Dhananath Fernando  00:03
Hello, hello! Welcome to a new series of podcasts, and we have themed it under Canberra to Colombo reforms that works. And this podcast series is a product after the Canberra fellowships, which policymakers, some government officials who have visited Canberra and studied about the Australian policy reforms, and we look forward to continue this conversation, not only from Canberra, from other countries. What we can learn to bring back to Sri Lanka as reforms, and I was lucky to participate on Canberra fellowships, and we are going to conduct a series of podcasts with policymakers, with think tank leaders who participated in this programme, and to decode what we can bring back to Sri Lanka. What is a productivity commission?

Speaker 1  00:59
Very seriously, realising that there are some current ways of doing things that are hurting the economy.

Dhananath Fernando  01:05
Everything under the economy, or whether are they only particular on trade?

Speaker 1  01:09
Australia, an equally bad trade offender as Sri Lanka in terms of how high the levels of tariffs were. At

Dhananath Fernando  01:18
the same time, there was a conversation about the Economic Transformation Act.

Speaker 1  01:21
Half our problems is that ad hoc industry representation and industry lobbying happens to retain tariffs or remove tariffs.

Dhananath Fernando  01:29
We're always worried that it will be political influence, and you will appoint people that you know from your school or from your university or wherever.

Speaker 1  01:36
But we have to be very careful that there is no link between their funding and the issues that the commission will tackle.

Dhananath Fernando  01:46
Today's our guest is Anushka Vijay Singh. He is the CEO of Centre for a Smart Future think tank, and also he is a member of the Monetary Board at the Central Bank of Sri Lanka. Anushka, welcome to our studio and for our very first episode under Canberra to Colombo reforms that works.

Speaker 1  02:07
Good, good to be here, Dana, and help to kick off the series.

Dhananath Fernando  02:10
Thank you very much. And today we are in particular is going to discuss about the Productivity Commission, which is one key reform that the Australians have done to improve the productivity of the economy and the economic growth, Anushka. First of all, I would like to understand because when you say productivity, that has been widely used in Sri Lanka. I mean, what is a productivity commission? Whether it is like improving the input to output ratio, how does it operate? Let's start from there.

Speaker 1  02:42
Sure. So you're right, Tana. So productivity is not an unfamiliar word. Paladaitawa is kind of well known as a as a word. As a concept, also there have been efforts many years ago to have a National Productivity Decade, a National Productivity Award scheme. We have a national productivity secretariat that was set up. I think those previous efforts had focused a lot, particularly on labour productivity, firm level productivity in officers, including government officers. And you're right. Typically, productivity refers to the relationship between outputs, so goods and services, and inputs like labour and capital, and productivity increase is when you get more more units of output for a given unit of input, or you're getting the same level of output with less units of inputs. But what is interesting is that productivity has a larger connotation. Productivity in the economy. How do we ensure that, as an economy as a whole, we are you know achieving more output for given inputs? We know inputs also increasingly scarce. So that productivity, that multi-factor productivity, is is now becoming a big focus. And in countries like Australia and New Zealand and others, they had taken this very seriously, realising that there are some current ways of doing things that are hurting the economy, that are hurting the prosperity of people, and that those current ways of doing things need to change. But to change it, you first need to investigate it. You first need to look at what are the different things that is holding, let's say, a particular sector back or a particular issue back, and that's what the Productivity Commission set out to do. And this was

Dhananath Fernando  04:30
set up, I think, because they had the similar challenges like the Sri Lankan economy at one point of time.

Speaker 1  04:35
Yes, that's right. And you know, you also talk a lot. We talk a lot about these trade barriers, trade competitiveness, high levels of protection. Australia, surprisingly, I don't know how many people know this was probably as an equally bad trade offender as Sri Lanka in terms of how high the levels of tariffs were, and they had you know they were protecting industry. Legacy industries like automobile assembly and manufacturing, and so on, and they really had to look at what do they need to do to get to the next stage of growth. And of course, policymakers they were very advanced in realising that you need evidence-based policy to guide this, to tackle this. You need to bring politicians, trade unions, and private sector that tripartite approach. And they, in 1998, they set up under a new act, the Productivity Commission Act. They set up this Productivity Commission, and in fact, it was a merger of about three institutions that were there before: the Industry Commission, the Bureau of Industry and Economics, and the Economic Planning Advisory Commission. You know, some of these words are also familiar to us. You know, Sri Lanka had an Industrialization Commission in early 1990s. We have had kind of planning type commissions before. So very early on, they realised that they want to bring these institutions together, have one clear mandate, create one independent institution that looks at that is a policy review institution that essentially looks at microeconomic issues, microeconomic policies, and provide evidence-based input to guide better policies.

