charindra chandrasena  00:00
Hi Dana.

Dhananath Fernando  00:07
Hi Jare.

charindra chandrasena  00:08
Hi Ravi.

Speaker 1  00:08
Hello, hello. Good

charindra chandrasena  00:10
to good to see you more and more often now.

Dhananath Fernando  00:12
Riyadh seems I'm I'm not sure with the currency. Riyadh is also slowly hiding away or like putting giving Ravi the opportunity. I'm not very sure.

charindra chandrasena  00:21
It's it's good to have a mix of Riyadh and Ravi, and because both of you bring different flavours to the conversation. So good to have you, Ravi and Dana. How are you?

Dhananath Fernando  00:34
As usual, things. I mean, when the currency depreciates and when so many questions being asked, it has been a bit of a, you know, busy. You

charindra chandrasena  00:47
become very busy. Exactly.

Dhananath Fernando  00:48
When there's a crisis, I become very busy. Yeah, everybody wants a piece of opinion and to understanding what is going on. So,

charindra chandrasena  00:57
so while the currency issue is going on, Dana. Today I want to focus on something a bit different because the currency is an ongoing issue. Today I want to focus on SOEs, and SOEs. There was the the Ministry of Finance report was put out for 2025, and that lays out the the profits, the revenue of the main SOEs. Now, I I believe you've gone through the report, and I believe you have to, Ravi. So, if I could start with Daranat, what is your initial view, especially looking at the the profitability of the SOEs, and what does that what does it sit beyond the numbers?

Dhananath Fernando  02:02
Yeah. So, Chari, again, I think not many people have seen this recent report, which is a very important report by Ministry of Finance. This is the 2025 annual report, and Chapter Eight, if I remember right, is all about state-owned enterprises. And there was a, I think, one newspaper reported on the profits and losses. So basically, profitability compared to last year has slightly gone down. Overall profitability, but what my point is, and and that's mainly also with C C E B basically started making losses from the previous year, 2024, because the Public Utilities Commission basically brought the tariff rates down. I'm not saying about 2026. This is till 2025, not the recent tariff rates, but in 2025. Because of that, the C C B has made a loss about I think 30 billion plus. So with that, the profitability overall has gone down. But what we need to do check is not too carried away with only with profits and losses. When you go one one layer down, what we can see is these state-owned enterprises basically manages about six holds about 16 trillion worth of assets, 16 trillion. That is about.

charindra chandrasena  03:30
Before before we go there, I want to now focus on that a little bit also because it's only fair to give that side of the story as well. Correct. Now, as you mentioned, if you exclude the CEB, generally the SOEs are profitable and more profitable than the previous year.

Dhananath Fernando  03:52
Excluding a CEBS.

charindra chandrasena  03:53
No, exactly. So, if you exclude a CEB, profits have gone up by more than 20%

Dhananath Fernando  03:58
Correct. About seven years,

charindra chandrasena  04:01
right? Yeah. So if I had the figures, it's exactly 21.5% Yeah. Right. So somebody could point to that and say, now for 2025, the whole year there has been a government that has been driven mainly on an anti-corruption platform. Therefore, the SOEs are not being abused for government gain. Isn't that why it's profitable? That is a fair question to ask. What is your response? Yeah, it

Dhananath Fernando  04:40
is not because while you are looking at the profits, excluding CEBs, even if you look at where the profits are coming from, that is mainly from the financial institutes. That is the Bank of Ceylon, People's Bank, NSB are what is driving the profits. So out of the. Profits about 70% plus coming from the financial institutes, so that's where the profits are coming from. But I'm not saying that the government is like like the previous governments; they are basing basically using it for private gain. But it doesn't justify the reason of running SOEs at the same cost, and why I question on the other side on government's mandate, because in the same report it indicates that some of the key SOEs haven't really submitted the annual reports, that is including CB. So if the government is claiming on their pledge on the anti-corruption transparency, why they really didn't push for submitting the basic annual reports of these institutions? Because that's the first step of transparency and making sure that you are not really using it for corruption purposes in that sense, so that's why I have a disagreement. I see. Can I?

charindra chandrasena  06:05
Can I? Do you have the figures or the percentage of the ones that have not submitted?

