Dhananath Fernando 00:19 Hello, hello everyone! Welcome back to our programme. As you know, we are discussing with Dr. Sawat Rajapatiranath the policy challenges in globalisation in Sri Lanka, and as you know, it's a book about Sri Lanka, book about Sri Lanka and globalisation. What we did right, what we did not write. Whether our policies were globalisation friendly or globalisation unfriendly, and what led to make those decisions is the conversation has always been about. And again, as you know, this is not to promote the book, but this is just to bring the context and the line of thinking why Sri Lanka should think about globalisation and more a globalisation friendly mode. But it's a academic research, and this book is available for universities to refer. And interestingly, why we like about the book is it's a book about Sri Lanka. And Dr. Sarath Rajapatiran is back with us. Dr. Rajapatiran, welcome back. Dr. Sarath Rajapatirana 01:19 Thank you for having me again. Dhananath Fernando 01:22 And today we are going to discuss about the 10th chapter for our viewers. If you haven't watched us, just go back and check. We have we have had discussions for the for the I mean for nine chapters, and today's chapter is quite as all chapters are important, but this is also a quite unique one since this has been quite a conversation among a lot of interested individuals in economics, globalisation, poverty, and income distribution in Sri Lanka. As we all know, if you are following this line of conversation, there has always been a conversation that with globalisation there was some level of income distribution sort of disparity, and whether globalisation influenced that or whether actually globalisation unfriendly policies really influence that is what we are going to discuss, Dr. Rajabadilla. I just want to understand in your chapter at the initial stages you basically share different views on globalisation and income distribution. There are multiple schools of thoughts, different views. Could you kindly first shed light on that, so then we can. It's easy for us to step into the conversation. Dr. Sarath Rajapatirana 02:33 When you ask it that way, it's tough. Yeah. So I start with a little history. Dhananath Fernando 02:39 Sure. Dr. Sarath Rajapatirana 02:40 As everybody knows, people who follow particularly this type line of research, that we had a system of economics. People had freedom to buy anything, sell anything. They also done. So, chapter 10 looks at some more detail, Dhananath Fernando 03:03 and in fact, you mentioned like in 1980s and 1990s, like we had very very reputed system. Yeah, Dr. Sarath Rajapatirana 03:10 and a lot of people like Amartya Sen and all that. That is the programme we should be doing. They are very consistent because the the benefits that came were very good, but people are looking for having good education, good women, good diet, they are healthy, and all that thing. But they are Sri Lanka was taken as an example how to manage your economy in such a way that these benefits are enjoyed by majority of people Dhananath Fernando 03:43 in 1980s. Dr. Sarath Rajapatirana 03:44 The 1980s. Dhananath Fernando 03:45 And even regardless of all the flaws that we had, Dr. Ajavatara, still I think some of those some of those reforms that were in that 77-80 period, it's still there. Like you know what we what we claim as like the good side of Sri Lanka is sometimes the policies that came from there. Of course, it is not perfect. Things would have been done better. There's always room for improvement, but still, I think there were quite a unique ones. But again, you in in in here you mentioned like, but we banned our reputation in 19. I mean, afterwards with economic policies and the civil war. So, do you want to shed light, like when it comes to the what happened over there? Dr. Sarath Rajapatirana 04:28 Yeah, there were reasons that things, few things happened. Most important thing being the civil war that we started in 1983 and maintained in 2009, and you might later ask the question, "What happened in 2009? I can give you the answer: nothing. But beyond, there's no. It was solved a particular way by fighting with the replacing. People who are running different parts of the country, but I think it's just to begin by saying it is over. It is good that it's over, so we can see what are we going to. Why did what did we do after 2009? Not very much. So on the other hand, we have peace. Our children can go to school without the parents worrying that they'll come back in