charindra chandrasena 00:06 Hi Riyadh. Speaker 1 00:06 Hi, sorry. You enjoyed the long weekend. charindra chandrasena 00:08 Yes, yes, enjoyed the long weekend. Much needed break, and also I know you're asking, and thank you for asking. It was a glorious, victorious Weekend. I mean, I won't go into the reasons, but people who know will know why I'm celebrating a fantastic weekend. And Speaker 1 00:31 another two weekends are also coming. No, charindra chandrasena 00:33 both of those weekends are going to be victorious weekends. We'll see. We'll see. All right, moving on from schools. Ah, I couldn't say hi to. See now Dhananath Fernando 00:47 the seats have shifted. Seats have shifted on the whole whole upside charindra chandrasena 00:52 down. Bonkers. Exactly. Dhananath Fernando 00:54 This is the this is the romance with school days. No, the moment that you go to that, you know what happens? Yeah, yeah, yeah. We charindra chandrasena 01:02 all become that age also at the moment. As Speaker 1 01:07 Charlie says, you know, jolly days, you know. Jolly charindra chandrasena 01:10 days, holidays. They were all great days and jolly days. All right. Yeah. So, couple of things to to take up this week. I want to. I want to start with the statement by the Deputy Finance Minister about para tariffs, and then I want to move on to a statement by the President, which he made in Parliament About well broadly about trade, but then this is trade that doesn't seem to have any trade. Yes, exactly any trade. So which has a which has a money laundering. But both are trade related, isn't it? Speaker 1 01:57 Both are trade related. Both are trade charindra chandrasena 01:59 related, actually. Yes. Speaker 1 02:00 Of course. charindra chandrasena 02:00 So, starting off with this para tariffs, your phone is. I hope Dhananath Fernando 02:06 it was not someone listening to our trade conversation. No, no. charindra chandrasena 02:09 So, the deputy finance minister said that they will face out. Are you okay, sir? Dhananath Fernando 02:23 I'm okay. I'm okay. It's just that someone. I'm sure there's something we trade every time. Every time somebody mentions yes. charindra chandrasena 02:30 So the deputy minister, deputy finance minister has said that Sri Lanka's para tariffs will be completely phased out, meaning completely removed by 2030. Speaker 1 02:45 Yeah. charindra chandrasena 02:46 Right. I I I hope I I hope I got this right. Right. That means a complete. They're completely going to take it off. Dhananath Fernando 02:54 Yeah. charindra chandrasena 02:54 Right. Dhananath Fernando 02:57 Yeah. What they say is 25% cess will be removed in 2028 and 29, and the 50% will be in 2030. charindra chandrasena 03:04 Yeah. So that means collectively it will be 100% by 2030 by 2030. And then they are going to go into three bands. Yeah, three or four bands. Four bands. Sorry. Yeah, bigger band. Four band tariff structure. So that will be from 0% to 10% Sorry, 0% and 10% and 20% and 30% Correct. So from zero to 30, it will extend for baths. Initially, let's talk about the timeline, Dana. Why is it happening in 2030 and and and not say for example 2027, Dhananath Fernando 03:43 yeah. So that is I also don't understand the reason that has been provided with Cherry because almost the protection of the local industries. What they have said is they need time for preparations to face with the competition, is what they have said. But I, in my view, this is too long, 2030. I mean, it's obvious the political repercussions that is going to bring this because 2030 is like 2028, 2029, 30 is like the you know election years, and intron you know just before an election, removing para tariffs is not an easy thing because the more time that you give to the you know the more time that you take, the lobbying power becomes greater and greater, in my view. And this was the same story even during not this time. Even the Hapana government, this was coming for I don't know some long years. But even that point also, they said, okay, we are going to phase it out in five years. Nothing was phased out. Nothing was phased out. But I must say, this is the right direction. Facing out paradise is the right direction. Four bands is the right direction. That's definitely for sure. But the timeline may not be also meaningful. And even when you look at the budget estimates for this year, while they are while the converse. Was removing para tariffs. The expected revenue has been increased in the budget by Senpad. That means while you are saying that you are going to phase it out, you are expecting more revenue from say Sen Pal, and also the what you collect from C Sen Pal is, I mean there is revenue, but it is not good. So in your directly answering your question, the reason provided was to give some more protection. charindra chandrasena 05:25 But but yeah, so there are when you say that 26 budget, you're talking about 26 budget, right? Has a greater revenue component coming from CSNP, which is para tariffs broadly. That can still be compatible with this plan, because they are talking about 28, correct, 29, and 30, correct? Right. So I I don't see an issue there. Dhananath Fernando 05:51 Yeah. charindra chandrasena 05:52 Do you? Dhananath Fernando 05:53 No, I see the issue was no no there there has no issue, but actually this was supposed to happen quite earlier. charindra chandrasena 05:58 Right. Dhananath Fernando 05:59 