charindra chandrasena 00:04 So Dana, we are going to start something new today. Dhananath Fernando 00:09 Yes, yes, looking very much forward for this. Yeah, yeah, charindra chandrasena 00:12 and we have you as our first, well, first participant. Dhananath Fernando 00:17 First participant. Is that a good word? I think that's a good word. charindra chandrasena 00:21 First expert. First expert. charindra chandrasena 00:24 So this series we are we are planning to you know continue and expand on it also, and like a weekly digest, you know. So this week we can't obviously not talk about the elephant in the room. Dhananath Fernando 00:42 I mean, in in all meanings, right? In all meanings, yes. All meanings, exactly. charindra chandrasena 00:49 I I use that very purposely. So now we don't know what's going to happen going forward. But what are your initial thoughts about you know from from an economic point of view right from a government stability point of view from perceptional point of view? What are your thoughts initially? I Dhananath Fernando 01:13 don't know, Jared. I have like a very straightforward answer because and obviously charindra chandrasena 01:18 I'm asking about economic. Yeah, but all this has Dhananath Fernando 01:21 economic implications directly or indirectly. I think there are two schools of thoughts which I can see, and even on the analysis, one side is this may give a clear direction to everyone that this government is not going to, you know, they are not going to tolerate any corruption, and it has gone to the highest level because even on implementation, there are two things. So, if you start from like the lowest end, like you know some small government official that you arrest from a bribe or anything, then it gives an indication. Okay, you are going behind the small fish, and now this has given like okay, we are even willing to go behind the big fish. Of course, the politics of it. I'm. I don't want to comment because whether it's a right accusation or whether it's a right way to do it, it's a different conversation. But in terms of a signalling, that's one school of thought. Okay, we are really for anti-corruption. That's why we have received that mandate. And even everyone, even in the IMF governance report, was done saying that corruption was one issue. Why Sri Lanka went? I mean, the bankruptcy-that is one main contributory factor. That's one way of thinking, one school of thought. The other school of thought is, of course, coming from the politics. Okay, now there is bond scam. There are so many other issues, and you have picked up on an issue which is, I mean, we have we are yet to see what is the determination from the courts, which is not like not the accusation that has been spoken before. At least to put it in that sense, because there were so many other starting from the bond scam, there were a lot of other issues, public finance issues, mismanagement issues, misallocation issues has been discussed. So in that sense, whether it's a political victimisation is another thing, and also with that, whether the politics of it, whether then okay you have now sort of a you know united opposition, and then it can spill over as like small small trade union acts and protest and all that, and then it spill over to the economy is a different conversation. But I think it's I think there's no right or wrong answer here. We have to wait and see. Actually, because markets is all that no, because it's based on the sentiment. But in a way, I think charindra chandrasena 03:28 today the market is down. Dhananath Fernando 03:30 Yeah. charindra chandrasena 03:31 Right. So Dhananath Fernando 03:32 maybe because of that, charindra chandrasena 03:33 that that could have an effect. Impact. No. Yeah. Dhananath Fernando 03:35 That that could have an impact, and also how the geopolitics also looking at this, and also the investors, whether it's how they decode the message. Okay, this is an indication that this government is purely for like anti-corruption. We need not to pay any bribes that they will stand for it. And on the other side of the government, this is this will also be a real test because I think they are competing their one year in few weeks time, and actually people will ask like, okay, anti-corruption front what you have done, and at the same time on the economic development side, economic growth front what they have done, and also if there are any accusations for the existing government members, what's the course of action afterwards? So I think it's a real. I think the single award is a galore. There's like the real, real fight for both sides on on what is going to happen, but my worry is this should also not deviate from the economic issues that we have been speaking because we are not still out of the woods. So this should not like because Sri Lankans are quite well known for you know going in tangents with different different conversations. But overall, I think this is a test because it's not like it is not that no one has been named as as corrupt or like victim. I mean, you know, it's still a court process which is ongoing. Of course, anyone can debate for both sides whether it's right or wrong. But I think in terms of anti-corruption. That's there's a signal being given to decode it. Whether it's actually an anti-corruption one or a political victimisation, it will come over a period of time. I think the still the conversation is quite early to digest that. But it will have some economic implications. Let's wait and see how the markets would react to this. Yeah. charindra chandrasena 05:17 Now, what are the so what are the economic issues that we should be talking about at the moment-that this is overshadowing, right? Because we we have a we have a looming debt problem coming, right? But at the moment, like, what do you think this week? You know, there was a lot of talk about this, and there's a lot of political talk happening. But now, say for example, if we go into tourism, right? So we just, you know, got our got past a landmark of 1.5 million. But are we just playing that numbers game where it's it's purely about getting, you know, crossing a certain mark and not worrying about the quality of the the tourists. Dhananath Fernando 06:04 I think certainly there are two sides. One is the quality. The other one is what we need to really look at is