Dhananath Fernando  06:10
Yeah. So basically, the main ones are CEB, National Water Board and Drainage (NSNWSDB) Sri Lanka SLTB, State Engineering Corporation, Milko, National Livestock Development Board, Rupa Wahini, Lanka Sotosa, Lanka Sugar.

charindra chandrasena  06:28
So that's almost 10. Almost

Dhananath Fernando  06:30
10, and there are a few more. Right. So that is a bulk, and especially as you know, the main losses also coming from institutions like SL CEB and the Water Board and SLTB. Rest is Sri Lanka Airlines the the popular culprits, but they have submitted the accounts. But these are key ones. But again, these are accounts for 2024. But it is not even released in 2025. So that was the challenge in terms of yeah in terms of annual reports.

charindra chandrasena  07:02
Right. Okay. Ravi, do you have the same view, or is it different, or is it the same larger view but with nuances?

Speaker 1  07:12
I'd like to take you know think about this about little differently. Now we've been talking about it, so then we block that story to death, right? We've been we raised this question of reform in 2015 up to 2026. Not single, not one single thing has happened, right? With I think a few dormant entities have been closed by this government, but I don't think anything else has happened. Now there was a survey that was taken by this. I think there was a political journal called Murugara that did a survey in 2024 amongst all the political parties, the major

Dhananath Fernando  07:51
ones. Sorry,

Speaker 1  07:51
Murugara. I think it was called

Dhananath Fernando  07:53
political survey.

Speaker 1  07:54
Yeah, on their attitude towards SOE specifically. So so the the so now every one of those now, UNP says they they will favour privatising profitable entities. The NPP, of course, had said that they view SO is a strategic and and better management. SJB says something about governance and again. They are sort of a hybrid between, but but nobody actually every single party seems to be in favour of of of SOEs in some form or another. And if you see last 10 years, absolutely nothing has happened. No different governments have come and gone, so that ties up. Now, what I would say, why is it that all these politicians like to hang on to these SOEs? Right now, there's a nice little incident that happened in 2023, right when there was a conflict between state ministers and cabinet ministers. Right, big internal turmoil happened. Now. The reason you appoint the state ministers, we had introduced, I think, restrictions on the size of the cabinet, the jumbo cabinet in various constitutional 90th it was on, 20th it was off when he came back somewhere. So to get round that, you appoint state ministers, right, and basically to buy votes in the parliament, so you have a loyal voting base. Now, the in terms of perks, pretty much the same, right? Besides their monthly salaries, both ministers and state ministers are entitled to several perks. Ministers are entitled to two vehicles for their use, with the option of picking their own drivers. Both categories are entitled to five different secretaries: a private secretary, a public relations officer, two coordinating secretary, and a media officer. Each minister entitled to 12 security guards, a vehicle for his or her own use, and a bungalow in Colombo. Now the main. Sort of complaints on the on these on the benefits that they get directed was that the state ministers weren't given the were the best cars they they had used cars and and that was the only thing, right? But there's something about the conflict. The principal reason was that that there were no government entities placed under the state minister? The cabinet minister has a ministry, and various SOEs and other bodies are under that. State ministers they created the state minister on the arguing that the cabinet ministers are overloaded. They need to have a state minister to assist the cabinet minister in his work, right? But the state ministers were grumbling that they did not have any institutions under them, right? SOIs or whatever. Now, when you have, when you are the minister, and you have some SOE under your reporting to you, you are able to influence. Now, in the this a good newspaper article from the time, of course, they were saying it says It says that I lost my notes, but give me a second. Ministers have shown interest in tenders for projects and other matters involving finances. However, they could not get involved officially. This was the complaint of the state ministers, right? Even minister resorted to such practices and cited a deal where state land amounting into 80 acres had been given by minister through any regular practice. So there are resources also under the ministry that you can. So basically, you can give jobs. You can get involved in in procurement. You can you can you can you can distribute resources for your for your. So there is a very strong incentive that that that ministers and politicians have to hold on to. It is very politically very useful for them

charindra chandrasena  12:23
absolutely, and I think in terms of you know recruitment, employment also how how politics in Sri Lanka and and in many parts of the world also work is you need people to do the I mean, I wouldn't say dirty work, but you need people to organise campaigns for you.