Dhananath Fernando  06:19
Anushka, now also with while the productivity term is quite common in Sri Lanka, the word commission is also quite popular in Sri Lanka because every investigation or something happens, it's always a commission or a committee that appoints. So, in this government setup, where this fits in, even if you look at the Sri Lankan context, if even if we were to implement something similar on as a productivity commission, where where does it fit in, and also how do they basically advise on policy? How do they understand a problem, or do they have the capacity to analyse like everything under the economy, or whether are we are they only particular on trade or factor markets or how do they how they how how have they defined their scope and where does it fit in that government architecture?

Speaker 1  07:12
Yeah, you're right that commissions have have both give us good feelings and bad feelings sometimes and Sri Lanka has a very mixed history with commissions. In one way, it is it has some of the features of the commissions that we are used to inquiring. So even the Productivity Commission in Australia has an inquiry role. But what are they inquiring on? They are inquiring on what is holding a sector back. Is this particular regulation or set of regulations good for the economy or good for the sector or not? How does the who who is getting hurt by a particular way of doing things today? How are consumers being affected? How is industry being affected? How is labour being affected? So in that sense, they are inquiring, but there are differences to that commission that that we are used to. It doesn't just have a short lifespan. It is a permanently set up institution, still very independent and has its own staff and can work for many many years as issues evolve. And I think that's an important thing for us because we have a tendency to to not give that time and space for these type of independent entities, but as we know, say with the central bank celebrating its 75th year and now really pushing for independence, you need a certain period of time with that independence to deliver results. And the Productivity Commission has, you know, a chair, a set of 11 commissioners. They have a small but you know very talented team of analysts, economists, microeconomic and industry specialists. And you asked about what issues they work on. So unlike perhaps a typical maybe think tank or research organisation that works on many different themes at any one time, from trade to agriculture to labour to education and so on, they don't work on all of those at any one time. They get their agenda on what to work on in one of two ways: the government, so the Australian Treasurer, commissions the Productory Commission and says we want to look at issue X, Productivity Commission. Please go and look into it and give us a report. Or it's self-initiated, where the Productivity Commission itself, the commission, the chair and commissioners decide this is an important area to look at for the future of the economy, and they pick up the topic and research on it. So it's very kind of it's based on actual requirement, not just you know to do some nice research and you know just put it out there, but rather it's based on a need-the need identified by the government or the need identified by the commission themselves. As a result, their inputs become very practically useful to help policy. Makers take a decision, but an important thing here again is they are not an implementing body; they are ultimately only advisory, and the government can completely reject it, accept all of it, or accept in part. But I hope we can talk about this stuff also later. It has had a huge role to play in shaping the public policy debate in Australia because they look at it independently. They are allowed to put out the reports independently. They are allowed to have hearings independently. As a result, everybody gets to know about their findings and the research. So even if the government doesn't accept it, the public and other stakeholders see what has been studied and has what the findings are, and it really spurs debate and discussion about government policies.

Dhananath Fernando  10:46
So I think for the benefit of our audience, Anushka, I think in Sri Lanka there are many governments comes and announces their grand visions, saying, okay, we have to develop the boat industry or we have to export vehicles, and this productivity commission sort of a setup is when the government, when the treasury secretary and the government thinks, okay, this is an area that we have to develop. So the productivity they can commission the productivity commission to understand what can be done to develop this industry, and then they will evaluate and they will come up with fact-based research saying, okay, this is the context, or else they can initiate on their own. Okay, we feel this is an important sector of the economy which we have to investigate and provide that advisory role. Of course, they cannot go and you know change the policy or anything. They can advise the government, the treasury. So then they have to implement. Does it provide some clarity? Is that the role that you that basically you observed when you studied the productivity commission?