not the tourist numbers. I mean, there's nothing wrong with looking at the tourists like the number of arrivals, but actually it's the room nights that we have to check. Second thing is it's the quality and also I think you and I had this conversation some time ago. That is, this tourism is a very sensitive area for any if something small thing happen. Basically, you are again inviting for you know every the entire ecosystem will collapse. So whether are we putting all our eggs in one basket is another question. But the thing is, two sides. One is yes, the tourism numbers crossing 1.5 million is good. But I think in terms of room nights, now what we see is a lot of Indian tourists are coming, which is obvious because of the closer proximity. But their average stays fairly short compared to Netherlands and the Germans, so as a result, your overall average stay is slowly coming down because you are basically overshadowed by the big Indian inflow on on one side, which is not bad, but they are not may not be the high spenders. So we have to have active strategy on either to you know extending their stay or like attracting from new markets, which the tourism campaign has to kick in, and even for Indians, I think that the other conversation that we could have, I mean, what we could have done was also on the casino thing that we discussed, because a lot of Indians come for playing casino over the weekend. So that also one reason why I'm not saying all the Indians are coming are like casinos, but that is a market that we can activate, which we actively contributed, recommending some suggestions to make you know bring a better regulatory framework to do this. But yeah, so tourism quality has to be improved. I mean overall, and there will be a limit that we can also cross, like you know, we cannot expect like a 10 million tourist inflow because our infrastructure is not developed to absorb 10 million tourists. So then we have to think about like the other infrastructure development, the capex expenditure that we need to do to really take the tourism to the next stage. But I think we are missing a big component by not following. I mean, not checking on the room nights because if you look at, I think the profitability of hotels, they are also. I mean, while there are some improvements, it is not really reflecting with the tourism numbers that is being picked up. charindra chandrasena 08:35 Yeah, and also like, I mean, are we actually going to hit our targets? Because if I if I remember correctly, our target for for 2025 is 3 million arrivals and 5 billion in revenue, right? Where we are now, it doesn't look like we are going to reach that, right? And I think it's a from from the from the government side. I think it's a lost opportunity because I mean, there's a lot of progress being made, but there was just like so much potential coming into this year because elections are over and the stability and all of that. Promotional side, there's something missing. Yeah, Dhananath Fernando 09:13 from what I heard was the promotion, the money is there because there's a levy that they charge from every tourist, which goes to that fund, and that money is there, but I think the execution has been because there has to be an advertising agency needs to come in. There has to be a process. I think because it's all very subjective because all creative work, which is your area, no. But that's the charindra chandrasena 09:32 thing. So I think the promotional campaign has been delayed. Dhananath Fernando 09:35 It's been delayed. It's been delayed. That's a sad side. charindra chandrasena 09:38 Yeah. So Dhananath Fernando 09:39 so absolutely because that that the the positioning of the product has to basically has to prioritise, but I don't think that is that seems not happening at the moment for I'm sure various reasons. Yeah, I think what what I heard was because I was at some few TV conversations who have. Active stakeholders, what they said was this procurement process is delayed and it's not moving ahead. It's not going anywhere, and that's absolutely a missed opportunity. charindra chandrasena 10:11 No, I mean so many governments have been have failed to do this. Yeah, Dhananath Fernando 10:14 yeah, charindra chandrasena 10:15 and I think there was some optimism that at least this government could get it done. Yeah, Dhananath Fernando 10:20 the other thing is, Charindra, the the the the capacity issue inside the government. Not I'm not you know pointing fingers to like a political party. The the government capacity is so weak. The process and evaluation can takes like you know they really do not have the capacity to evaluate such a campaign whether this really you know, up to mark to attract tourists, and whether this really would deliver the expected outcome, I don't think they have the capacity, the the infrastructure inside the government. So I think that's what delays it. But it's it's of course the I think the one action I'm not sure about the regulatory framework inside the tourist board. Probably we have appointed many committees, but the minister to lead it and get it across, lead it in the sense the campaign, and of course it has to follow the due process. But this is a typical charindra chandrasena 11:13 Dana. Like why put a target, right? Unless you're absolutely confident about and and it's bad on the government, right? That's my point. Yeah, Dhananath Fernando 11:22 but I think how this is going to, in my view, that. But of course, I have slightly a different view on that. The government won't get like a you know damage in their reputation by not reaching the target. You don't think so? Because I think what would happen is the numbers are already much better than even 2018, because already they have crossed 1.5 million, so they will not go to 3 million. They will probably end up somewhere in 2.5 million, not 2.7 million. So the messaging will come out okay. Tourism increased as like you know 10% or 15% compared to 2024, and better than like you know pretty much before the it like rebounded for 2018. So in terms of a reputational thing, I think the government is safe. Is my view because what is going to come up is okay, we have done better than 2008. Even the export numbers, everything is going to jump. I mean, historically high value. It may not be, it may not be adequate for us to