Dhananath Fernando 00:20 Hello, hello! Welcome to another episode. And as you know, we are discussing with Dr. Rajapatin about his book, Policy Challenges of Globalisation in Sri Lanka. It's a book about Sri Lanka, and we discussed eight chapters. If you haven't really checked the previous conversations, we kindly invite you to go back and check our discussions about all eight chapters that we have done so far, and this is the ninth chapter, and again an interesting one: export growth and appropriate macroeconomic policy-a necessary nexus. Dr. Rajabadirna, welcome back to our programme. Dr. Sarath Rajapatirana 00:52 Thank you. Good to be here, Dhananath Fernando 00:54 Dr. Rajbhadirana. As the title says, export growth and appropriate macroeconomic policy. Could you give us like a synopsis of what this chapter entails? Dr. Sarath Rajapatirana 01:04 Yeah, this chapter traces the links between economic policies and export growth. Dhananath Fernando 01:09 Right. Dr. Sarath Rajapatirana 01:11 I can develop that to some little bit more. Right. Dr. Sarath Rajapatirana 01:14 It's wrong or it is not as beneficial to look at a single single FAR in economics, because other factors intervene. Dhananath Fernando 01:28 Right. So what do you mean to say is generally people think that doing just one change will transform all exports, but that is not how it works. Speaker 1 01:39 Yeah. Dhananath Fernando 01:39 Okay. Dr. Sarath Rajapatirana 01:40 Because there are other things like what is the exchange rate at that time? Dhananath Fernando 01:43 Correct. Dr. Sarath Rajapatirana 01:44 What are the fiscal policies that are used at that time? And also, what has been the record with that with export growth in the past? Dhananath Fernando 01:54 Got it. So I think that it's a very important point because a lot of people think it's a magic van, and you do just one thing, and like exports growth takes place. Like I mean, it doesn't happen like that. Dr. Sarath Rajapatirana 02:06 Doesn't happen. It is never. Dhananath Fernando 02:08 It has never ever happened. And I think when you carried away with that ideology, that one thing can change. That's why you think like, okay, you do this. This country, this that. This country did that because without considering all factors together, just taking one incident isolation and thinking that that was the reason for export growth is not the way forward. Is did I understand exactly right? Exactly Dr. Sarath Rajapatirana 02:31 right. Yeah. Dhananath Fernando 02:32 And Dr. Rajbhagarna, you have been okay. So how do you connect the the globalisation and the export growth and the macro economy? Because now for a country like Sri Lanka, and since it's a book about Sri Lanka, we don't have any future or globalisation future if we don't really export. Yeah. So how do you see the role of macroeconomic policy has influence in Sri Lanka's current export status, which is I would say not in a in a. It's going down actually. It's going down. Yes. Could you elaborate a little bit more from? But that go down Dr. Sarath Rajapatirana 03:08 started before this government came into power. Absolutely. So we had to be. Yeah. So many ingredients are needed for export to be able to attain its rate of growth. So what we find is that after 2005, there has been reduction in the growth rate. So that means the question now: What are we going to do with it? See what is what are the missing? What are the links? So that is why we are macroeconomic. It's got lot to do with it. Right. That's the point. Right. So when you talk about macroeconomic, you are talking about what is what is the monetary policy at this this corporate policy at that time, certain history that countries have, and elements that are needed in order to improve our export performance. How many people will buy, and then also most importantly, without imports, knowing having the not having the imports growing fast, exports can't go fast. Period. Got Dhananath Fernando 04:16 it. And as the statistics indicate, our export to GDP ratio Dr. Sarath Rajapatirana 04:23 is Dhananath Fernando 04:23 declining. Dr. Sarath Rajapatirana 04:24 Yeah. Dhananath Fernando 04:25 So no point that we are pretty much celebrating that exports grew from like 11 billion to 12 billion, 12 billion to 13 billion. You have to compare it with as a percentage of GDP. Dr. Sarath Rajapatirana 04:36 Yeah. And if Dhananath Fernando 04:37 it's declining, definitely that's not a good sign. Dr. Sarath Rajapatirana 04:39 Yeah. And also, our share in world trade is also decline. Dhananath Fernando 04:43 