Speaker 1  11:47
Yes, very much so. So they, for example, they get their instructions from the treasurer, which I think has its pros and cons, which we can discuss from a Sri Lanka context, but they would be told to look into a particular area, and they are given after that they are given complete freedom. And I observed that independence they are given, the autonomy to look at it very independently was probably the most vital feature. As a result, they are able to do all of their investigations, data, qualitative, and importantly, they also go around the country to all the different states and conduct public inquiries. As a result, it enriches their their findings, and they are allowed to put it out. So I think this is where we also our policymakers also will need to be quite comfortable that you have asked this entity to look into it, but you can't control the outcome of the findings, and it may be some may recommend things or it may have findings that you may not like as a government, but you have to be comfortable with then responding, saying why we are going to act on those recommendations, or why we are not going to act. So it's a little bit of a big kind of mindset shift, also. But I think it can be a benefit because the you can have policymakers or politicians who are worried about doing something, and they kind of are concerned that you know there's something not right here, rather than getting pushed to do it by the opposition or by the private sector industry or so on, they can ask the Productivity Commission to look at it independently, and that also helps them not go down the route of bad policies like the famous case of the fertiliser, organic fertiliser in agriculture. So the subject matter that the Commission chooses can can where it can be you know something very big systemic issue or it can be a little more you know immediate short term in nature that the country has to tackle.

Dhananath Fernando  13:50
Anushka, how a commission manages on multiple sectors because in Australia there were multiple sectors. It could be automobile, it could be agriculture, it could be, I mean, factor markets. There, there'll be diverse sectors. So, where are the expertise being received for the productivity commission? Do they really have the capacity? Is it like an in-house staff, like on all sectors, or how do they operationalize this requirement?

Speaker 1  14:18
Yeah, I think that was also a big takeaway, Dana, from this visit. They were able to attract high-quality staff, and I think that's something we will have to consider in Sri Lanka also. For institutions like this, it's not easy to get specialised talent. So, Australian Productivity Commission brings a has a chair who is remunerated. It's not some honorary voluntary position. They have commissioners, of which some are actually full-time commissioners. Which means this is not like a non-executive role in a public corporation. They are full-time commissioners guiding the research. Programme guiding the analysis of the team, and then they have staff, and then they also have the provision that from time to time, depending on the team that they have to work on or the policy issue, if they don't have the expertise, they can bring it in. So I was just looking yesterday at the current structure org structure of the Productivity Commission because they are working on issues of, let's say, elderly care and the ageing economy and the care economy, they have actually brought in a commissioner who is more specialised in that area to oversee that area of work. So that's an interesting model for us, where we may not be able to have all of the staff needed for every single issue on day one and permanently, but rather ways in which to have that flexibility to bring in the relevant analytical ability.

Dhananath Fernando  15:48
Also, Anushka, now when it comes to interaction on this productivity commission, while we participated on the Canberra Fellowship Programme, I think we have been engaging with the Productivity Commission in Australia for some time back, and also at the same time, there was a conversation about the Economic Transformation Act, and there were some elements of like a trade sort of a think tank has been mentioned, and the productivity has been mentioned. So, can you also connect the dots whether under the Economic Transformation Act, a setup like productivity commission has been considered, or some elements of a productivity commission has been covered, and with your public policy expertise experience, you have you have been at the table on as from representing Sri Lanka at the negotiation table for trade deals, and you had the monetary board. If you were to recommend a setup like a productivity commission, how do you bring it in the Sri Lankan context?

Speaker 1  16:48
Okay, so I think Dana, it might be useful to recall here that you're right. The productivity commission idea has been worked on for a little while in Sri Lanka, but it hasn't fully got off the ground. I'll tell you the when it first started. This was around 2016, 1718, You remember there was a big push by the government to liberalise para tariffs and remove para tariffs, and there was a lot of concerns from the industry about what this might mean for them. We actually worked on establishing a trade and productivity commission.