Speaker 1  12:45
Yes, yes. From from

charindra chandrasena  12:47
from doing the cutouts to hanging them to everything. Yes, you need wasting posts. Yes, I think the best case

Dhananath Fernando  12:52
history, as we record, I think the former minister Saranagunovardana has been given a court. Yeah,

charindra chandrasena  13:00
today in the morning,

Dhananath Fernando  13:02
and you know that is under a state-owned enterprises corruption. Absolutely, right. So even if you look at some of the former ministers who have given similar kind of what you call sentences or like court rulings, that is all connected to some state-owned enterprise. you know, in Sri Lanka, so which is why I think Ravi's point: these are being used as vehicles for corruption, and that has been there throughout. So I think our initial question was whether the financial performance doesn't indicate whether the corruption has kind of come down. It may be because of the the quantum of corruption may have come down, but the the tendency to use it as it is vehicles for corruption will not. Yeah, and your

charindra chandrasena  13:52
argument is that we shouldn't make that decision based on one government alone. Absolutely, right. If if say let's assume that this government is not corrupt, there is no guarantee that this will be the same government next term. And if a corrupt government comes in, what are the safeguards at that time? You need the safeguards for the worst case scenarios. Absolutely. And even

Dhananath Fernando  14:17
under this, absolutely, even under this government, even the it's not the politicians. Even it could be the bureaucrats. For example, the coal issue that is also done under a state-owned enterprise. State-owned enterprise. So those things can recurrently take place. So that's where we have to be quite cautious. And I think that's the broader argument that these generally being used as vehicles for corruption. You know.

Speaker 1  14:38
Now, to I was just about to say what Dana was just saying. Now, if you are good to illustrate this, if you take this this

Dhananath Fernando  14:51
coal tendering coal tender,

Speaker 1  14:53
right now there's a there was a report that was out, right? They have allowed unregistered. Suppliers to bid, right? The lab that had certified the quality had was was also not was not was didn't have the registration. This is not the

charindra chandrasena  15:14
audit general report. Did the auditor general

Speaker 1  15:16
report right? Tender rules explicitly restricted the process to fully registered suppliers, right? So, so a number of they they procured the stuff late, and then they did an emergency procurement because it was late, right? Now, what has happened is they have given it to the lowest bidder, but but the quality of the product was was was not right. Now the bigger question you must ask is why does Lanka Coal Company exist? Right, it's a private company under the Ceylon Electricity Board. Now is it that the Ceylon Electricity Board cannot do procurement on its own. How do they buy all the oil that they buy for the for the for the other power plant? They buy it directly under the Electricity Board. Now the Electricity Board, or sorry, they buy it from the yeah they buy it through the CPC. Right now the reason you have a private company now private company incorporation costs are involved. You have to maintain accounts. You have to file annual returns, right? You have to. There is a administrative cost that is involved in this, right? But the way the the this works is you incorporate a private company as a sort of you call it a subsidiary of the of the department that you are dealing with, right? Then when tenders or procurement comes up, the the upper echelons of the department at all. Since we are procuring from our own subsidiary, we don't need to follow the tender process, right? Then the subsidiary that has been changed in the case of coal, but but but that's the standard process. Then what the subsidiary purchases you can bypass a lot of other conditions, right? And then who do the directors of the subsidiary have full control over the finances in a department? The the bank the the bank is directly you have to the bank account is run by the treasury. The department is only an administrative thing. Whatever revenue goes directly to the treasury, right? Here it goes into a company bank account, and the directors who are appointed by the minister or the other people in the department are able to they appoint their friends, relatives. So it's an easy way to give jobs, right? And and you give them tender at a good cost plus, so that there's good margins there, so you have lots of resources flowing into that. You can employ your friends, your family, all those people in there. Yeah, yeah, the benefits. The incorporation of a private company under under government department, it is structurally designed for corruption. This is this is not an accident. It is by design, right?

charindra chandrasena  18:25
It's a convenient hybrid. No, where they get to where they get additional. Okay, okay.