you know cross the cross the river in in in that famous quote by former president, but I think that that that won't be issue. But of course, it may not be adequate for us to come out from this debt crisis. That's why we have to be really concerned about. charindra chandrasena 12:34 I actually think it will be an issue. You know why? Okay, because the government is actually surpassing all other targets. Dhananath Fernando 12:40 Is it charindra chandrasena 12:40 all the other targets, export target? It looks like, and then the revenue, tax revenue, all these targets, they're actually surpassing, right? This is the one target that they're going to fall short of. Dhananath Fernando 12:55 Okay, charindra chandrasena 12:56 and I just think in terms of optics, right? If you are going to be touting the fact that you are like beating your own targets in everything else, then the same logic applies to this, right? Dhananath Fernando 13:11 Yeah, but I think what no, you have a point. But from what I see, Charinda, now even the revenue targets and the export targets. I think the initial targets were quite long term, like in 2030 to reach to. I really cannot recall the exact number. How generally this is going to? You have been in media, know how this is going to position by the government, any government. They are going to compare it with the previous government and probably go back to go back to East before Easter attack, and then show like look we have rebounded, and that's a that's a that's a signalling for the confidence. But there's a point; it can it can it can backfire. But I think overall, even if you look at I saw some media, I mean promotions, of course. I think with the government reaching to one year of, as you said, like what they have positioned is like okay, revenue was this amount, especially the the Sri Lanka customs revenue. Now it is this amount, and tourism this amount, this amount. But if you really go to the details, there can be because the customs. I charindra chandrasena 14:20 think the half yearly targets they are exceeding, which means that most probably the the full year targets also they will exceed. Dhananath Fernando 14:27 Yeah, but I think tax to the government revenue to GDP are they will come closer to that based on I think the vehicle import numbers because those revenue also comes we need to understand passing the cost to the consumer. The I think I saw the customs have surpassed 1 trillion. I think now it's close to about 2 trillion. I think Dhananath Fernando 14:49 if I remember, why they have surpassed 1 trillion for sure. So all because of the vehicle import taxes, which basically the common man bears because. Even if you look at the vehicle import numbers, while people think like it's B by D's and Nto's are the most popular, but actually the highest number of vehicles are the two wheelers, which we don't spot actually because in terms of a number like a quantity, that's the highest number. Of course, in terms of value, vehicle contribution may not be big as like the rest of all the vehicles put together, but that's common man also getting impacted by this 100% 200% taxes, like someone who is affording a motorbike. So it's ultimately the consumer bears it. That's why we generally recommend don't too much depend on the import tariff. Of course, we don't have another option at this point of time with the crisis, but I think government is in terms of numbers is safe. But where we really need to keep our eyes is what is going to happen next year and the year after, because the growth momentum has to come. These are revenue measures. We have to depend mainly on the growth measures. That's where these industrial zones, the export diversification, things like that should take place, in my view. charindra chandrasena 16:07 Just on the cost, Dana, right? So you believe it's too high, right? The import tariffs. Dhananath Fernando 16:15 Yeah, absolutely. charindra chandrasena 16:15 Yeah. So the government's argument would be that if we load it, one is there's going to be over congestion in terms of traffic. Then that's going to lead to other problems and all of that. So how do you balance that? Dhananath Fernando 16:34 Yeah, no. First challenge that this congestion issue is, I mean, I would say it's a misdirected argument because understand if there are more vehicles there will be congestion, but to avoid congestion, taxing the vehicles is not the solution. You have to invest on public transport. There are no two words about it. Like you know you have to invest on public transport to avoid this congestion issue. The charindra chandrasena 16:59 other other one about foreign reserves. Foreign reserves, Dhananath Fernando 17:02 yes. Again, that's also, I mean, not not accurate. I would say because we are not one thing is we are not, as you know, we are not importing from reserves. It is we are importing from ex. I mean, from the export proceedings, the remittances, and the service exports is where we utilise our, you know, to imports. We are not under any circumstances importing from reserves, but there's an implication because if you really need to defend the currency, since the central bank is building reserves, there may be issue. But at the same time, then the government has to let go of their income target, because in terms of their income or the revenue, that also coming mainly from the vehicles. So you cannot, it's a you know you cannot save both sides. But charindra chandrasena 17:51 but but what what is more important? That's that's why I think. Dhananath Fernando 17:55 No, I think the the vehicle imports is fine. I mean, I I I I think it's higher. That's that's what I said. It's the tariff rates are or like the excise duties and these tax rates are very complicated and it's high. But we really do not have an option because government clearly said even when we are imposing this, I mean high taxes, our main objective is to collect revenue. That's the main objective. It's not about anything else. Don't get us wrong. It's like the revenue. We need money because that's the easy way to collect money rather than increasing taxes. So in that front, I don't. I mean, it's too high. But what is what the lacking? I mean, the the gap that I see is the the the the lethargy on investing on the public transport, because I think the budget president mentioned about 