Speaker 2  17:22
Right. It

Speaker 1  17:22
was styled a little bit like the Australia Productivity Commission, but recognising right now the challenge is this trade protectionism. We hired initial analysts. Not a lot of people know this, but we hired first set of analysts. We had a fully written out operations manual on how inquiries will be conducted, how data will be treated, the relationship between this and the ministry. We had appointed commissioners, so there were people who had been in industry, people who are in academia, appointed as commissioners by the cabinet. We identified the link between this entity, which was under the Trade Ministry and the Ministry of Finance, because ultimately tariff and para tariff decisions are by the Ministry of Finance. So, how does this body recommend? How do how does this commission respond to industry requests? Because as you know, half our problems is that ad hoc industry representation and industry lobbying happens to retain tariffs or remove tariffs. How do we make that a lot more systematic? So there was actually a mechanism that was established. How industry can come and make representation to the commission and say, if you remove this, this will be the impact on us. But the commission, through its own tools, we had built a tool to look at whether this industry is telling the truth or not, you're saying you have 1000s of workers and so many jobs will be lost and so many businesses will be shut down. The Commission analytical team would have a database to say, is it true? In this period of protection you have enjoyed for 10 years, have you grown? How many people are employed, and can actually have a more independent view on whether the impact is real or not. Based on that, the commission would be able to recommend to the ministry. Go ahead, remove it. The impact is not there, or there is something here. We might need to phase it out more. Unfortunately, there was a change in government. We didn't get the chance to put it in its own act, like the Productivity Commission of Australia did, we started but couldn't. And the next iteration came, as you mentioned, more recently, as this National Productivity Commission, which is actually in the Economic Transformation Act, and that had its own steering committee once again to design this. The head of Advocata was also on that committee, Murtaza. We looked at the experience of that initial attempt, Trade and Productivity Commission attempt of 2016, 1718, Brought in the best practices from Australian Productivity Commission. Looked at some of the pitfalls that. There, the New Zealand Productivity Commission, because they actually got shut down and put it into law. So, if you actually look at Google, the Economic Transformation Act today, there is a section on the establishment of the National Productivity Commission, you know, outlining what it will work on, where will they get the mandate to work on things, who will be on the commission? And I'll just draw one difference: the one difference between the Australian Productivity Commission, where what they work on is sent to them by the treasurer, and they can develop it on their own. In this case, it wasn't the treasurer or the treasury secretary; it is either cabinet or parliament, and the accountability is to Parliament, not to any individual.

Dhananath Fernando  20:44
When you mean Parliament, is is it like a collective Parliament, or any Parli member of the Parliament can ask?

Speaker 1  20:49
So a member of the Parliament, a member of Parliament could through the Speaker ask, or through a relevant committee ask. So it's similar to how now the accountability provision for the central bank is a parliamentary committee like COPEF. So similarly, it would have been a parliamentary committee, but also it had the provision to pick up a topic on its own as well. We felt that rather than an individual, it's better for this collective responsibility.

Dhananath Fernando  21:16
Thanks, Anusha. So now you know the connection between why this productivity commission is important, and what we have learned, and what the Sri Lankan context, and why it fits on the Sri Lankan context as well. Thank you very much, Anushka, for bringing that point because you had that knowledge and know how to bring that, and since you have experience on working in this sector, I think that that that was quite a useful insight. Next, I also want to understand? Since now the Productivity Commission has these two sides. One is they can investigate on an area that they think which is has to be investigated, or else upon the the Treasury Secretary's request or any other mechanism. So how do they prioritise those issues? Like how do you really? Because they we all know they don't have the capacity to investigate all the issues under the sun. So, how are they going to prioritise? Is there a provisions or indicated in the in their act that how to identify a prioritisation, or how does it happen at the practical level?

Speaker 1  22:14
So, I'm in a way that I we I you might remember I asked this question from them. I don't know if I got a very clear response because what, but I did feel that the commissioners play a big role. So if they are getting multiple requests from the treasurer or they have already identified certain issues to to to investigate, the commissioners sit and figure out what is more important. How do we prioritise? What is the staff strength we have, and so on? So, I think it's somewhat mechanical from from an internal process point of view. But what I understood was the commissioners play a big role, and this is where I think I want to reiterate: this is not like your typical government bodies where you have the private sector, say the private sector representatives doing this as a voluntary job and saying they are you know contributing a few hours each week for the good of the country. This is a serious job.

