you also get into politics, you ideally have some level of experience in you know different you know many you know, working for a maybe to government to an extent, maybe working at the private sector, doing some volunteer work. So then, you have that overall thing. Because I remember a classic case. You remember since you also are a big fan of cricket, when Steve Smith and I think I really cannot recall the other bowler on that tampering the ball matter. One charindra chandrasena 31:45 sandpaper, Dhananath Fernando 31:46 sandpaper issue. One of the main punishments or like you know penalties for the cricketers by the Australian Cricket Council was two. They gave a number of hours to volunteer because their diagnosis was for someone to really become unprofessional, like you know, you know, to to tamper the ball and think that they can win the match, they went to the root cause. They thought, okay, that means this person has an issue with their, you know, on the thinking. So they thought, okay, you have to work while with all penalties. I think they, you know, Steve Smith was he was I mean his captaincy was removed and all that. But they gave that thing because and I think the biggest penalty was for David Bourne, if I remember right. David Bonner charindra chandrasena 32:34 and yes, these two were the seniors. There was another boy called Bancroft. Bancroft, exactly. He's the one who took the hit. Hit exactly. Yeah, Dhananath Fernando 32:42 but yeah, the the biggest band for Dave, I think, for the seniors was because you know for influencing the exactly. So there was a logic even their thinking. So even this political thing, so you have to ideally you know have that because even the U.S. system, while it is not perfect, I was thinking even in a transition rather than all of a sudden someone leaving and coming, ideally there has to be automatic presidential transition exactly where the charindra chandrasena 33:05 election happens in November and then the actual what is it taking oaths happens in January so that new government has time to get their house I mean get their team in order and the old government can facilitate the smooth transition. Dhananath Fernando 33:21 Absolutely. So I I think these all require a lot of constitutional amendments. But at least there has to be some practice. At least you know who is in the you know shadow lineup, and you expose them. You get involved, or like there's a structure to do it. That way you can minimise those you know mistakes because ultimately it's a country. You can be any political party, but you have that exposure. So I think we went a little longer on the political front. I think it was very interesting. But I charindra chandrasena 33:49 mean, that connected to that is the economic side of things. And so now, okay, on the economic front, the ratings upgrades have happened. Yeah. Right. Good news, or do you have any bad news for that also? No, Dhananath Fernando 34:02 there's in this case, Charlie. The important thing is there's good news, but of course, good news can make it bad the way that you interpret it. Only hard side. No, it's good. I mean, the the the feature rating has reaffirmed the C stripper C plus. So they have given some reasoning the risk factors as well. Risk factors are mainly on the debt. What they have said was the debt numbers are not with the range of the feature rating. For an example, the the debt is mainly measured based on compared to GDP, you know, a simple calculation is debt divided by the GDP. So, which is at the moment is about they what they expect is it will come to about 95% in 2027. But ideally, it has to be in the range of 70s as per each like the rating structure. Same with the interest that we pay as a percentage of revenue. So they say it has to be ideally in the 14% but it will most likely stay at the 40 to 50% in the Sri Lankan context. So if we really do not do the reforms, that's why we really reiterate on the reforms front. It would be very difficult in moving forward, but at the moment they have reaffirmed that triple C plus. What people need to understand is when we are paying, start repaying our debt, we plan to repay it again by borrowing money. So basically, this rating is a matter of whether we can again borrow money or not. So if we really cannot upgrade the rating to borrow money back, it's a matter of time that again we have to going go for another restructure. Ideally, this has to be come to about B level to borrow. Of course, we can borrow at C triple C plus, but the interest rates interest rates are high, yeah. Very, very high. But charindra chandrasena 36:03 I mean, now I think we are. Correct me if I'm wrong. I think we are on track to reach B, right? By the time the repayment has to start. Dhananath Fernando 36:12 Yes, I mean we are on track in the sense, provided that we take on the reforms, because