100 new buses and like having a separate company. They are doing that, not that they are doing that. But I think it can. I mean, the it's not only the the buses that we have to focus on the railway and on the other choices and all that for someone to commute between two points. Those things have to have a different strategy, and also there are a lot of regulatory issues like the National Transport Commission, and then there are regional transport like timetables, CTV buses. There are safety. I think it's an absolute chaotic situation, which I think could have, which could have been a you know more sensible and tangible benefit for the passenger or like the common man, which I think could because what we saw was like train issues and strikes and things like that, and then you had that ticketing issue that came up. So, so I think public transport investment and the indication of the signalling could have been stronger because now we are heading to the next budget, but from the previous budget, we hardly see that the the main idea being materialised. charindra chandrasena 19:48 Yeah, because I I read somewhere that we are one of the one of the places which where it's most expensive to purchase a vehicle. Yeah, right. And then, like, here's my thing, right? Like, if you, if somebody wants to develop their career and like become somebody who's wealthy, one aspect of that is having that car, right? I think we've had this discussion before also about the aspirational value. Dhananath Fernando 20:17 Absolutely, charindra chandrasena 20:18 right? So right now, right, nobody is going to have that that goal because it's very difficult. Right. I mean, you have to become really rich. Right. But somebody in that middle tier can't. Right. Dhananath Fernando 20:31 No, absolutely. So that's what I said. Why we should not tax it too high is because you are basically killing the aspirations of the aspirational Sri Lankans. charindra chandrasena 20:40 Yeah. Dhananath Fernando 20:40 And everything else is also very expensive. And on the other side, challenger, now when you are buying a vehicle, you have already to an extent paid taxes like you know based on your income, either you know 15% or up to 36% You pay the taxes when you earn a revenue, and now you are paying taxes for a vehicle on, I mean, additional 100% on top of on on top of it. This is like for consuming that you have to pay another 100% 200% That's too much. But again, you know, the solution is not having everyone have you know every Sri Lankan having a vehicle to commute to Colombo or wherever that you know for their respective area, it is about giving people choices. People should have a choice to travel by public transport whenever they need. They can also own a vehicle, and then they can commute. And also the other way to look at it is that the congestion pricing. Like the problem is, you know, if all the vehicles starts coming into the city limits at the same time, then you have to make it expensive. Really putting economics into work. Okay, then if you are coming at the peak hours, that's very expensive to visit the city. But as you said, and as we discussed, housing, vehicles, your education, your professional education by making it very expensive, you are basically distracting a lot of people to stay in Sri Lanka. That should not be the way. That's why. That's why I hardly stand for public transport as well as for more reasonable taxes for vehicles. And with that vehicle, I mean imports challenge. The energy sector has to be developed because the future is, as we all know, it's EV and hybrid and green energy. So without having because when you allow more and more EV vehicles to come in, then you have to have proper energy reforms, which where you can you know charge these vehicles from green energy. Then only you have like that building that proper proper ecosystem. charindra chandrasena 22:34 Aren't they aren't they doing that now? Dhananath Fernando 22:36 That's one main worry that I have because the government, as I always say, they haven't done anything wrong. There are a lot of right things that needs to be done, but they haven't done anything wrong. If I were to comment on one wrong thing that they did was amending that energy, the the electricity act, because for three main reasons. One is what the structure that they are proposed is there has three paths now in energy. You generate, transmit, and distribute. And under this, you have you are basically keeping everything under the government control. Okay, that's also you can argue there is nothing wrong with that. But the problem is on the transmission. Now we are at a point, regardless of how much energy we generate, without upgrading the transmission grid, there is no point because your grid is going to trip off. So their suggestion is to invest by the government and the expected investment, as we saw on the media reports, about five to 8 billion, and some says 11 billion over the next five years. Certainly, there's no space for sure. So that's that's the problem. So without having that electricity reforms, you really cannot get that spillover effect on the industries because the energy cost is already high. So then you're attracting these foreign investors to do you know open open up factories. All that is become very difficult because your energy prices are already high, and for the next five to six years, you cannot do it. And if you are thinking to borrow that money, that's also not possible because then then your debt to GDP ratio goes up because it's already a government entity. charindra chandrasena 24:11 Yeah, and Dhananath Fernando 24:11 then you cannot also borrow it from the private sector because private sector has a single borrower limit now. The banks have been given clear directions by the central bank that there's a limit that you can extend to a company, including the government. So there's a single borrow limit with the CEB. It's difficult. The third option is you get a treasury guarantee. That is also not possible under the New Debt Management Act because you have to get a you have to do a risk assessment. And actually, this CEB went for a 50 million loan from Asia Infrastructure Investment Bank, and they were asked to pay 4.8 percent risk premium on top of the interest rate. So all three options are out. So what could happen is we will