Dhananath Fernando  23:11
This is in simple terms, not like a meeting where you come for short eats. Absolutely not. And open the

Speaker 1  23:17
file only when you come in. These people, most of them are actually full-time compensated, and they are involved. And these are senior people; these are professors of economics from certain universities who have taken time off to do this. There are former industry leaders who have taken time, and they're very careful to look at independence and conflicts of interest. So, as a result, these people are high quality group, and because they are high quality group, they can actually figure out how to guide the research, how look at the political sensitivities of issues, how to prioritise, and and so on.

Dhananath Fernando  23:52
Thank you, Anushka. Also, wanted to understand how the product you mentioned this briefly that in terms of engagement with people and the trade unions to the private sector, is there any particular mechanisms that they use? And you also brought out the point that sometimes even the consult, I mean, the consultation work from the industry, whether how do you really understand whether are they actually representing that industry or is there a mechanism which has been outlined, or are there best practices from the Australian Productivity Commission? How do they engage with private sector, public sector, civil society, or the particular industrial chambers? Are there anything that we can learn and adapt in the Sri Lankan context?

Speaker 1  24:37
Absolutely, and I think a big takeaway was it is not done ad hoc.

Dhananath Fernando  24:42
Okay,

Speaker 1  24:42
consultation is not done ad hoc. Public consultation is not done for the sake of ticking a box, saying we have consulted the public. It is actually a genuine desire to listen to people, and then take those insights, marry it with their own analysis. And then come out with something. So, little things like they publish the calendar of public consultations on a particular issue. They actually actively go beyond Canberra. They have commissioners who actually based in many other places. The office might be in Canberra, but they have officers in Brisbane, Melbourne, commissioners who are based in those different places. So as a result, they actually go to the country and ask about these issues. They actually publish the results of some of these consultations. So that I think that's what's different about how we are used to it. Sometimes consultations are done in secret. There is no transparency around what the industry or private sector or unions have asked from the government, so they are much. Their public transparency is impeccable, and I don't think it was easy to do. It may have not come overnight, but for countries like ours now, we have the benefit of seeing how it has been done. We don't need to go through that same long journey. I think we should instal these types of public transparency upfront, they would they will they're very careful about how they engage. They don't just call individuals or preferred people or institutions or chambers. They have a very organised, systematic way for public consultation, and then organised, systematic way of putting the findings also out. And if I was to maybe summarise the three main pillars that have made the Australian Productivity Commission successful, it would be public transparency, rigorous analysis, and stakeholder engagement. It's not just about the technical work; it is an important one of the three, but very much focused on public transparency and stakeholder engagement. Otherwise, I don't think they would have been able to get the credibility they enjoy today.

Dhananath Fernando  26:48
Anushka, just want to quickly do go one layer down on the word that you mentioned. It's not you mentioned it's not ad hoc. Could you elaborate a bit more because they are going for multiple sectors. When you say it's not ad hoc. Like sometimes the certain sector consultations has to be done like over a period of time. So when you meant that it's not ad hoc, like you mentioned, they publish like a timetable of how the public consultations are done. Do you mean to say that even with the I mean the the industry groups that there's a there's a scheduled consultation work, or is it something that you recommend? Could you get to the next layer? What do you really mean by it's not ad hoc? Because if there's a, I mean, I think the Sri Lankans are under the perception that okay, we are signing a trade agreement with let's say country X, and then at that point you invite all those countries who are exporting or importing from that country and ask like what are the issues, and then that's over. But when you say it's not ad hoc, could you explain a little bit more?

Speaker 1  27:48
I think why it was so so much of a stark contrast from what we are used to to what they do is because we see how ad hoc it is. There is no proper mechanism for private public consultation. The government doesn't sometimes know how to design a good consultation. Who should be in the room? Are the people we're inviting actually representative of a sector? I have been in these consultations both from a government side sometimes, and also in the past from the chamber side, and I have been left wondering why are some of these people who are representing three companies given the same seat at the table as an organisation representing 300 companies, but the government hasn't doesn't have the professional approach to consultation to realise who are they representing, who are they representing, and how to manage that input. This is something that the Productivity Commission folks. I felt I didn't get all of their internal documents, but I felt that they have a much more methodical approach. Who to consult with, analysing how they should plan those consultations. But I think it's a broader reflection than now of how Australia does this, even for other sectors, not just the Productivity Commission. We heard some years ago from the Chief Trade Negotiator of Australia, who actually said, for trade negotiations, when they are going in for a new trade negotiation, they have very specific steps for consultation. They announce ahead of time when they will consult. They publicise who they consulted with. They send a summary note, public summary note of what did the industry ask for. So nothing secret. And they have a response also to what they, as trade negotiators, felt about the asks made from industry, so there's no room for people to make backroom deals. There's no room for some people to have a bigger voice than others, but I think that goes to partly the professionalism of the people, but also not relying on people only and having the right processes, where it's not up to the individual. At the Productivity Commission to decide, or shall we consult or not consult? It is hard coded in how they work.