Right, Dr. Sarath Rajapatirana 04:44 declining. Yeah, Dhananath Fernando 04:45 that means that indicates that what we produce is not being bought by in a global context as a overall share. Your value may be increasing, but when you compare to the entire gamut of goods and services. Dr. Sarath Rajapatirana 05:00 Yeah, Dhananath Fernando 05:00 that means our competitiveness is is not Dr. Sarath Rajapatirana 05:03 improving. Is Dhananath Fernando 05:04 not improving. So that's something that we have to keep in mind. I think Dr. Sarath Rajapatirana 05:07 you use the magic word competitiveness. Dhananath Fernando 05:09 Yes. So that's that's something that we have to keep in mind because most of the time we get carried away with saying, okay, we you know we increase the imports exports by this number of dollars. So as imports, and but you are not really comparing it with as a percentage of GDP. Dr. Sarath Rajapatirana 05:26 Yeah, I am shocked whenever I see people say we are going to grow by this month, that month. I like to ask them say, what is the basis for it? Tell us the basis. So as I said before, you can't do commodity by commodity. It won't tell you exactly what to expect with your policies. But the thing is that we have our governments in power have not explained in detail in some detail what has to be done in order to increase our export growth, well, the competitiveness-if we don't do as well as India, we won't be able to compete with India, vice versa. Dhananath Fernando 06:10 Absolutely. Yeah. And as it was generally said, like the the the next export, what we are going to export in the next 10 years, probably those industries have not even born now because it takes time. It takes time. Things things change. So, Dr. Ajay, now moving forward, interestingly, your chapter links between the economic policies and export growth and the macroeconomic context. So, in terms of Sri Lanka's case study, like how do you see? Because you in in the previous chapters you have analysed the macroeconomic influence, the role of IMF, World Bank, and how different types of economy economists came and provided their insight. So in this case, in terms of export, what is the context in the in Sri Lanka? Dr. Sarath Rajapatirana 07:00 Yeah. So basically, we can start comparing ourselves with our neighbours, India, Pakistan, Bangladesh. These countries, you can see that they are done well. Yeah. So the question then is, how is that they can do well, being near us, and but we can't. There is a lot of uncertainty in our case. I think that is another factor. That is, you can't be sure that the imports that are needed in order to get the export sector going faster are not readily available. So that is one important factor. Another thing is that the know-how have we been able to increase our know-how? Because we have in the area of textiles, and we have done well. We we what others outside now when we say export it, we we include important not only that, but all the other things, the state of the economy, what type of people can we recruit in order to expand? When we say because to expand, we have to have some new things happen because the old things obviously have not been working well, and that's why we have to see this connection between what is the connection between the two. That is the this chapter asks that question. Dhananath Fernando 08:27 Excellent. I think it's a very important point that you brought out because again, that's what we mean by the macroeconomic policy. Exactly. When you have the, what you do is you set the you set the soil. Dr. Sarath Rajapatirana 08:38 Right. So Dhananath Fernando 08:39 then, then the entrepreneurs and the people who are capable will do the needful. They Dr. Sarath Rajapatirana 08:45 will do it definitely. Yeah, Dhananath Fernando 08:47 Dr. Ajay, now moving forward, also we are discussing this book at a time when there are severe changes that has taken place in the U.S. with President Trump policies, how do you how do you view this with what you have written in your book? I know it's a book about Sri Lanka, but you cannot completely isolate U.S. to begin with because that's a major sport market. Yeah, Dr. Sarath Rajapatirana 09:16 they are dominant power. They are dominant power. So Dhananath Fernando 09:20 how do you compare? I Dr. Sarath Rajapatirana 09:22 think I begin by saying it's very difficult now because the great uncertainty that has been created by mr. Trump's policies certainly. So we cannot say entrepreneur cannot begin to say, oh, we can buy this. This this product production that product