the afternoon. So they are very good things. So still we can do more in terms of what that piece applied to the situation where people can have their own solution to invest to give support to various parties and groups that would be good for the country. So, but my big problem is that after 2009 we have not done anything to improve the situation. Dhananath Fernando 06:00 Got it. So, Dr. Ajay, why on the question of why we haven't done anything? Do you think it is also because of the distraction that we had from globalization-friendly policies? Because you analysed in the previous chapters on the political influence, on how everything came together, but when you look at look look back at 2009. Again, we tried like an IMF programme to towards the latter part of the civil war. What is your recollection or what is your view on during that period? Dr. Sarath Rajapatirana 06:35 I find it very difficult to say we got in trouble because of gobar and friendly policy. It is not the case. It is the case that when the opportunity was given, our people of entrepreneurs did not take advantage of the situation. Now, then another question that would come: Why didn't they do it? That's a very good question to answer. If you have answered, then we can look at our reform system, but is it that we could have done more in the reform programme? I think there are many things that you could have done more. Dhananath Fernando 07:07 Yeah, and then again you speak about like from 1993 to 2009 period, and then again you speak about President Gotabis period and the and the reasons for kind of like bad governance structures, and you highlight a couple of reasons why what happened and what led to what happened to us, basically. Dr. Sarath Rajapatirana 07:30 Yeah, couple of things. He he President Gotabaya got Sri Lanka to have the Lowest, lowest tax to Dhananath Fernando 07:45 GDP, Dr. Sarath Rajapatirana 07:47 tax to GDP in the world. Dhananath Fernando 07:50 Right, Dr. Sarath Rajapatirana 07:51 I think it went down to 8% Dhananath Fernando 07:53 Yeah, and Dr. Sarath Rajapatirana 07:54 people now talk about 12% but I think it's 8% is the correct answer. That's one. Then. Dhananath Fernando 08:03 also, I think the fertiliser policy that you mentioned. Fertiliser Dr. Sarath Rajapatirana 08:05 policies arbitraries before because he listened to some people who had no, they only knew medicine, and they were giving advising the president that we should get rid of fertilisers, but fertilisers. there are some qualification. Dhananath Fernando 08:26 Yeah, so they said organic fertiliser they covered, not the chemical fertiliser. Not Dr. Sarath Rajapatirana 08:31 chemical fertiliser, yeah. Dhananath Fernando 08:32 So Dr. Ajay, coming back on the tax question. Dr. Sarath Rajapatirana 08:35 Yeah. Dhananath Fernando 08:36 You coming from kind of you know you have been a senior fellow at AI, and pretty much you have coming from the market side of things. Did I? No, Dr. Sarath Rajapatirana 08:51 don't brand me. Dhananath Fernando 08:52 No, I'm not branding you. Sorry. No, you. So when I'm Dr. Sarath Rajapatirana 08:54 economist, I am fully neutral. You're fully neutral. Sorry, I beg your Dhananath Fernando 08:59 pardon. It's okay. Yeah, no, I I definitely didn't mean to you know label you a brand new, but when it comes to taxes, which is you brought this important point that it we brought it down to 12% I mean from 8% which was a so how do no from Dr. Sarath Rajapatirana 09:14 12% Yeah, Dhananath Fernando 09:15 we we were 8% when we went to the crisis, right? It was quite low. Dr. Sarath Rajapatirana 09:19 Yeah, Dhananath Fernando 09:20 as a percentage of tax to GDP, now how should we look at the taxes in this context? Because the, in their defence, what they said was, when you bring the taxes down, it will improve consumption. Is the logic that they brought in to justify the tax breaks given? But as an economist, how you should view this, and probably what's wrong with that thinking, if I were to ask. Dr. Sarath Rajapatirana 09:46 Yeah, I don't think there's anything wrong in giving people more to eat. Anything wrong with that? Question is how did we get there? On there a more efficient way of doing it? Dhananath Fernando 09:57 Right. Dr. Sarath Rajapatirana 09:58 So that is that is the question. Be asked Dhananath Fernando 10:00 right, Dr. Sarath Rajapatirana 10:01 but if you have access to as we have to health, education, all those things, those are good things. But there are ways of getting it done even better. That