Dhananath Fernando  30:07
Anushka, also now since you mentioned at the beginning, it's the either the Treasury Secretary can direct that he want he or she wants to understand this industry, or the Productivity Commission can investigate. Now, once this research and policy analysis is being done, whether are there any provisions that this has to be implemented or adaptation of those findings? Are there any legislative provisions in the Australian Productivity Commission, or is it just like a piece of consultancy work that okay we analyse this is what it is. It's whether up to the government to take it or leave it. Or in the Sri Lankan context, how do you see this has to be fit in? Since you have also been at IPS and now you are the CEO of a of a very reputed think tank, so how do you see this fitting in our context at the same time? You can do the work, but whether actually it's being brought to the system or not is a question mark. So

Speaker 1  31:06
yes, again, we asked this from the Productivity Commission folks, and the answer was there is no compulsion for the government to act on its recommendations. I was surprised. I think several of us were surprised. We thought it'll be, but I think they there was a reason for that, and perhaps it'll be a similar reason in Sri Lanka. No politician would be supportive of establishing an institution that then their advice is compulsorily taken by politicians. So I think it's a non-starter. If we, why we, you and I may like that,

Dhananath Fernando  31:43
yeah,

Speaker 1  31:43
that independent, rigorous analysis going straight into guaranteed implementation. Political economy suggests it's not going to happen. It's the same in Australia. I think, though, what they have done successfully is because of the quality of the work, the rigour, the public engagement, the transparency. Once they put out a report, and once they go out to the public and say, "This is what we found. This is what we recommend, it hugely shapes public debate. And remember, we had to remember that policy is not only influenced through individuals, but that collective. So when so many people are talking about it, it's the report is being covered in the media, think tanks like the equivalents of Advocata and CSFs in those markets start picking it up. It becomes hard for the government to ignore it. They may not act exactly on it, but they can't ignore it. The government will also then have to explain to the public, the Productivity Commission said you should be doing this. Why are you going in a completely different direction? Puts pressure. So while there is no legislative provision to compel them to act on the advice, I think it's very hard for them to ignore, and that has come from years of building up the credibility

Dhananath Fernando  33:01
and also the the how it up I mean uplifts the policy conversation because when that data is out, the public may question okay there's a different set of recommendations and why are you going against it while your own productivity commission has recommended something different so that's the importance of,

Speaker 1  33:21
and and I found this line quite interesting that it said the commission's influence extends beyond formal recommendations. Its research methodology and evidence-based approach have shaped Australian policy discourse. So I think that is what's interesting. It's not just the recommendations, but it has broadly influenced the policy discourse and becomes hard to

Dhananath Fernando  33:45
ignore. Anushka, how a setup like a productivity commission can stay away from the political interferers because that's the main concern when it comes to Sri Lankan context. When you think of appointing a commission, a new institution, you're always worried that it will be political influence, and you will appoint people that you know from your school or from your university or wherever. And basic concept is being diluted. What can we learn from Canberra on that front?