remain, we will muddle through the. Same way, okay. There will be three unbundling will be done, which is good, which is the right way. They are decided to unbundle the transmission, generation, and even what we saw was they are going to send letters, and all the employees will be distributed into these three companies, main like three sectors, and out of in between also there are other companies as well, and they are going to divide it further in the next two to three years time, which is good. But investment side has been completely ignored, is my view. And for existing assets, you can actually easily raise money because already that coal plants are there, there's machinery. You can bring investment. Bringing investment freshly to this is very difficult. I think the government's one argument that they floated was okay. The the cost even the private sector comes in, they also will have cost of capital. Yeah. Right. So they said it's cheaper for the government to finance it through debt rather than depending it on the cost of capital by the private sector, which I have a fairly a different view because the cost for the government actually under debt is rather than it's expensive, that option is not available. There is no it's like a price control. There is no point you know debating over a control price when the goods are not available in the market, so when there's no capital available in the market, there's no point saying that it's you know available at a lower cost because that excess is pretty much not available on one side. So that's my if I were to comment very hardly and to rethink about the strategy, probably the electricity thing is not a good indication. In fact, we did a paper, but that's something that the government has to be. charindra chandrasena 26:45 Did you present it to the government? Yes, Dhananath Fernando 26:47 yes, present in the sense like we shared it with the all the. I mean, the energy minister, the power sector reform secretariat, and for all high powers, we basically shared it because that's charindra chandrasena 27:01 what was the no they yeah Dhananath Fernando 27:03 no they didn't I mean they provided some commentary on some other points but not mainly on the investment front because our argument was on the the three things that I mentioned yeah and yeah I mean no one really commented on it but I saw some commentary on a different for a different comment saying that private capital would be expensive than the debt capital by the government, but the simple argument is the debt capital option is not available for the government to begin with. So charindra chandrasena 27:34 the he was asked about an energy minister was asked about this recently in an interview. So his argument is that that we have we have done so many things that seemed improbable earlier, so just watch us do this as well. Dhananath Fernando 27:49 Correct, charindra chandrasena 27:50 right? Dhananath Fernando 27:51 Correct. No, I wish them all the best. I mean, if you can do it better, but the numbers doesn't match because 5 billion, 6 billion is already almost equivalent to our reserves, and if we were to borrow it from the bank, I mean the system. That means we have to have pretty much double the reserve purchasing done by the government because whoever who has to buy it from the system. So I I think this could have been I mean thought through. Probably they focused mainly on the unbundling first, and then you know unbundled further at the latter stage. So charindra chandrasena 28:30 their argument then is that that it cannot be given to the private sector for also national security reasons as well. Yeah. Dhananath Fernando 28:39 No. What we said was no. Okay. Fine. If you want to keep it under the government, you keep it. But what we recommended was you unbundle it properly, because now Charenda, on the generation, all the three companies are under actually four: the the hydro, wind, coal, and diesel. All categories are as one organisation. The problem is the engineering to asset base to everything from wind to hydro are completely different. You know, the even think of an engineer who is an hydropower engineer cannot work. I mean, cannot work in the sense his skill set is completely different to an engineer who works at a coal plant, and the set classes are completely different. So, if you even what we said was okay, you unbundle, and even if you want keep the government ownership on the generation, but you properly unbundle it. But now you have everything under one like cluster. It would even be difficult to get debt financing because, as you know, Asian Development Bank, World Bank, they all finance green initiatives. ADB has clearly said no that they are not going to fund anything for like coal plants and all that. Now, when you have the coal. Coal plant and the wind plant together under one company. Can they really finance this company? Because now, because on your portfolio you have a coal plant, and it's not properly unbundled. So in that sense, even if you want like the government to borrow money from the multilateral agents or even a bilateral basis, it would be very difficult to finance it Dhananath Fernando 30:24 because it's under one. So what we said was okay. If you really want to keep it under, keep it, but unbundle it properly. But ideally, on the transmission grid, anyway, it was supposed to have the 51% ownership for the government. What they could have done was to raise capital. You open it up for you know a bit more because the government can keep the ownership. Of course, I do not agree that by keeping the ownership that the national interest would be secured. But I understand if it's a policy stance by the government, we respect that because it's a policy. No, but charindra chandrasena 30:55 but a lot of people think that national security argument is valid, right? So why is it not valid, Dana? Speaker 1 31:02 It's not Dhananath Fernando 31:02 valid, Sharindra, because if it was, I mean, I have, I, I have two, I mean, a surface level argument and like a economic argument. If it was valid Speaker 2 31:11 now Dhananath Fernando 31:12 during the crisis, it was under government. No, there were no security at all. Basically, we did not have power for 12 hours. So if it was under government and if it was secure, then we could have we should have done