the other other risk factors which highlighted by ADV. Whether it's ADB, yes, I think it's ADB because now remember, Chari, we when we did the debt restructuring, we went for this macro linked points. Basically, means if you perform well, the debt forgone would be lesser. charindra chandrasena 36:39 Yeah. Dhananath Fernando 36:40 So now we are performing well, which is good. charindra chandrasena 36:43 Yeah, but then so I have a question about that, and I have a concern about that. Aren't you basically betting against your own economy, right? When you say okay, a macrolink bond, essentially you are being punished for improving your economy. Dhananath Fernando 37:04 Not really, in my view, because we had to go to the reasoning. Like first, we were the one who borrowed, promising that we will pay back. So now they have given a relief because ultimately it's our duty to, regardless of who borrowed and whether we, I mean, wasted it and all that is true. But as a country, I think we are responsible for what we did. So we borrowed first, and we basically breached the contract. charindra chandrasena 37:32 Yeah. Dhananath Fernando 37:33 So now they have given a debt relief. So if we do well, some share has to be also shared with them. Some share in the sense if we do well the release I mean the relief would be smaller. charindra chandrasena 37:46 Yeah, exactly. So so the if your if your economy grows, the more it grows, the less you have less you have as a debt like a hair cut on your debt, right? So as the Dhananath Fernando 38:01 interest, charindra chandrasena 38:02 yes, right. So that is, isn't that an incentive for a government? Not that it it will affect this government. I'm saying for for a government, for a general government, isn't that an incentive to not grow your economy? Dhananath Fernando 38:14 That may be one argument, but I don't think so because ultimately, it's if you imagine if you structure it in the other way around. Like if your economy is not growing, you have to pay a higher debt. It is not possible on the first place. But if your if your economy is growing and if your debt remains as it is, so then the incentive structures are quite upside down for the bondholders, so who you know, from their point of view, from their point of view, on the government's point of view. Also, it may be because now we are increasing the capacity to pay the debt. So, in my view, we should take it on the we should look at it on a positive anger that we have now improved the capacity to pay it, so we can pay it. But I think I agree with your argument to an extent. I think the I mean the argument was after 2027. Now your debt commitment afterwards, like depending on your GDP in 2027, plus whether you had cumulative economic growth of 11.5% then your it decides what I mean. What are the conditions on the macrolide bond? And afterwards, you are fixed for 10 years. I think a better improvement could have been whether you have like a mid range capture as well, because you probably will grow for the till 2027, and imagine afterwards that you you are not growing or some unfortunate incident happens. So then your conditions are fixed for 10 years, which could have been avoided. I think there has to be sub conditionality or review has to come and adjust it. But given the nature of the instrument bond, it is very difficult. And this is the first time even the macro league bond has been done. We are depending on your macro conditions that things have changed. Even Verity has suggested a governance league bond. Governance link bond is also a new concept. charindra chandrasena 40:12 Yeah, which which for me is a better concept because then there is an incentive for the government to improve their governance. Governance, no, Dhananath Fernando 40:21 absolutely, right. charindra chandrasena 40:22 That so if you improve your governance only, you will get the best or better benefit out of it. Correct. Dhananath Fernando 40:28 I think the challenge is what they have highlighted was if we if we now at at the moment we are performing I think at the you know the the top band there was the IMF baseline, then scenario one towards the favourable side and scenario two, I think already I think we have hit about 100 billion dollars this year GDP. Expected was I think about 88 billion. So we have already passed I think if I remember the IMF benchmark and the even the scenario wise pretty much we are on the I mean on the favourable side, that we have performed well, so I think the expectation is that it will have an additional 250 million US dollar to be paid. I mean, compared to the baseline, so with that challenges we have to grow exports. I think the risk factors that have highlighted was we are mainly dependent on the tourism and the remittances, and also in terms of revenue, it's picking up because of the vehicle imports. So this