So they then they pushed it because even the I saw the deputy finance minister has said we are taking sort of a lenient approach because of the local industry's concerns. So this was supposed to happen quite early as also part of the IMF agreement. But let's leave the IMF agreement even before IMF agreement. This was the deal. So that's where the only the issue. That's what I'm saying. The strategy on strategy has been on the other side has been just extending the timeline and push it like one year, two years, and you know taking a long time frame to phase it out. Do charindra chandrasena 06:33 you remember when this last time this was Yahalna? Dhananath Fernando 06:36 Yes, it was charindra chandrasena 06:37 Yapalna. Right. Okay. And and and it was not reduced even by one phase, right? It it Dhananath Fernando 06:42 wasn't. I mean, some I think there were adjustments, but it was not a programmed to phasing it out throughout, and there were no introduction of like four bands. It was like just yeah, charindra chandrasena 06:53 right. The last thing on the timeline is you said 2030. My view is that it's 2030 because that's after the election. Speaker 1 07:06 Yeah, because it'll be the second term, if at all. charindra chandrasena 07:08 If this government wins, it'll be second term. If it's a new government, first year of that first term. Of course, if it's a new government, there's no guarantee that they'll control this. But if we say assume it's this government, then they have reduced only by 50% after the election. The rest of the 50% they do after the election, and I and and I think maybe political considerations also they don't want to lose the that sort of industrial vote or the business community vote. But on that dana, do should people or should the businesses consider this a threat, or or should it to put it bluntly, should they just suck it up and just you know be ready to compete? No, Dhananath Fernando 07:58 I think they have to ready to compete. But I have an alternative proposal. If the businesses worry about that they cannot compete with by facing out para tariffs, I recommend the other way around. The state should give a subsidy for the same period. Now the problem is what they are trying to do is this is quite controversial, I know, against also some things that Advocata believes. No, what I'm saying is, it's a better way to give a direct subsidy for these industries rather than doing it on the tariff rate. What I'm saying is, okay, you move right across for this zero, 10, 20% 30% Instead of there are industries who have concerns, they have a balance sheet. They know how with the price margin how much they cannot compete. You give a direct subsidy for those companies because phasing out a subsidy is easier than phasing out a tariff. charindra chandrasena 09:01 Okay, Dhananath Fernando 09:02 because it's coming from the tax. Because ultimately it's the same. Because what you're doing is you're collecting it from the consumer, Speaker 1 09:08 yeah, Dhananath Fernando 09:09 and giving it. But but but having these very high protectionist rates is causing the business environment, and you're you're restricting the job creation opportunity. So what I'm saying is okay, fine. By the state, you give a subsidy because that's what they are collecting from the taxes now, based on the balance. So then you can also find out like the tax leakages or anything which is equivalent. But you same logic. If you really want to boost, you give a direct subsidy. Don't amend it through prices and tax rates. If you really want, okay, you take 2030. So then it becomes more reasonable, and also the the the the the factories or whoever who runs in these local industries also feel responsible, and there can be a better audit can be done, like arts units that they produce and all that, and do that in that sense. If you really want to make it come. Competitive. That's my alternative suggestion, but the the reason why I am saying this timeline is a challenge is, it is the more time that you take, I'll tell you what is going to happen. I mean, I'll tell you this is my view. This 25% becomes like okay, we'll push it to the next year. Look at what has happened to VAT, for an instance. We said like july 1, everything will be bad tax net will be broad, and then there will be some. There will be definitely there will be some external event. It can be a geopolitical or a natural disaster. Something will happen in the world, right? Every year there will be something unexpected has happened. With that, of course, what you are saying is okay. It's a difficult time. Don't do it now, and then you don't do it at that moment. So then you are not doing it at all, or like you push it to the next year, and then you do it in the margin, and then again you it's easy to reverse. You move back to the same thing and all that. So that's where my worry is because if if you really want to make it competitive, you do it now because you what you need is radical reforms. You can't like just take. I understand certain things you can't do radically, but this is because the local industries have also been in preparation. So if this came in a hapal on a time, it was obvious that this was coming up when this was an IMF programme in 2023. Now three years had gone, so it's obvious that this is come into play. So every this is not like breaking news. This has been a news for a long time. So they have