something during then. My other argument is by keeping it under the government, you are basically risking the national security because you know it's in it's simple that you put all eggs in one basket. You are creating your you know you are risking the the national security, and now it is under one set of people, the procurement and everything, and it's also constantly the prices are going up, and that is a massive threat. And the thing is to ensure the national security, you should also have the investment because on because next time it would be cyber tax and things like that. To do that, you have to you should be able to absorb the investment. Now, without investment, keeping an underdeveloped grid is a national security threat. I mean, what was said was even because of this monkey jumping, it was tripped off. I mean, that's I mean, if if the monkey jumped and if the system tripped off, I mean, was that actually the reason? I I still don't know. No, I think there may be some. I mean, maybe it's a fab. But you know, because if the if the grid is not stable and if the grid is not upgraded, even a small shock can basically trip it off. charindra chandrasena 32:43 Not a small monkey. Even Dhananath Fernando 32:44 a small monkey can. I mean, if that the case, then your priority has to be to upgrade the grid. And now, without upgrading the grid for next four to five years, is aren't you like you know bringing? I mean, risking the national security on the energy. That was my argument. But if the government really wants to keep the national security. My argument was: government is this; they have the superpower. No, they can any time. They can. I mean, exprop. I mean, they can. I'm not recommending it. They can, you know, seize any asset and they can do it. Of course, it will undermine the confidence. charindra chandrasena 33:19 Yeah. Dhananath Fernando 33:20 But you have that option. You always have the if some money is. I mean, government is a monopoly of all bad things. No, I mean they can take anyone to custody. They were they can take you know charge. Now charindra chandrasena 33:32 even former presidents. Dhananath Fernando 33:34 I am not saying that. But I mean you have that. I mean powers too. I mean if if a private sector guys, you know, if if he doesn't play according to the rules, you basically can, I mean, you know, corner him. No, so in that front, the government has enormous powers. That's why, that's what you do as a regulator. And the other problem is in in this case, when you have this, you know, rebundling or keeping it under the same clusters, the costing and the regulation also becomes very difficult because now the problem is the the PUCSA for them it's very difficult to identify what is the gen. I mean they can identify the generation cost distribution and transmission, but it's not very clear cut and the salary structures of the distribution transmission. It's very difficult in this structure, but slightly unbundling it may not solve that problem entirely. Is my view, and that's why the national security becomes an issue, because the the best I mean the the worst thing that we could do is keep a underdeveloped grid. Okay, if someone says okay, connecting with India is a national security threat, then it can we can have separate conversation again. I am not saying that, but then it's a you can okay under you know you can do the analysis for like the geopolitics and okay how the agreement has to be then what happens if India does something or something something, but here it is like you know allowing the private sector to work and the the. Areas that the private sector has involved, I mean, there has been hardly any national security issues. I mean, the telecom privatisation was done to an extent. I mean, do we see anything? And the world has evolved to an extent that you work with private sector, public sector together. So that's I said. You keep the important sectors under the government because hydro under the previous act and the new act, it was always under the government. The the national system operator is pretty much under the government because they are the one who are basically buying and selling to the system. So I I I don't. What are your thoughts? I mean, what what do you hear on the energy? Because that I'm sure no. charindra chandrasena 35:41 So on the solar front, I think they're actually focusing heavily on it. So China, right, is the global leader in solar. Dhananath Fernando 35:53 Yeah. charindra chandrasena 35:53 So I think maybe they are taking a leaf out of their books because there's a there's a you know long running connection between the current government and China, Dhananath Fernando 36:04 right? charindra chandrasena 36:04 Right. I feel like that that that could be one of the strongest points, Dana, because if they develop solar to like with floating solar and all of that, of course the investments need to be massive on this front, right? So I don't know the I don't have the exact numbers, but even recently they they approved this solar floating solar project got cabinet approved recently, right? So I think that really to to make use of Sri Lanka's natural like you know the availability of sunlight throughout the year and all of that. This is something we can really, really focus on, and that could actually-I mean-that could bring down the costs like crazy, right? Absolutely, right. So, Dhananath Fernando 36:51 don't you think by the amendments to the bill without upgrading, actually, then I, I, I see a contradiction in your argument because, okay, you say okay for China to give their option on solar panels and all that, we have to empower solar. But actually, what is happening is the opposite because without an upgraded grid, you really cannot absorb the solar. That's charindra chandrasena 37:10 that's that's that's. I'm just saying on the the fact that they are focusing on it. Okay. So then, then it comes down to like, are they actually properly focusing on it, or is it just you know paying lip service to it, right? So that's where the it was no not a defence of the of the government, but I think that it looks like they are trying to do something on solar that a lot of other governments were just talking about, right? Right, and I just hope that it works. What what what bugs me sometimes with not just this government, any