Speaker 1  18:30
So then there's a plethora. If

Dhananath Fernando  18:32
I may, actually, even the president, I think he has realised it, and he made a statement on this in a public gathering. He said there are certain state-owned enterprises. He got the cement corporation as an example, and we did a reaction video as well. He said cement corporation doesn't produce a single kilogramme of cement, but what they do is there's a cement corporation and there's assets under cement corporation. They have rented it out, and out of that revenue, there's a board of directors who are taking a director board allowance, and he said even closing these downs are very difficult. So he has declared 150,000 sort of a bonanza for officials who are basically closing these institutions because it's that difficult because the corruption change. It's in a way not corruption, but in a way, it's corruption because when a cement corporation doesn't manufacture one kilogramme of cement, but still you take a board allowance, it's in a way not corruption because you are entitled to take a allowance, but you know you are not producing anything under your mandate, so it's not corruption, but it's in a way corruption, or it can be broadly realised. realisation improper

charindra chandrasena  19:41
enrichment, I suppose,

Dhananath Fernando  19:45
or you know, productive loss or something like that. But still, this is why this is challenge. I think that's why my initial stat that I want to highlight, because SOEs, it's their asset base is about 16 trillion. 16 trillion, not billion, which is about 50% of the GDP, and what they contribute is about as profits is about 450 billion, which is about 2% of the GDP. So, using resources of 16 50% of the GDP, you're only contributing 2% of GDP. So that is where the disconnection

charindra chandrasena  20:23
is. Can I can I ask both of you a question? Now, Advocata has been advocating for the phasing out of SOEs for, as Ravi mentioned earlier, also for now 10 years. Is there any SOE that should be retained?

Dhananath Fernando  20:43
Good one. No, so

Speaker 1  20:47
the so the there was a good document that was drafted by the SOE reform unit that was set up under in that 22 thing. So they had certain principles. If it involves national security or or or some essential thing, then it's not a that guideline was had a yeah but but that commercial yeah but but that

charindra chandrasena  21:16
now that Ravi takes out a lot of it to have the defence sorry national security, and then energy, and then essential services, as the ones that maybe should be retained, that puts a lot of the SOEs into that basket. Somebody could argue that, okay, this thing is essential in the current climate, and that could be anything because essential services have been, you know, the gases have been put out, preventing strike action in many on many occasions. Dana, do you have any that should be kept?

Dhananath Fernando  21:59
Yeah. So my extreme view is government should not retain any commercial level enterprise. That's my extreme view. Any, any, in my view. But even if you read, but that's not how the world works. No, there have been already SOEs there. There has been already there's a conversation. So, but if you think of a framework,

charindra chandrasena  22:18
one can I can I stop you? On the extreme view, if we can just spend a bit of time on the extreme view, what does the government do then?

Dhananath Fernando  22:26
Yeah, no. Government has to do mainly the rule of law. That's their main product. That's where they have to invest. Mainly take the judiciary rule of law and the main functions that the private sector cannot do, the government can do. That is the even the healthcare, education that can be that can be run by the government. I'm talking about the commercial operations of the government. What they are doing is like so.

charindra chandrasena  22:55
Healthcare is government. I'm

Dhananath Fernando  22:56
fine with the healthcare. There can be private sector. Even in your

charindra chandrasena  22:58
extreme view, you're okay with healthcare.

Dhananath Fernando  23:00
Healthcare. I mean, certain sectors. I think the healthcare can be provided by the government. Okay, and what else? Education, all those those things can. But energy, energy, energy. I would say the private sector can do it. But if the government really wants to have a control, there can be a regulatory framework because energy, when it comes to market competition, it is difficult. It's because you know when it comes to something like energy transmission generation, these are very capital-intensive projects. So there can be a regulatory framework, something like we already have, like the Public Utilities Commission. But if you really want, I'm not completely opposed to that. But I think it can be run by the private companies for sure. But what we need to understand is the role of the government is not doing businesses and running these commercial enterprises. Their main product has to be rule of law, governing which the private because judiciary and all that. That's their main product in my view. But as can I can I also

charindra chandrasena  23:56
ask another question? What if the government says that if the SOEs are profitable, that results in greater revenue for the government, and by not having any of the SOEs, the major commercial SOs under it, you're depriving the government of government revenue. The