been probably preparing at the same time. charindra chandrasena 11:29 Yeah. So or they were preparing to push it further and exactly. Oh, they are preparing to push it Dhananath Fernando 11:35 further. Yeah, yeah. Yeah, Speaker 1 11:36 just on from the business school's point of view, how how reliant are they on these para tariffs? How reliant are they on the protectionist regime? So depends on which industry you are. Now, if you look at, for example, I'll tell a talk about industry where Sri Lanka is relatively very competitive. You take the apparel sector. Now the apparel sector, there are about basically you get the big four, big four, big five that operate like the you get the you get MAS Brandix Hydra money so on and so forth. If you look at them, 30 or 40 years ago, they were number one, right? The number one was a different company. I think TriStar was bigger than them. Then suddenly there was this huge demise of TriStar where TriStar completely collapsed. Now there are particular reasons for that, right? One reason is that I don't think he competed. I think it was owned by a gentleman called Kumadevpur. I don't think he. I think that he didn't compete at the same level of the present big three, and that probably had a huge impact on his business continuation. So it depends on how competitive you are without any outside help. So Sri Lankan businesses, if you take always there is like outside thing which kind of protects them. So para tariff is one of them, right? If you take the telco sector. There's something called number voting. That's another issue like that. So every sector there is there are issues, right? So without that, what happens is Sri Lankans always Sri Lankan business and this the business mentality is they always only compete within, right? We need to compete from outside, like and country outside. Yeah, with the outside. Like for example, like Singapore, no, they compete with the rest of the world. We are not competing with rest of the world, and we only have a few industries that we compete with rest of the world. Maybe what you call apparel, maybe tire, maybe glove manufacturing, maybe. But even now, now say charindra chandrasena 13:42 something like tea. Now we can't really say that we are very competitive globally, right? Because we have our our our position has been eroded over the last Speaker 1 13:52 correct charindra chandrasena 13:52 couple of decades, actually. So Speaker 1 13:54 yeah, correct. So the thing is, like in now in tea, we have a competitive advantage, right? One thing is, Ceylon tea is considered the best tea in the world, right? And at least that has always been the marketing pitch, and it's engraved in everyone's mind also locally and internationally, where Cinonti is the best. charindra chandrasena 14:10 But but now isn't there competition from Kenya? No, Speaker 1 14:14 exactly. So the thing is, maybe the competition is not on quality. charindra chandrasena 14:18 Not on quality. Yeah. Speaker 1 14:19 So the thing is, but but the thing is, there are particular business models that you need to get into. For example, we need to get blending in, right? So in Sri Lanka, I think blending is not allowed. It's not allowed, right? So what happened was, some of the operators, what they did was they export the tea to Dubai. The blending is done there. Where else we could have done the blending here, right? And because of that, even for example, the support services of the tea industry, like printing, packaging. I know for a fact there was a printing company. They basically they used their number one client was actually a tea tea brand. So when those guys they went overseas, when they were to Dubai, these guys they completely dismantled the. Printing plant and took it to Dubai or wherever somewhere in the Middle East to basically be the supporter to continue their services. So those are the classic examples that for us that we have lost out on because if that blending was done here, there would have been job creation here, there would have been investments here, and we probably would have had a better say in lot of things. So the problem is we just kind of handed it over to another country where the same. But the thing is, the tea can be bought in bulk at the auction. I think the auction is on. I can't remember that. I think it's on Wednesday or something. So what happens is they buy it from the auction, and they export it. So if they want to do the blending, they can't do it here. They can do it in a third-party country. I mean, it's very simple. A country that has absolutely no relation with tea, right? So these are these classical cases of where Sri Lankans and Sri Lankan, especially Sri Lankan businesses, have missed out because traditionally competition is something that lot of businessmen in this country, at least some of them don't like because they think you know we are a local company, and it has always been the case where they say you know we are a local company, you know we need to be protected. What about the job? But the problem is on the long run they are missing out. Their company will never grow. One thing. Second is it's always stuck on the same year, and when we have external shock now, for example, let's say tea industry, the whole Iran, boy, Iran is a big buyer of Ceylon tea, right? How is that impacting the tea industry? Because the reason is, can we take a shock like that? So the charindra