government, is that you know if you you have to have main areas, Tana, that you really focus on, and that can be your government's legacy, right? I think energy now corruption is obviously going to be the anti-corruption drive is going to be the main legacy of this government, right? But energy is going to be crucial going forward. So if they can really do it, that's my that's why I'm annoyed with them about the tourism factor. Right, that if you give a target, right, what we expect from this government is not that to give a target and fall short. Dhananath Fernando 38:16 Correct. charindra chandrasena 38:16 Now they haven't fallen short yet, of course. Right, but they are going to. Dhananath Fernando 38:20 Yeah. charindra chandrasena 38:20 Right. Well, there Dhananath Fernando 38:21 I agree because if they actually make the tourism target, then it would be like a massive. I mean, you know, massive boost. You say, okay, we told the target, and now we have achieved it. Yeah, yeah. Now that I charindra chandrasena 38:32 feel like they are developing infrastructure, right, to a certain extent, tourism infrastructure. Dhananath Fernando 38:36 Right. charindra chandrasena 38:37 But they are not developing the promotions, right. On the marketing front, I don't think these people are necessarily coming due to any sort of there may be certain crowds, but I don't see a direct connection between the government's promotion efforts and the influx of tourists to Sri Lanka. I feel like this is very much social media driven. This is very much user generated content that is getting us, and that is the same way that we got tourists, you know, last year, Dhananath Fernando 39:09 last year, and the year before. charindra chandrasena 39:11 Okay, I just think that there needs to be a concerted effort on the part of the government to really, really put Sri Lanka out there on the map, because I mean, for all what we are talking, right? There are countries which are getting 50 million, 60 million tourists, right? So we are, you know, what is is banging our drum about getting 2 million, 3 million tourists. We need to aim higher, but also when you put a target, actually work towards it. Dhananath Fernando 39:45 Correct, charindra chandrasena 39:46 right? Because this social media drive is what is getting us the tourists. So Dhananath Fernando 39:49 I, I no, I I agree with you. If if you put a target, you have to work towards it. But I think that culture has been basically you, you know, you put a target just to like you know save your face in front of media and. Then you somehow compare it with some other, you know, some target, and but no, very interestingly, when you spoke, it may be also. What do you think? Like because Charinder, we haven't really worked on a framework with a massive tourism campaign for sorry, massive communication campaign for tourism. It has for a long time it has been user generated. charindra chandrasena 40:20 No, so Dana, the problem is what is our positioning in the first place? Yeah, exactly. We were a land like no other, right? We were wonder of Asia, right? We were so Sri Lanka. We were there was another Dhananath Fernando 40:34 one. Small, small but small miracle, prune. Yeah, small miracle. Small charindra chandrasena 40:39 miracle, a prune because the the whole small word was there. Dhananath Fernando 40:42 Yeah, correct, right? charindra chandrasena 40:43 So, when I feel like, firstly, we have to figure out what our audience is going to be, what what kind of tourists we want to cater to, because we are not getting the Maldives crowd, right? Do we want to be like Thailand then, right? Like a hybrid, somewhere. What is our what is our model? I don't see a model at the moment. It's like if you're like if you want to travel, come to Sri Lanka. Dhananath Fernando 41:08 Correct. charindra chandrasena 41:09 Right. We don't really we'll take anybody. Dhananath Fernando 41:11 Correct. charindra chandrasena 41:11 Right. So right now we are getting a lot of young tourists. True. That's why down south and L like it's party central. Right. And it'll be even more party central now towards the end of the year, right? But really, is that the long-term plan for us to get 20, like you know, teenagers and 20 plus 20 to 30-year-olds, right? How much do they spend, right? And is our are we attracting tourists on the on the idea that you can feel like a millionaire here because it is so cheap, right? People who can't get by in their own countries can come here and they can afford a lot of things, right? In the sense that if they live like a local here, right? If they eat from the same places that locals do, then they don't have to spend much, true, right? So I'm I'm I'm saying I'm okay with that also, but then that has to be that has to be by design. Right now, it's just what is happening organically? It doesn't feel like there is policy behind it. It doesn't feel like there is insight behind it. Dhananath Fernando 42:26 No, that's that's I think was missing for some time. Yeah. But I think the other other side of it is the for the for the tourism, the the cost of construction issue because to make it affordable because these all these hotels and everything needs refurbishment every five years to attract that you know that segment of tourists you have to really have the upgraded rooms the options and things like that so so that's that's another another way to look at it the other argument is I I I forgot. No, charindra chandrasena 43:03 now there's there's in terms of segmentation now there's a seven star hotel coming up in Candino, right? So I think the infrastructure will develop. I don't think we are positioning ourselves for that market. Dhananath Fernando 43:17 Do you really think the infrastructure is because Javindon? If you look at the the you know the train services, the public trans they are not coming in like you know not everybody comes in private jets now, so isn't it up to mark because even presidents what I mean in history you are saying charindra chandrasena 43:33 it is up to mark or no? I'm not Dhananath Fernando 43:34 saying it is up to mark. I mean that infrastructure while it is important to I mean have those hotels and everything, but it also, rather than the hotels, it's like accessibility. You know, having you know activities too. So charindra chandrasena 43:48 my