Dhananath Fernando  24:19
argument, Charlie, is actually if if the private sector comes in, the government will have a bigger, higher revenue, because at the moment, even if you look at the levies and the dividences that they have received, is about 57 billion to 60 billion, according to the report. But even if you look at any government, they have a 30% share of all businesses. So even these banks and all of them are run by. I mean, if the let's say if the People's Bank or the Bank of Ceylon, in their absence, someone else will fill that gap. So the profitability of that is kind of equivalent to what they. Anyway, getting because this revenue of the Bank of Ceylon doesn't mean that revenue entirely or the profit entirely goes to government. They are retaining that profit out of that. A dividend is only being given to the government. So after the taxes, so even the government keeps a 30% share as taxes. Still, in my view, the government revenue will go up further, so that's why I'm saying in terms of commercial operation, government should step away. But there are other things that the government definitely should involve. I'm not saying for a no government country. I'm saying there has to be a government for sure, but they should not do commercial enterprises. That's what I'm saying. Government really do not. I don't see a logic of keeping any of those institutions, which is they are they are according to our report there's about 500, but they are mainly monitoring about 51 now. Earlier it was 52, so on there I don't see a logic. But thinking on a broader framework, even if the government thinks okay, no, we really have to be in this commercial enterprise. Don't get me wrong. I'm not talking about education or health. I'm saying the commercial enterprise. The framework could be whether there's a market failure, something drastically happened. There's a market failure, or whether there are industries that the private sector is not willing to invest money. I think the classic general popular exam. I mean, the example people take is okay. Let's say there's an ATM that has to be set up in a rural area, the private sector, because probably there'll be 10 people withdrawing money. But so, what is

charindra chandrasena  26:30
the incentive for the private sector before they are? Let's

Dhananath Fernando  26:32
say that let's say that is the scenario, or like a there's a bus route, only there are 10 passengers. How are they going to commune? So there's a case. But even in my view, okay, in if there's a not those two examples, but if there's an industry that the government is not, the private sector is not really willing to invest, then there will be a case. But just because of an ATM or a private bus route, there are different models that you can address. That just because there are no, I mean, there are no private investment on a route. You are not starting the bus company to run that now, so then you subsidise it for someone who is operating in that route. You government give a subsidy rather than incorporating a separate, you know, entity to run that operation. So that has been the case. Even if you look at the history, that has been even how these state-owned enterprises to an extent, evolve because there were instances many decades ago certain industries like hotels, leisure sector, airlines. There were no private investors because they really didn't see the benefit of how they can you know recover their investment. So as a result, the governments invested on air lines. Sometimes hotels, even the Cinnamon Grand, that was a public state-owned enterprise at one point, but after some time, when the private capital comes in, you slowly need. So I think

charindra chandrasena  27:47
so. What you're pointing to are two instances where it is okay for the government to be in commercial SOAs,

Dhananath Fernando  27:57
correct?

charindra chandrasena  27:58
Commercial enterprises. Now the second reason is clear. If there is no private sector interest, then obviously somebody has to do it, and the government needs to step in in the national interest. The first one is a bit less clear. Okay, then I ask you about that market failures. Now around the world throughout history, we have seen the private sector or the the market forces led private sector fail. Okay, and the government. The understanding is that the government will have a greater public interest. Now in Sri Lanka, whether that is the case or not, is a different matter. But in theory, the government will care more about people beyond just the bottom line. Correct. So I'll give you an example now. A monopoly is a market failure technically. So in the in the LPG sector, the gas sector, the government could say that littoral exists because if not for litter, it would be just the private player, which is last. That it would be a last monopoly if not for littoral. So then, how do you respond to that? No,

Dhananath Fernando  29:18
absolutely. So Ravi may have a view on the history of like how the litro. I mean, it was a public corporation, and then sorry, it was a private company. Then it was nationalised again. It was shell room operated, and again government bought it back. So in that case, study there are two options. Now we also need to understand the reality point of view as well because since the Sri Lankan market is quite small, sometimes there may be no space for four or five players in the gas market, for an example. So in that case, I am not completely opposed to government having some stake, but there are business models that the government can bring more competition in that case, even if there is another private. Player, there are certain resources that can be used as shared resources and give the differentiation at the retail level. For an example, gas procurement, their storage, but that can be done. That storage or the common facilities done as a separate company with all the players together running it. So at least the competitive nature of the business will be there. Right, totally. I think the best example is on petroleum, CPC STL, right? CPSTL. CPSTL, which is a which is a separate company, which is comprised of the directors of the other private players as well. But I think there's an argument between the representation or the majority share is whether it's you know reasonable or not. But at least that sort of a model can be operated. But I'm fine even if the government really thinks no, at least we should have a share in the market. That is fine. But a monopoly of the government is not acceptable. It could be a monopoly of the private sector. So that

charindra chandrasena  31:04
is that is that is what I was trying to get at, and I would like to get Ravi in this as well. Ravi, wouldn't why is it not the best model to have both the government and the private sector present in any industry where there might be multiple private sector players and the government, so there is no monopoly. It's not even duopoly. It is oligopolistic, yes, or it could be even you know much broader market. Why is that not the best?