chandrasena 16:34 yeah, that point. I'm going to play devil's advocate from the end Right now, so we are a small market, and our purchasing power is not very high either. Speaker 1 16:49 Yeah, charindra chandrasena 16:50 right. We have had a history of difficulties and crises. Yeah. End of 26 year civil war. Speaker 1 17:01 Yeah. charindra chandrasena 17:04 Now I'm the local business. We have kept this economy going. Speaker 1 17:09 Yeah. charindra chandrasena 17:10 Right. We have contributed to the country's growth. Speaker 1 17:15 Yeah. charindra chandrasena 17:17 We don't have a big pool to go to this is all we have. This 20 million population. You're bringing in companies from outside with far greater technology, far greater resources, far greater R and D, everything, and you're telling us to compete in our own country without any advantage, where's the home field advantage? Tana. Dhananath Fernando 17:44 Yeah, so it's actually the home field advantage is there if they become competitive. So the challenge is, I'm not saying I understand the contribution that they have done over a period of time. Home charindra chandrasena 17:56 field advantage, they will not admit that it's there, no, Dana. Correct. It's like so Australia and Sri Lanka playing a match in Sri Lanka. That's going to be spinning conditions, which the Australians will find difficult. Yeah. So now the local companies will argue you're building a pace vehicle for fast bowlers, and they are going to hammer us. Yeah. Right. Dhananath Fernando 18:18 No, the challenge is if the if the global trend is on the on the fast bowling pitches, then you have to adjust. No, like if the World Cup is going to, I'm just you know trying to explain it on the same example that you brought out, Shari. If the if the World Cup is going to play in like in London or wherever where the fast bowling next charindra chandrasena 18:38 World Cup is going to be South Africa. South Africa is fast bowling. Dhananath Fernando 18:41 So if you really want to, you know, be competitive. I mean, if you really want to at least have a chance on semifinals, you have to be prepared for fast bowling pitches. Yeah. And the world is moving towards that. So that's why I'm saying. So if you are just like by removing the para tariffs, you are just opening your embracing yourselves to the global competition, and this is not you're not taking a disadvantage. This has been the life for anybody in any industry because ultimately what you're comparing yourself is with global standards because everything that you consume and compare your education to everything is on a global scale, so there is no way that you can only protect and hide yourself from that. You have been, we have been doing it for some cultural and historical reasons. I mean, the reason why this protectionism built over a period of time was because for the war we had to have money to run basically bullets and missiles and everything. So as a result, we increased the tariff rates just to earn more and more revenue when things being imported, and then it became like since the war went. Does that does charindra chandrasena 19:59 that? Correlate with the numbers and the timeline, Dana. Yeah. Is it during the war that the the tariffs Dhananath Fernando 20:06 to increase? This was also mentioned and researched by Professor Premachandra Tukural. Okay. Because we want to finance the war. That's where during that time. You charindra chandrasena 20:15 mean the 80s? Is it 19? No, no. Mainly the Dhananath Fernando 20:18 19 to to 2000. 90s. So basically, Speaker 1 20:21 it was a war economy. War economy, right? Dhananath Fernando 20:23 And then after that, because of that, as a consequence of that, the local industries also had a massive cushion because they really did not want to compete because already there is no competition coming from outside because your tariff rates are already high. Now after that, the war ended, and now things have changed. And now you really don't want to bring the tariff rates down, which was set up for a various different reason. And now we are asking to keep the tariff rates high as it was before, just because you are really finding it difficult to go up. My chat, my I am saying it because it's the by removing the para tariffs, actually you are doing a service for the local industries because now the claim was like okay we have a 20 million population because we are servicing 20 million population and everybody knows that's why I think the pre-chat that we had this 20 million population is no longer sustainable because you are having a declining kind of population you have a ageing population your child birth rates are crashing. So as a result, and people are migrating. Migrating, so you are shrinking your size, market size. So when you are shrinking your market size, what are you going to do, and for how long? So that's why I am saying. Anyway, everyone has kind of even them have. They have also agreed to remove it by 2013. So there is no no debate about where we need to remove or not. Like that means everybody has agreed to fast speeches. charindra chandrasena 21:46 I I I don't know whether they have agreed. That's what that's Dhananath Fernando 21:50 what the news story says. That means if the consolidation with the local industries, they have said like you know not they have maybe I'm not sure whether they welcomed it and welcomed it with open charindra