will, when it slowly comes down, if we don't improve our tax administration, those challenges will be there. That's where the concern. I mean, why triple C plus so far? I think when the economy grows faster, that the growth reforms are required. That's why even the geopolitical conversation was relevant because for us to improve trade, to grow the economy, it has to purely through trade. There is no other way that we can grow the economy, and that front we have to have that geopolitical connection and also the other reforms on the trade front. The economic transformation bill, in which whatever the name or form that we want to bring it, that has to be there the free trade agreements because we are talking about like a five year, 10 year you know time frame to really grow the economy. So that's where the tricky part is. What's what's your take on? I mean, I agree with your point on the not agree, but I think it's a different way to look at it. But I really do not see it's a disincentive. I think we should take it more. No, charindra chandrasena 42:24 I, I, I, I, I mean, I've heard this argument that at the time there wasn't much more that the government could have done. That they were in a sort of a tough corner. That they couldn't really their negotiating power was limited, and that's why they had to agree to a macro-linked bond. I mean, I'm not an economist, so I don't really know what happened behind closed doors. But maybe that's that was what happened, where the government just did not have any option but to agree under pressure to these macro-linked bonds, which for me are almost an incentive for the for any government to not pursue economic growth. Dhananath Fernando 43:08 Okay, because I feel I feel Chari this is should be a lesson that because I'm not a big fan of like okay we have to get the debt relief as much as possible. I mean that's I mean that's a basic principle, but one thing is we should know if we borrow money we have to pay it back, you know, because otherwise we will go to that habit of okay every time like Argentina, you borrow money you again devolve you go devolve, charindra chandrasena 43:33 and Argentina is trouble is in trouble again now, again Dhananath Fernando 43:35 now exactly so so that's that's number one principle number two I think the govern the governance link bond, in that sense, fine because you have going to the root causes. When you fix the governance, then you have a better incentive to bring the interest rates down, coupon rates down, and that has an impact. But the macro, the other alternative could have been okay. You give a fixed rate regardless of your economic growth. You just give a fixed rate. That's we had to always compare it to the second alternative available. So even if it's a fixed rate, we do not know. Like you know, if they they need they may keep it higher, then at least that advantage, the even the incentive for us to grow the economy faster may not be there, because charindra chandrasena 44:16 then the incentive would be there. No, then how? If if it's a fixed amount, then the the more you grow your economy, the greater your repayment capacity. Dhananath Fernando 44:25 Yes. charindra chandrasena 44:25 Right. So so then itself, that's the risk. I mean, Dhananath Fernando 44:28 if that the case, if they bring the, I mean, if they then they may not make it like a scenario based, they will give like a more like a higher rate, which is high at the higher side. charindra chandrasena 44:39 Yes, that that is possible. So that's yeah. That's why Dhananath Fernando 44:41 we have to. That is possible. Yeah. But even if he can, guy, if he can get a fixed rate at a lower, I mean, at a lower band, that would have been ideal. That would have an idea. Perfection. But this has been challenging. charindra chandrasena 44:52 What is the IMF saying? I saw they had put a put a report. So there is Dhananath Fernando 44:57 a technical report done based on. Government's request. I think it has been going for about like six months, and they have basically given the financial risk statement, and they have done about 12 recommendations. It's a detailed report. It's a technical report on the on preparing the financial risk given these debt restructuring challenges. So they again basically have mentioned about the data challenges to do a proper financial risk, mainly connected to state-owned enterprises on one front, and also on the macroeconomic front, especially with the GDP growth, the revenue growth, and again depending on the oil imports and tourism has identified as another financial risk. So they have given about 12 recommendations, Chari, on mainly to do on the near term, on to avoid this financial risk. Quite a lot is also based on the state-owned enterprises because that's your charindra chandrasena 45:59 favourite topic. Our Dhananath Fernando 45:59 favourite