point is, Dana, you can't change the perception of Sri Lanka in one month, right? If you want to attract that audience in 2027, you have to start laying the groundwork now. I don't see any of that happening at the moment, right? It just feels like we are positioning Sri Lanka as a beautiful place where you can have a not so expensive party. Yes, great party, culture, beaches, mountains, wildlife, all of that. But at a fraction of the cost that you could get, you would get it anywhere else, right? And I think I feel like that is the positioning at the moment, and that's organic. I'm just saying that we shouldn't have a positioning that just feels natural. Is it well thought out? And that may be the positioning. I'm saying it. It is not scientific at the moment the way it's done, right? Not just this government, every government. I feel like in terms of infrastructure, what we are talking about is I feel like they are trying to, for example, simple things like toilets, right? Why would tourists. Go to a place where you know the toilets are just like dirty, right? So simple things like that. I feel like these guys are focusing on it a bit more than than previous governments, but without a promotional campaign, we are just going to keep attracting this kind of audience, right? And on on on tourism, this did you hear about the protest plan for tomorrow? Dhananath Fernando 45:24 No, I I heard about it. That of course now what I see is there's a trend of these protests. No, so okay tomorrow one is of course with this court issue, and not the court issue, but with you know rest of the former president. But even before that, there was a railway strike. There was a there was a postal services strike. Now there is a GMOA strike, the hospital service. So I think there's no. My observation is Sharinder. These are not very isolated. These are all very well coordinated. No. So when there's a political issue, there can be different different protests which comes supporting that bigger cause, or it could be also leading up to the budget, because you want to pressurise the government to get the benefits that you want. So you slowly see every time when you are getting closer to a budget, there's this protest cycle comes in. So I don't know what it is, but this is very. That's why we generally recommend by keeping this, you know, big government. You really cannot do it because every time you are getting that pressure, you know, for mine issues, and you are basically disrupting the entire system. But tomorrow's one, I I am not sure which direction it will go. But what I can see is still budget. There can be many more protests. charindra chandrasena 46:42 So, in terms of stability, what do you think about? It won't affect the government stability. Not these people come to Colombo. Dhananath Fernando 46:50 Yeah, it it won't at at this point because they are the two thirds majority. Yeah, you know, it's if it builds pressure, it will be over a period of time. I mean, just because it's too early to like you know to have a protest coming to Colombo and really build pressure to the government, in my view. Yeah, and I charindra chandrasena 47:03 mean the president is still very popular. Dhananath Fernando 47:06 He's popular. His charindra chandrasena 47:06 approval rating. We don't have approval ratings here, right? But I think if we did, his popularity is high. Speaker 3 47:12 Yeah. charindra chandrasena 47:13 But not necessarily the governments. I mean, government. I think is popular, but but he's seen as a sort of a the the one man army and a few others in the government are not so probably, but I don't think there's a risk of anything happening. No, Dhananath Fernando 47:28 I think because it's a yeah, it can. I mean, it can lead to a you know lead to a series of other conversations. But at the moment, as I said, since they haven't done anything wrong and people really haven't pressure. I mean, feel any pressure? Pressure in the sense, of course. After the economic crisis, everyone went through quite a bad period of time, but because of their decisions, people haven't felt anything. You know, any pressure. For example, when there's a fertiliser ban, farmers felt it, and there were no gas at the shop. People felt it, but there's nothing like That so so I don't yeah I I don't think there'll be any like you know one protest can completely. I mean I think it could charindra chandrasena 48:09 it could inspire confidence in the government if it's a flop. Dhananath Fernando 48:12 Is it flop? Yes. Yes. If they don't charindra chandrasena 48:14 get the number of people they want. Yeah. Dhananath Fernando 48:16 But my advice would be don't forget about the growth because without growth, you are basically coming back to square one, and that will be question first term now. First year is done. When it comes to second year, third year, the pressure is going to mount up. If you don't know the growth, like then that's where the job opportunity will lose patience. Exactly, and you have to feel you should need to feel the you know income increase and things like that, and convenience in life, like the public transport, the train services, those are important things because it's a otherwise there can be a minor shock that can completely because for a minor shock you have to change things and you have to fasten the seat belts and then you feel the pressure and that can be capitalised by many other, you know, factions. That is, that would be my, you know, that's my line of thinking. charindra chandrasena 49:08 Yeah, yeah. I, I, I think their sort of premise for this whole thing is also a bit shaky about this protest and all of that. So we'll be interesting to see. But yeah, so good chat today. Good chat, good chat. We did the first one, so yeah. I think there are a few Dhananath Fernando 49:27 more. I mean, we'll take it up in the next conversation. There was a big conversation about money printing, whether there has been money has been printed, and few others as well, like export development and credit card numbers have grown. charindra chandrasena 49:39 Yeah, Dhananath Fernando 49:39 I think, but we can discuss all that in the next episode. charindra chandrasena 49:42 In the next episode, no. Okay, great. Thank you. Thanks, Dhananath Fernando 49:45 Charlie. Thank you very much. Transcribed by https://otter.ai