chandrasena 22:02 arms. Correct. That Dhananath Fernando 22:03 that I that I don't I don't know you I I I I agree with you. I'm not saying that they have agreed, but it seems with the consultation, everyone seems in the same page that 2030 is the time frame. So my maybe I charindra chandrasena 22:14 feel like that may be the compromise. Compromise exactly that they were trying to do it next year and then they said no we can't and and might be the middle ground. But Dhananath Fernando 22:21 my point is, this is not just sustainable. At one point, even if you have the best protection all over, we will go and collapse because you really cannot sustain this. So better we adjust it early. Like there have been also challenges. Like nobody expected a lockdown. How somehow the business is operated? Nobody expected like a ditwa. Nobody expected President Trump's tariff. So, with all that things moved on, so I think this is also a. It may be a shock, but I am saying even if you really want to sustain, think of like a direct transfer to them instead of doing it all the other way around. I I think I have used this example, the classic example. the The problem is not where you see the problem tend to be. Take the tile example. So tile has a massive protection. Wall tiles, floor tiles, right? The problem with tile is it is not anything else. It's energy because what we are using to bake tiles is LP gas. LP gas is important, so you are and also it's expensive. So as a result, you are giving a protection not because to make the tile industry competitive, because your energy source is very unproductive and your energy cost is very high. So without solving that problem, just because you give a protection for tile, you are not actually you cannot make tiles competitive in a global stage. You are just actually you are spending more dollars than actually importing tiles. In that case, because you have to, you know, you are importing a lot of LP gas as a very unproductive tile source, energy source to make tiles. So that's where I am saying by just giving protection for these industries doesn't really make it competitive. Rather, it will make it further uncomparable when our economy uncomparative. charindra chandrasena 24:07 Something that did they might convince Dhananath Fernando 24:08 you, John. Sorry, did I convince you now? No, no. I mean, charindra chandrasena 24:11 I'm saying they might come back with this argument. What are our chances anyway? Apart from maybe the biggest play in each industry. What are our chances really in the global market? Okay, because here we are a big fish in a small pond. You tell us to go and you know survive in the ocean now from this small pond with so many bigger fish. What are our chances? No, we are just going to get gobbled up. Speaker 1 24:42 No, the thing is, sir, when you put these things, you have a roll-on effect also. No, no. For example, you take the tourism sector. Tourism sector, one main thing is the hotel, right? So the hotel, if you look at Sri Lanka and Thailand, I think we did a study. I think Sri Lanka is construction cost is about 30% Not done, yeah. About 30 Dhananath Fernando 24:59 40% 30 Speaker 1 25:00 to 40% higher, so tourism is a main foreign exchange driver. I'm talking about the economy, right? Just imagine if it's 30 40% higher, how are we going to compete with Thailand? We are competing directly with Thailand, right? How are we going to compete? We are competing with Indonesia. Maybe can I take a different example? Because tourism, by definition, it has to be no for people outside the country. No, correct. But the thing is, you take the input cost and all that. Yeah. What goes mained into into a hotel? Yeah. It's basically the steel, the the the steel, the cement, and the tiles. That's the main thing. I mean, the kitchen and all is different, but those are the main things. Yeah. So all those three three items are heavily protected with particular tariffs. charindra chandrasena 25:44 Yeah. No. Let me take a different example. Maybe confectionery like biscuits. Okay. Okay. That is mainly for local consumption. So people have got used to a certain type of biscuit, and you know, yeah, all of that. Now, if there are global business biscuit brands coming in, the local business biscuit manufacturers might say, "How are we going to compete with that? And also maybe at at at a at a price point also. Okay, how are we going to compete with that? Speaker 1 26:21 So, what about the consumer then? charindra chandrasena 26:23 Yeah, that's that's so you can come back with that when I finish this, right? We have only this market. We have no major ambitions of say, for example, capturing India, right, or going to Europe or whatever. This is our market. We are happy here, and the consumers are happy as well, so why why fix it if it isn't broken? Is the argument that they might put? Dhananath Fernando 26:46 Yeah. So there are the argument is couple of arguments. First is all these companies, let's say the confectionery, most of the main brands they are already exporting actually. The the two main guys are exporting. So that means when you are exporting, you don't have this tariff advantage in other markets. So that means they can compete. What that actually they could do is okay. While they are exporting, they also keep. But their main charindra chandrasena 27:12 market is here. Their main market is here. I'm not Dhananath