topic. It's I mean we wish it's not our favourite topic because it has become a favourite topic because that has a lot to bear with on the public finance. So they have basically identified a lot on. But charindra chandrasena 46:14 have they? Is this updated or have they covered the fact that 33 SOEs were closed down recently. That part is not covered. I'm guessing Dhananath Fernando 46:25 it's not covered. They are because it's the the the 33. Chari, while it is a right decision, those are sort of like they were defunct anyway. Defunct anyway. Yeah. But it's good that it was closed down. Yeah. I think their challenge. They are what they have highlighted is the big five state-owned enterprises, which has been causing because it's a public finance risk that they are calculating. So the risk are from the big big boys, big five charindra chandrasena 46:48 CBC, CBCPC, Sri Lankan Airlines, Dhananath Fernando 46:53 then the National Water Board, and the SLTB, Sri Lanka Transport. Okay. So there are five to six, which is concurrently basically, you know, contributing as the largest losses. Those are the challenges. So that has been highlighted in the report. Is charindra chandrasena 47:14 it is it broadly in line with the risks highlighted by Fitch? Dhananath Fernando 47:20 To an extent, to an extent, which is mainly highlighting the debt risk, which is again covered on the financial risk. This is more broader. I mean, this is broader and more detailed oriented. What reforms on the public debt front, on growth front, on SOE front? What has to be done? charindra chandrasena 47:38 But broadly, it's positive also, right? Dhananath Fernando 47:40 It's also yes. I mean, it's a technical report, but what are the reforms that we need to do to make sure that the risks are mitigated? So, in that front, it's good. So I think we have covered quite a lot today. But I mean, I again, I kindly request our audience to become a subscriber, become an Advocata insider. We are bringing to you analytics on currency, on vehicle markets, as well as on any update. So we are planning to do also some content on stock market, as well as different reports. We would like to give a detailed update for our insiders because that will help our insiders to make financial decisions. It can, I mean, they may be running a small and medium enterprise. They may be a big corporation, but this financial information, more detailed, consumable manner, we are planning to provide. So it's we have an offer early bird offer till 14th of October. So only seven days more, 10,000 rupees per year, so it's just even not 1000 rupees a month. Afterwards, it will be 12,000 rupees per year, so it's basically 3000 rupees per month. And we have a different version with more reports for as Advocata Insider, which is 36,000 per month per year. That's 3000 per month. So please subscribe, subscribe our channel, and you have the uncut or underrated version of all these podcasts. Underneath, in the sense, like we take this conversation a little, a little further, which final parts will be available mainly for Advocata insiders. Yeah, that's my promo chari. No, no, that's absolutely fine. charindra chandrasena 49:25 Now we have to move on to the move to Mana. Dhananath Fernando 49:30 Mana, yes. Go charindra chandrasena 49:31 to Mana. Dhananath Fernando 49:32 Yeah. charindra chandrasena 49:35 Yep. All right. Good. Good long chat. Dhananath Fernando 49:38 Good long chat. charindra chandrasena 49:39 So we will. We hope the government is listening. I think. Hopefully, they are at least somebody. But yeah. So I am going to. We are going to stop now. We will catch up. Yeah, Dhananath Fernando 49:54 subscribers. Subscribers. I think we have a reasonable viewership when when you meet people there. Mention that they watch, and some clips are going viral, and you can follow us on Advocata Institute as usual. So some of those short clips will be will be there, and if you have any suggestions, please comment about topics needs to be covered or how do you find it, and also negative comments, positive comments. charindra chandrasena 50:20 Yeah, we are we are open to everything. Yeah, Dhananath Fernando 50:22 everything, and we are planning to expand slowly the the production with one more camera and like hopefully, hopefully, fastly, fastly, yeah, slowly, not slowly. So then you will have like a better quality video and also audio, I think is is all good. Yeah. No, we'll charindra chandrasena 50:43 have more people. We'll more people. Yes, we Dhananath Fernando 50:45 are planning to expand for three people. So then, charindra chandrasena 50:47 if they get bored of us, then they exactly and Dhananath Fernando 50:50 yeah, different views and so stay tuned and subscribe us. charindra chandrasena 50:55 All right. All right. Take care, Lana. See you next week. Transcribed by https://otter.ai