is the issue that that comes up here. Dhananath Fernando 10:14 Got it. And then yes, we discussed about the organic fertiliser policy. Now, not I think many people really didn't see the, I mean, people saw it, but I think the narrative was set to not to look at the economic side of it. They were more went like the organic fertiliser policy, saying that this is kidney diseases and all that. Probably without realising there'll be more kidney diseases when you have a bad policy, because pretty much people are completely. Dr. Sarath Rajapatirana 10:41 Their system is failing. Failed exactly. They have Dhananath Fernando 10:45 no nothing. Nothing to even you know to operate with. So how do we? What is the mechanism to look at these things? Because we can see, especially in countries like Sri Lanka, there are a lot of globalisation unfriendly policies brought in with different narratives. It comes as a different programme, but it ends up by becoming kind of globalisation unfriendly policies. And if you recall, even there was a conversation on tea on pesticides at one point when President Sirisena was pretty much in the head seat. So I'm. I mean, the the the point that I'm trying to bring is all sorts of weird ideas being pushed forward without realising this has an impact on the globalisation unfriendliness, and then you basically start you know going down the drain and completely a different direction. What is the lesson for policymakers to look at, and how do they structure and evaluate when it comes to those sort of kind of I would say unorthodox, uneconomic ideas? Dr. Sarath Rajapatirana 11:53 Yeah, it doesn't assume it's a very uneconomic way. So the question is: Elect the proper people, because they are. I mean, after this, a democracy. The very important point that we these are democracy. People have the right to decide what they like to do, they don't like to do. So that democratic background or the. is the one that will save us. Dhananath Fernando 12:25 Yeah, that's a very important thing that we need to keep in mind. Yeah, Dr. Sarath Rajapatirana 12:28 and we should not neglect it. Correct, correct. Dhananath Fernando 12:32 And Dr. Ajay, now when it comes back to the necessary policies, like you in in in in here, you basically mentioned the necessary policy reform did not emerge because of the wide chasm between the economic policies of the major political parties of the UNP and the left-center political parties like Sri Lanka Freedom Party. Yeah, what do you mean by we could never agree on a programme? Correct. We Dr. Sarath Rajapatirana 12:59 could never agree. That's why when we compare ourselves with Eastern Europe, Eastern East Asia, when East Asia, they they have no problem Dhananath Fernando 13:08 because the programme was agreed by all sides. Dr. Sarath Rajapatirana 13:11 Yeah, they agree because they don't have huge chasms of differences of opinion. So that is the the classic case is what what is cited the free the freedom Sri Lanka part freedom party yeah Dhananath Fernando 13:33 Sri Lanka freedom party and the Dr. Sarath Rajapatirana 13:36 U M P and the U M P that is the two so if we if it were like say South Korea, Dhananath Fernando 13:45 then Dr. Sarath Rajapatirana 13:46 they have no Dhananath Fernando 13:48 problem, Dr. Sarath Rajapatirana 13:48 and because that's why they were able to do all the fantastic reforms, and other countries all in that neighbourhood. So and so and we had the democracy we sort of in a way didn't get full benefit out to democracy because they have all these things going on. People couldn't agree what type of policy to use. Actually, so there is not a great mystery about different policies. We know when you start a policy that's not going to produce a thing, we can do. We are trained as economics in order to know it in advance. This is not doesn't have a good future. So, fair enough. Dhananath Fernando 14:30 So, Dr. Rajabhadra, then what was so? What do you mean to say is Sri Lanka has pretty much in a more globalisation unfriendly trajectory throughout, which probably no, I Dr. Sarath Rajapatirana 14:46 won't say throughout actually because then there should not be good growth. That we had very good good growth at one stage, but we couldn't persist on it. Dhananath Fernando 14:54 Got it. Dr. Sarath Rajapatirana 14:55 That is that is why we we we went. Okay, and also we had we. Education, we have benefits are given, and so we know how well to apply it. And one reason, one reason, not the only reason, was the politics was not very