this part of the economy basically exports. Dhananath Fernando 09:53 Yeah, Dr. Sarath Rajapatirana 09:54 what is it that we can do in order to make it exports grow from what we have. And so you'll see that India is going to have growth rate of 7% per annum for the next couple of decades. That's being a huge country. That's going to huge benefit to us also because of what they. So more people will buy our clothes, our garments, because they they are the income goes up, then they spend part of the money on other countries, but also on on with us. Yeah, Dhananath Fernando 10:37 and Dr. Ajbadhina, in your chapter, you have basically, I mean, done a historical perspective on macroeconomics and trade, and basically you have divided it to the period of 1960 to 1977, so on and so forth. So, in your view, the export growth and the macroeconomic, I mean, export growth was better when we had the macroeconomic stability. Was it something that you have observed? Yeah, Dr. Sarath Rajapatirana 11:09 of course. Yeah, yeah, and also having that we we talked about as good policy framework overall, globalisation friendly policies. That that will help Dhananath Fernando 11:23 us, Dr. Rajbhagar. Something that also people are, I mean, they are finding it difficult to understand is the imports and exports are on the same two sides of the same coin. Dr. Sarath Rajapatirana 11:35 Yeah, Dhananath Fernando 11:35 and some people are worried that the macroeconomic, the the the same macroeconomic stability or the macroeconomic framework will be diluted by having higher imports. How do you explain that on a globalisation friendly policy framework? Dr. Sarath Rajapatirana 11:54 I don't agree with the dilution idea. Right. Yeah. I don't. Private sector will look after their their what they have to do. If they don't know, they won't be in the business. So I I don't worry so much. What what I would like to know is that the import should be appropriately available when the production is to be exports have to be increased. So when our institutions that are dealing with the problem, they say we are going to increase by this much, this percentage, that percentage. It is really not very helpful because without more analysis of the exchange rate, what is the fiscal policy doing at that time? What is monetary policy? Only then you can say what can really happen. Dhananath Fernando 12:50 Got it. In fact, in your chapter, you are also detailing it out: the fiscal and the monetary policies and the support that was required from fiscal and monetary policy for export growth, which is part of the overall macroeconomic stabilisation or stability framework. So, what sort of a? I mean, if someone who is not very familiar with macroeconomic policy or like the monetary policy, what do you? How do? How a layman should think about it, Dr. Rajapati? In terms of fiscal policy and the monetary policy. How should they know that things are doing in an appropriate way to facilitate export growth and for like globalisation friendly? What are the indicators that we should know? Okay. Yeah, that Dr. Sarath Rajapatirana 13:35 is what we are talking. Yes. What are the proper indicators? Dhananath Fernando 13:37 Yes. Dr. Sarath Rajapatirana 13:38 Indicators, for example, stability. First of all, stability. Are we able to keep, for example, the rate of price increases with some may stable, and now prices Dhananath Fernando 13:53 has to be stable. That's a very important thing because it's a price. Although you can't, you can't price. You can't price it for exports. Your salaries and everything you have to adjust, and that's becoming you are becoming uncompetitive in a global market. Dr. Sarath Rajapatirana 14:07 Yeah, T N T A was a great economist who no no no more said we are not talking about stability in the graveyard. We are talking about reasonable stability. Reasonable stability that is shown by Pahumanth of the economy, and also in learning from other people that we have discussed earlier, learning from other people. So India is now sending a very good standard for us to follow with the 7% growth rate for a huge country, which is now just overtook Japan as a great producer of goods and services, so those are so those are what our neighbours are doing also help us to understand where we should be. And we are competing with other other neighbours, Bangladesh, but they have some of them have like have political problems. Yeah, they their parties over all the place now, and so therefore we need stability, economic stability. It has to be supported by political stability, also. So, it's