Speaker 1  31:35
I'd like to just take a step back, you know, and ask this question: What should the government do? Right, a bigger question, a more philosophical question. There are three things. One is keep the peace, uphold the law, administer justice. There's only three things that government must do that are absolutely essential. If I were to give you a little bit of keep the peace. Prevention of public disorder, riots, violent conflict. Right, handled by primarily by police and law enforcement. Ensures that citizens are physically safe. Right. Uphold the law, which is about establishing and enforcing clear rules. Right. That limit the power of both government and individuals, so that you prevent tyranny. Right, no one is above the law, and it applies to everybody equally. Right, administration of justice is a justice is a resolution of disputes amongst people, penalising wrongdoers through a system of independent judiciary and courts. Now, how this helps people is where if you keep the peace, it reduces fear. Citizens can walk the streets, run businesses, go to school without being under the constant threat of violence. It protects vulnerable groups, prevents the exploitation of minorities, children, elderly, by predator, safeguards property, prevents riot, looting, whatever. Right. So that's keeping the peace, right? Second, administering justice allows you to resolve disputes peacefully. You don't need to go fighting or take to take to violence to sort your problems out, and it uphold the laws to establish simple, clear rules that you know exactly what's legal, what's illegal, and allows you to. If you do those three things, people can get on with their lives, and and the economy will prosper once the government is able to do those three. If you look at the post-independence history, it has failed in all three. Right? You have none of these things. Once you get those three right, then we'll talk about what is the government should do. Right? Get the basics right, then talk about other stuff, right? Without jumping ahead, trying to do things when you are incapable of delivering even the most basic things that you expect from a government, which is why everybody in this country wants to migrate and has migrated for decades, right? Get these basic things right. That's all I say.

Dhananath Fernando  34:16
Shari, I have a direct answer for your question. Whether your fundamental question was why a government and a private sector both in a competitive service. So I'll give you an example in the port sector. Now under port terminals, as you know, there's CICT, which is operated by the Chinese company. There's SAGT, which is operated by the private sector company John Keys, and there's the East Container Terminal, which was supposed to operate by the government, and there's West Container Terminal now with the Adani Group, right? So on all these now, ideally all these four should compete in a competitive environment. Now the challenge is when the government comes in. Now the Sri Lanka Ports Authority manages some of they are the regulator of the market as the government, and at the same time as the regulator, they are also in operating a terminal, the East Container Terminal and the Jaya terminal, and they have a director board representation in the private companies as well even in the CI/CD. I think there's a 15% shareholding of that. For that, they have a director board position. So you are when the government is also trying to compete with the private sector. There's a massive conflict of interest because the government at one point also acts as a regulator. You are also a player, and you can regulate the market in a way for your advantage. So that's why I recommend government should not engage at all if they really want to. If they really want to, they should limit themselves. I mean, if they're out of the second option, it's on a regulatory role because at least then the players compete. You are just taking the umpire, and now we are the umpire, and also trying to become a goalkeeper or a player. That completely confuses the market and loses the confidence. That's the main argument. But the other choice is there's also an evolutionary process. Some how it happens is generally the government will run it as a government monopoly. Then you dilute your shareholding, right? Or like you open it for competition, and then they allow. I was talking in theory. Exactly. In practice, yeah, exactly. First is the government monopoly. Then you allow it for private players, and then you slowly dilute your shareholding, and then basically you give it to the private sector, and you set up a regulatory agency if it's like a critical area that you regulate, so that's generally the evolutionary process of the state-owned enterprises. That's where we have to be. So I agree with Ravi. I mean, those are the there are basic functions. But

charindra chandrasena  36:51
you're not against regulation.