helpful. Although we were democracy, because we were democracy or we are a democracy. We show people made the choice of what they would want, but then and that was supported. But then, when there are so diverse views of the same problems from different angles, we can't agree on what we should be doing. Dhananath Fernando 15:38 Right, right. Dr. Sarath Rajapatirana 15:39 So, Dhananath Fernando 15:40 and Dr. Ajay, in your in the chapter basically on this poverty and income distribution in Sri Lanka, basically you have done an analysis of different times of periods, the economic growth, and basically the Gini coefficient based on the monthly income. What is the take on that, and how we should look at it? Because what you basically tend to say in your conclusion is, it's the globalisation unfriendly policies that pretty much led to this. That's why you are not Dr. Sarath Rajapatirana 16:14 making a lot of advances, despite ending the ending the one war. We didn't follow through, and that's very sad because we would have had a very good move forward if we used the peace that was called in the U.S. when this was called a peace dividend. We didn't use the peace dividend. We could have been a very good peace dividend, Dhananath Fernando 16:40 right? But we really could not persist on it. Yeah, because Dr. Sarath Rajapatirana 16:45 of the dissension. Dhananath Fernando 16:47 Got it, Dr. Ajay. Anything did I did we miss in this chapter? Like anything else, when it comes to poverty and income distribution, that we need to keep in mind, especially with the periods like that we have been discussing, Dr. Sarath Rajapatirana 17:04 yeah. Dhananath Fernando 17:04 Anything else that we miss Dr. Sarath Rajapatirana 17:06 out? No, I don't want to end up this argument by always saying globalisation friendly is good, unfriendly, not good. That's the way that that emerged from the way the economic behaviour and how people who ran the economy operated. So some people are successful, others were Dhananath Fernando 17:28 not. Not Dr. Sarath Rajapatirana 17:29 so. But we know if you are, if we know that if given opportunity, entrepreneurs and people who are running to capital to apply the capital to to increase production of anything. We could have gone faster. We could not have got stuck. So that is why we've been compare ourselves with East East Asia. The remarkable thing to see is that they went there forward without any problem. Dhananath Fernando 18:02 Sorry. Dr. Sarath Rajapatirana 18:03 Some people would argue and say, "Well, that is because we had a democracy. We couldn't agree. Partly true. On the other hand, we had to fail. We had to be on the side of democracy. Democracy, because that's one of Dhananath Fernando 18:16 the precious things that we have. Right. Dr. Sarath Rajapatirana 18:19 So we can't give that up. Yeah. Dhananath Fernando 18:21 Understood. So thank you very much, Dr. Rajapatiranah, for sharing your insights on Chapter 10. We are slowly coming to the final chapters of the book. Dr. Sarath Rajapatirana 18:28 Yeah, Dhananath Fernando 18:29 and if you have any questions, please share in the comment script so we can shoot those questions back to Dr. Rajapatiranah. At the same time, if you haven't become an Advocata insider, this is the time to consider that you can get access to our exclusive content, which is on the exchange rate, the interest rates, and kind of detailed analysis on different market segments in the financial markets. At the same time, you are supporting a greater cost that is setting the tone or the narrative for economic reforms in Sri Lanka because that's the only way out for us to improve our standard of living, and you are helping to bring the economic literacy up for fellow Sri Lankans. And as you know, we are operating in all three languages. Advocata Institute is our English channel. There's Advocata Plus, which is in Singhale, and Advocata Kural in Tamil. Since we talk about a little bit about the civil war and all that. You know how important it is to operate in all three languages, and you can support us by becoming an Advocata insider, Dr. Ajava. Thank you very much again for joining us, and looking forward to seeing you with Chapter 11 analysis. Dr. Sarath Rajapatirana 19:36 Yeah, right. Thank you. Nice to be here. Nice to come and discuss these things with you, and so let's do the next one. Let's Dhananath Fernando 19:45 do the next one. Thank you very much. See you in the next episode. Dr. Sarath Rajapatirana 19:48 Yeah. Transcribed by https://otter.ai