Fernando 27:13 saying that they are exporting the same volumes like this, but so what they are doing is while they are exporting, you keep a high tariff, and then you basically earn. I mean, you become cash rich by dominating this market. That's that's one side. So my first argument is: since you're anyway exporting, you really don't have the tariff tariff advantage in other markets. So that means you're open for that competition. That's one. Second thing is, sorry, in any economy, your centre is the consumer. Your centre is not the business because when if your centre is the business, that means actually you are giving monopolistic power. Either you are monopolistic, giving monopolistic power over one industry or like one player or like it could be one industry. Both are equally bad because next time, let's say let's go for this argument. Okay, this bisphat manufacturer, they also have ingredients. Let's say they use flour for biscuits. I'm coming and saying, okay, you're you're doing this now. Okay, I'm producing flour, so don't import flour from anywhere else because I can do the flour, right? And then Riyadh does sugar. He says, look, I have my own sugar cane thing. So don't, I mean, don't bring it from Brazil. I can, but of course, my sugar is like you know three times higher than the sugar from where you are importing. I am saying, of course, my flour, it's my flour, but it's of course expensive, 60% than what is coming. You are coming and saying packaging. Okay, I have a packaging thing. It's like all let's say eco-friendly and all that, but don't bring this polythene. And now, what's going to happen to the biscuit? Even if they are exporting, because if you go down that end, government think okay, you are not thinking about the consumer. You have to think of Daranad and his business because you are keeping Daranat's industry as the centre. And then comes Riyadh, and then comes Charindra, and when you have like five of these guys, basically your biscuit is become like a gold biscuit, right? You know you really cannot eat it, right? So then you are making everything uncompetitive. So that's why generally you keep the consumer at the centre and you bring competition. And this is not rocket science. This is like the globally accepted rules of the game in anything you are keeping the consumer at the centre. You are thinking of consumer giving the consumer the lowest price and the best quality, and let them make the choice. But of course, you have to adhere. If for an example, if you are importing something which is not good for let's say the health standards, like then it's a separate. That's why you have to have the I don't know what is the regulation like the current I do like the SLS do everything I think SLS may not be the best example but you check those whatever the ingredients or the quality of it you have the different standards you have the certifications everything when you import that's a separate thing if you. If you really want to have very high standards, you do it. Actually, at the moment, they are doing it at the same time. So then you keep the consumer at the centre and you open it for competition. So that's what my main two arguments. Because by trying to do it, you are basically making our biscuit industry more on or like biscuit or confection industry more on competitive, rather than making it competitive. And we have lot of success stories how they became competitive as well. For example, the two companies exporting, and look at the our carbonated drinks market, Ceylon Coal stores was the it's a global case study how they competed with the giants. I am not saying every industry can do it, but having said that, Chare also I admit not all industries will also be feasible. I mean, not if you are thinking of all domestic industries will survive in this global wave, it won't happen. Some of them have to, I mean, move out from those industries. I think it's a natural consequence as well. If you look at the bullock carts, the bullock carts industry has to move out for something else. So just because you love bullock carts, you really cannot sustain it because the global trends change so fast. Dhananath Fernando 31:04 Even even now, look at what's happening for Toyota cars, right? Every I mean Toyota I mean they were the market leader. And look at now the number of EVs cars coming from China and all over the world, right? Now trends are shifting. It's no longer Riyadh's favourite diesel manual is what he is what he's becoming today. I know he had a different view, but I mean the market dimensions are changing, right? So now we know point. At charindra chandrasena 31:27 one point, this is a story I heard that there were people before calculators to do the calculations. Yeah, and once the calculation calculators came in, they just went out of Speaker 1 31:39 exactly. I mean, this is this is Dhananath Fernando 31:41 standard of. I mean, this is like what is happening all over the world. So you really cannot do you know try to restrict it certain because certain things Speaker 1 31:49 won't. So you know, for example, there was a nice this thing on someone had posted on Facebook of you know the Karidaka rally, a helicopter helicopter covering the rally with a cameraman, and they said in this frame, two two people's employment was taken out immediately because there is no helicopter or cameraman covering it now. It's all now covered by