Dhananath Fernando  36:53
I'm not. I mean, I say regulate only if the market forces doesn't work. Like even if the if there's a challenge on the market forces that you need to regulate, only regulate if it's necessary. And if you have

Speaker 1  37:06
the competence to regulate, that is the you can't get your basics right. Then you want to regulate the things which you yeah don't try and try to

Dhananath Fernando  37:14
regulate everything because then there'll be so many regulations you again limit. But but

charindra chandrasena  37:19
I'm not talking about overregulation here. I'm just simply asking about the concept of a regulator. Correct. Yeah. You have to be

Speaker 1  37:26
competent to start with. So you can understand what you're doing. No, but that

charindra chandrasena  37:30
is that is true, Ravi. But the thing is, somebody could argue that without a regulator, you would be allowing the private sector to run amok. Yeah, but then if

Speaker 1  37:39
you have an idiot as a regulator and you have an idiot as a government, which is what you are dealing with. I

charindra chandrasena  37:45
think it's a it's a it's a particular particular view that you have. Yeah, it's all right. On a strategic

Dhananath Fernando  37:51
sector, in my view, in my view, they are. I mean, for an example, telco. Of course, the compete the the competence of the regulator is different because ultimately those are all regulators that they joined properly. You are going to

Speaker 1  38:05
have medicine shortages because they have their city can controlling prices. Tell me one regulatory to deliver something. Correct. That that challenge is there,

Dhananath Fernando  38:15
but in in certain strategic cases there may be a case for a regulator, but it's only if it's only necessary. I think the first step is the market forces should work. But even if you see it is kind of if there's a challenge on only operating with the market forces, then you can consider a regulatory role. I wonder

charindra chandrasena  38:34
if Sri Lankan example could be the TRCSL, Telecommunication Regulatory Commission because now there is SLT, Sri Lanka Telecom, and Mobitel present, while there are multiple private players in the mobile sector as well. So I wonder if if that's the closest we've got to a good model. I don't know what your thoughts are, but I I I just wonder because generally as an industry that's the one we talk least about in terms of crisis and all of that, right? Absolutely. But but my question was more theoretical about having a regulator, whether it is working in practice or not. Yeah. Because no,

Dhananath Fernando  39:16
absolutely. So the challenge is sometimes you know ideally, and

charindra chandrasena  39:19
and another reason I ask is, wouldn't that inspire greater confidence in people, especially Sri Lankans, who are so used to the government control that if they are giving up control, at least there is some regulation to you know ensure the checks and balances on the on the

Dhananath Fernando  39:35
regulator. The important point is the regulator has to be financially independent. For example, stock exchange, it's being regulated by the Securities and Exchange Commission, and they are kind of and they are even if it's a regulator, it is not the directly the government or the ministry who try to regulate. Of course, SEC has also made lot of mistakes, but at least the you give the financial independence so the regulator can operate it itself. But I think the. Misunderstanding has been carried. People think regulation means a price regulation and imposing price controls. That is not regulation. For an example, for banking sector, the central bank acts as the regulator because otherwise everyone's if everyone starts I mean collecting public funds as deposits, then it becomes a little difficult to run it given the nature of the sensitivity of the industry. So there can be a case for a regulator when it's only necessary, in my view. First, the market forces should work, but the regulator has to be same with central bank. I mean, central bank there's a monetary side and a regulator side, but Securities and Exchange Commission, the Public Utilities Commission, even for the one of our main suggestions for the electricity new act was still the Public Utilities Commission is financed by the Minister of Finance, which they have a direct involvement with the CEB because with the tariff rate. So you have to make them the regulatory independent. For an example, the casino industry. There was a case for an independent regulator because these are kind of sensitive ones. But only when the because these are highly licenced industries can be complicated. So, but again, only if it is necessary. Necessary, they have to be very. I mean, in my view, like the areas are very sensitive on deciding on a regulator. In my view, probably Ravi has a question. Yeah,

Speaker 1  41:18
final thoughts. I think we can close close here. I think all my friends. Now said.

charindra chandrasena  41:31
But yeah, thank you, Ravi. Thanks, Dana, as always. And I think an important discussion, and and it's it's good to have different views on the table as well. Before we wind up, you have a message. Yes.

Dhananath Fernando  41:47
So these conversations are brought to you thanks to our subscribers and our Advocata insiders. So become an advocacy. It's just 12,000 rupees a year, 1000 rupees a month, and consider becoming an insider. We are what you are trying to do is to build a policy community who supports reforms, and at the same time, for that you will get exclusive content on exchange rates, stock market, property market, and so many other areas, including some newsletters and economic news updates. So, become Advocata Insider and support the good work that we do.

charindra chandrasena  42:22
Right. So thanks again, gentlemen, and we'll see you next week. And thank you for tuning in. Do give us your feedback on on this show and all our other shows. And you can suggest topics for us as well if if you are interested in us discussing anything in particular, and keep tuning in. We'll see you next week.


Transcribed by https://otter.ai