a big, difficult thing in order to get export growth going. Dhananath Fernando 15:34 Got it. Thank you, Dr. Aypatra. Any final thoughts before we wrap up? Anything that we missed out? Anything that our audience should know about the book and and chapter nine? Anything that we miss out? Dr. Sarath Rajapatirana 15:47 One set of policies is not sufficient. That is the thing that you had to look at. Other thing also in the private sector they look after each other by supposing you are producing some input treated, and if you know that if if if we say I have a company, I want increase exports. I will consult them. Then we are going to get to this type of growth rate. What do you think? What do you need? And we can help you to get the inputs in time. Talk to the customs people. So look at that, which I didn't say earlier. Customs very important. Yeah, Dr. Sarath Rajapatirana 16:19 yeah. And so, therefore, what what is called special payments, Dhananath Fernando 16:24 right? Which is a very Dr. Sarath Rajapatirana 16:25 decent way of pegging bribery. Dhananath Fernando 16:28 Special payments. Special Dr. Sarath Rajapatirana 16:29 payment. Dhananath Fernando 16:31 Anything else, Dr. Rajapati? No, did we miss out? So yes, absolutely. Customs is important. I think we spoke about having export is not a function of like one like magic activity. It's mainly stemming from the macroeconomic proper macroeconomic framework, and also that macroeconomic framework has to be globalisation friendly, and that's where you get to the export growth phase. Anything else, Doctor Ajava? In case if I miss, and also that macroeconomic indicators, including the monetary policy, the fiscal policy, those are part of that broad fabric, and that's how you basically take things forward. Dr. Sarath Rajapatirana 17:11 Even something like hiring power. Dhananath Fernando 17:14 Yeah, Dr. Sarath Rajapatirana 17:14 you know, without having power in today's modern economy, modern production process, you need power. Dhananath Fernando 17:20 Yeah, Dr. Sarath Rajapatirana 17:20 without you can't do it. Otherwise, like in the past, you had to use cattle to transport things. So we have to look at those things. But people who risk their money by taking trying to establish a particular type of export, have to consult. They will consult and they will look at it, and they'll talk to their friends close by. Say we have this problem. How can you help us? We we help you then earlier that situation. So it's a very interesting way. It's it. cannot be just dealt by one one description export. Dhananath Fernando 18:08 Got it. Dr. Sarath Rajapatirana 18:08 Yeah. Dhananath Fernando 18:09 So I think the message is clear. You cannot really look at export growth like in isolation. Yeah. It's a function of all other lot of details and the macroeconomic stability and the macroeconomic framework plays a very very important role. And do not carried away with the stories that okay this country did this change, and then export grew. Probably you have to look at all the other factors that is not mentioned in that framework because there has to be definitely 100 other indicators or things that must be in alignment for exports to be moved forward. Dr. Sarath Rajapatirana 18:51 Yeah, true. Dhananath Fernando 18:52 Thank you very much, Dr. Rajabhaina. Thank you for joining us, and we are looking forward to seeing you to discuss Chapter 10. Yeah, in our next episode. Dr. Sarath Rajapatirana 19:01 Yeah. Okay. Thank you. Thank you for inviting me. Dhananath Fernando 19:04 Thank you very much. And again, we invite you to subscribe for Advocata Institute. At the same time, we have the Advocata Insider Programme. By joining Advocata Insider Programme, you can be a voice and a part of improving the economic literacy in of our fellow Sri Lankans, and you can you are supporting to bring content like this, which is free of charge. But don't forget, Advocata Insiders get access for exclusive content, the uncut versions of our podcast. At the same time, analysis on forex markets. At the same time, we have launched a new segment on the stock market. At the same time, on the property market. So there are so many unique, exclusive content that you will receive on a weekly basis when you are an Advocata insider. It's just 12,000 rupees a year, just 1000 rupees a month. But importantly, you are supporting a greater cause that is to improve the economic literacy of Sri Lanka. Thank you very much. We'll see you. With episode 10 in conversation with Dr. Sarath Rajpathil. Transcribed by https://otter.ai