drones, right? So with times things change. Dhananath Fernando 32:15 Now I'll give you now one classic example. Now we all know world is moving to driverless cars, right? Now, what is going to happen for our learners? Imagine like the entire world move for driverless cars. Now, are you going to protect the learners industry? Yeah. And the RMB are we going to say no, no? We don't want driverless cars. We because to protect the learners and the driving institutes that we have to have like driving cars. Even this this was a conversation. Even since you brought out the calculation, Chari, I don't know whether you recall when we went grade. This also when I was in grade nine. Actually, for the syllabus, the calculator, how to operate a calculator was incorporated, and there was a massive discussion. Like, why are you even bringing calculator? People, students used to like you know do the maths in the head or a piece of paper here, and now no longer people like write they type. So with that, that's how the world evolves. So just because you want to protect one sector, it doesn't really helps. You know things move. Speaker 1 33:11 And I think certain sectors and all that they figure out that they can't compete. Then what they should do is they should let that go. That's that's the thing. That's maturity. So what happens is what say now for example, these bond traders and all, what they say is that you know you need to have the maturity to know when to let it go, right? Because some people they say because Sri Lankans, I think we have this mindset. I think it's a South Asian mindset, is basically you know let's wait and see, wait and see, wait and see. So what happens when you wait and see? What happens? The damage becomes even more right to the level of you know you can't salvage it. So that's what they say. When things are going south, you must have the skill to know it's going south, and you might have the maturity to move out. charindra chandrasena 33:50 Yeah. Interesting. Okay, we have to move on because I want to just touch on this topic as well because it happened last week. President Anur Kumar Sanyaka, delivering a speech in Parliament, said, which was quite quite surprising, actually. Speaker 1 34:10 Yeah, charindra chandrasena 34:11 I suppose not surprising to people who knew about it, but surprising to the the masses that Almost $1 billion has been transferred, Speaker 1 34:25 basically syphoned out, charindra chandrasena 34:26 syphoned out as advance payment transactions. I'm reading an article of the Daily FTS since 2023, without any imports coming in, Speaker 1 34:40 yeah, charindra chandrasena 34:40 without any imports, corresponding imports. So 1 billion has been sent as advance payments for imports, but there are no imports that have come in. What does that tell you? Speaker 1 34:51 Money laundering. Money laundering. Simple. Because now, for example, now you get money can be laundered, basically in. I mean there are. Dhananath Fernando 39:44 As a misperception, when this happens, there can be a balance of payment crisis. That cannot happen. For example, you send the money dollars. No, as Riyadh said, no import comes in or like an empty container. But dollars have gone out. People think because of that there will be $1 shortage or a balance of payment crisis. It cannot happen. Simple, simple reason because someone who is buying that dollars has to give rupees. Speaker 1 40:23 Yeah, Dhananath Fernando 40:24 that means your imagine three of us are basically importing, but when I give the rupees, basically I am restricting both of you the capacity to import. Yeah, Dhananath Fernando 40:34 because when I am buying those dollars by rupees, you have less dollars to import. So I am actually utilising someone else's opportunity. That's number one. Number two is what has happened is wrong if it has happened. You know, no one can like just you know send dollars and import nothing because it's a money laundering, as Riyadh very correctly said, and also over invoicing or under invoicing or also illegal. That distinguish has to very clearly mention. But where this directs is generally, if you recall, Chari earlier also this conversation came. Exporters are misinvoicing and hiding money overseas. This is where generally this slowly diverges to. Ultimately, you end up of someone else's problem as a problem for exporters. While you really need what we knew, what you need is exporters needs to be encouraged and strengthened because ultimately what it end up saying is okay. The problem for the dollar shortage is exporters hit money somewhere else. That's why it ended up last time also. If you recall in Parliament they said 55 billion something was, and I'm sure some exporters are doing it. Speaker 1 41:37 And there's no evidence or anything. You know, even the numbers of OTM report, Dhananath Fernando 41:41 some other report. It's a study done by multiple countries. I'm sure exporters are doing it. There's no doubt, like because we all know there's a misinvoicing thing that was happening. So I'm sure it is happening. But it doesn't mean that it creates a balance of payment prices in the first place. But to my knowledge, now already the central bank has introduced a new system that I think that gentleman was also. I mean, for their credit, that gentleman was also, if if I'm not mistaken, hired by the IMF to implement a similar system in re in the region because there is a very strict process of like what is the I mean what's the amount you know all those things have been mentioned, and it is like the databases kind of. If I am not sure whether it's connected or not, but they are trying to connect it, so the customs can actually check whether the same corresponding thing has arrived or not with the custom. I am not sure whether to what extent that he has implemented. That's where the importance of digitization and all that. But if it has happened, it has. It should not has happened. I'm not sure whether the president has been also misguided to say like for something. Okay, this is to divert the pressure on exporters or anyone. But if it has happened, it's definitely money laundering because you can't really because when you are even transferring dollars outward, you are asking so many questions and so many documentation has to be provided. I remember once we this is many years ago. We were want to make a payment for an outside contractor, and they asked like so many questions: Why this? Who is the consultant? What's the what's the service? What's the report that generated? All sorts of things. So, so it's not easy to transfer money. And Speaker 1 43:15 then that wasn't a big amount. Yeah, it's like Dhananath Fernando 43:18 $5,000 or $6,000, right? So this Speaker 1 43:20 is like a billion dollars that charindra chandrasena 43:22 it's a billion dollars over three years. So maybe maybe in small Dhananath Fernando 43:26 tranches, but where we should not direct this conversation is to bring the pressure on exporters because I'm worried because same thing has happened over and over again. If you recall, our as I said, our full pricing revision delay ended up as at exporters. Ultimately, exporters are now asked to convert their proceedings in 30 days instead of 90 days, right? So all your policy errors are now diverted to exporter. Similarly, I don't want to have a situation. Everything has come and say, okay, exporters are the problem. You are hiding money. You are not. I mean, they may be hiding money, which is not right. But when you are when you are having a conducive business environment. Anybody would like to bring money, correct? Right. Without you know correcting that, you are trying to correct. Yeah, yeah. Insert pressure on exporters is not also acceptable. Yeah, Speaker 1 44:10 and there are the other other real detrimental issue is putting conversion targets or timelines. It's only going to make things worse. charindra chandrasena 44:17 Yeah. Speaker 2 44:17 Right. We kind of touched charindra chandrasena 44:18 on that last course. So I think you also did know. Yeah, so I I get the overall vibe you're bringing that exporters should not be unduly pressurised. But Dhananath Fernando 44:31 agree, it doesn't mean they can under invoice or invoice at the same time. It's not a licence to do that. Yeah, yeah, completely wrong. Yeah, yeah. It has to be punished. You're charindra chandrasena 44:39 basically saying that the larger macro issues should not be, I mean, they should not be made to pay for somebody else's sins. Absolutely, right? All right, good chat. I think we went into different different areas, but broadly on on those two, and then even more broadly. On trade, right? So before we wind up, Dana, you have your yes. Dhananath Fernando 45:06 So I invite all of you to think of Sri Lanka in like next 10 to 15 years. We can only transform it through policy reform, and what Advocata does is we set the policy narrative and the reforms that are needed, evidence-based, and that's why we need your support because we are an independent think tank. We don't depend on any political party or their ideology or vision. We are trying to bring policy prescription based on research, and that requires to maintain our independence. And we would like to depend our independence based on our viewers, and that's why we are inviting you to become an advocacy. It's just 12,000 rupees. Don't say 12,000 rupees is too expensive. We all know it's not expensive, and even like just one meal will cost you more than 12,000. I mean, if you go with the family or you know in that context, so it's not expensive. And also by subscribing, you're also getting other benefits like analysis on stock market, exchange rate, property market, so on and so forth. So, consider becoming an Advocata insider and subscribers and support our policy work. So that will help Sri Lanka to navigate through the policy dimensions that is required, and at the same time, to remain our independence. At the same time, because we are at crossroads, reforms are needed, and we need independent think tanks like Advocata in Abu to bring that policy perspective to the policymakers. So, consider becoming an Advocata insider. charindra chandrasena 46:36 Right. Was that part of the message? That that wasn't part of the message. All right. On that sneezy note, we will wind up. Thanks, Dana. Thanks, Jari. And thanks, Rayad. Thanks, Shari. Thank you, everybody, for non-stop today. Okay. It's Dhananath Fernando 46:56 not nothing is part of today's discussion. Yes. So we will charindra chandrasena 46:58 wind up quickly before the next one. Thank you, everybody, for tuning in. We hope you join next week as well, and let us know your feedback and on and and your thoughts on topics that you'd like to see us cover. So we'll see you next week. Transcribed by https://otter.ai