Speaker 1  34:15
One is that that independence has to be granted through statutory provisions, so by way of the Act, similar to Sri Lanka Central Bank Act in Australia, the Productivity Commission Act gives it statutory independence, which means it can operate without political interference. But it's also not just through the law. I think through practice also, they have managed to stay away from you know deep political controversy. I think maybe we need to ask Australians how they how successful that has been. But my impression was that it's because of the way in which they work, how they analyse issues, and how they put it out there that they have managed. To be seen as a technical body, not a political body. But I'll draw a contrast with what happened in New Zealand a year and a half ago. The New Zealand Productivity Commission, structured in a very similar way, was shut down by a subsequent government. This came at a big shock because it was a relatively new institution, 1012, years old, productivity commission has been here in Australia since 1998. Successive changes of government and they still exist in New Zealand. The income incoming government at that time felt it was getting politicised, and that the person who was appointed to head the productivity commission was too close to or too favourable to the outgoing government. Hard to say how much of this is true or not. You'll have to again ask New Zealanders. But the fact that even that impression got created, the perception was there, hurt the New Zealand Productivity Commission. Somehow, Australian Production Commission has stayed away from it. I think it's because they've had eminent chairs like Professor Gary Banks and others who we both met. I think it's tough. Legislative independence has to be there, but also in practice, they have to operate independently. Who is appointed to the commissions and chair has to be very carefully thought out, so that you avoid any appearance of bias.

Dhananath Fernando  36:23
Anusko also wanted to understand now in Sri Lanka already there's a lack of skill set on this policy analysis. We have very few. While we have think tanks in terms of really attracting the talent is quite difficult. So even if we were to move in this productivity commission front. How do you recommend? I mean, how are we going to staff them, and how? What should be the salary scale? Does I mean, is it the if the if can we really attract the talent which is required to run a productivity commission in the stature of Australian productivity commission with the salary scales that we have. Do you have any thoughts? I know it's difficult, but is there a way that we can think about? Okay, now there are ways that we can do it. There are assisters that we can get maybe support from the multilaterals, or just want to pick your brain on on getting things done and how we should move forward at that front.

Speaker 1  37:22
I think this is a big, big challenge because an institution like this would need to have very good technical talent, trade economists, microeconomists, people who understand industry structure. You know, bunch of junior analysts who may have otherwise gone to consulting firms and so on. So to attract this kind of talent, and also to attract good commissioners, who some of who might need to be full time, we have to pay differently. It cannot be structured like a usual government department. You have to look at different salary scales. You have to recognise that these people need to be compensated from outside the usual salary scales, and sometimes you need to have the flexibility to hire them on short-term basis to do a particular study for a particular topic that the commission needs to do right now. They don't need to be made permanent. So, in the Productivity Commission, National Productivity Commission section in the Sri Lanka Economic Transformation Act, there is language to reflect that, but of course it wasn't established yet, so we don't know what the difficulties would be practically. But it has provisions for bringing in outsiders, has provisions to commission research if you don't have internal abilities, I think it's tough. Then I don't have a recommendation. I think, like you said, in the initial years there might have to be some support from development partners, but we have to be very careful that there is no link between their funding and the issues that the commission will tackle. It has to be here's the money. You do what you want. We are supporting building up technical capacity only, but I think we'll have to look very differently at salary scales in government if we are to set up these kind of specialised bodies. That if you want to get the talent, you have to pay pay well.

Dhananath Fernando  39:17
Anushka also want to understand, especially the Productivity Commission analyses multiple sectors of the economy. What is the mandate that they can access the data? Because already, what we see from the regulator's point of view, sometimes for them to regulate, the players are not disclosing the data. So, do we have to have any provisions in the Productivity Commission Act if we were to move in that direction? Or in the Australia, I mean, how assured that they can access the right data, and how does it work? Could you shed some light on that as well?

Speaker 1  39:47
Yes. So the Productivity Commission of Australia had those provisions in their law, and even in the Sri Lanka National Productivity Commission section of the ETA. We included those provisions, so it is there. We debated for a long time in our committee how much power to give the commission to ask for data and so on. But hopefully, you know, you can go and anyone can go and check that language. We try to bring in certain level of compulsion of entities, but you, you know, Dana, it's actually so hard to get data from within government. This might be a government entity, even within government. Leave alone trying to get private sector data. Even within government, it's often hard. So I think the provisions try to address these silos of data, but also with some provisions for ensuring data. You know how we how the commission will treat data securely and transparently, and not using it for undue purposes and so on. It's not uncommon. I think even central bank has certain provisions like that for banking supervision. We got some inspiration from those different ones and put some language in. But practically speaking, we will know only once it's set up and whether they can access that data. But yeah, you're right. Accessing the data that exists all over the system will be essential for something like this to work.

Dhananath Fernando  41:12
Anushka, very quick question on the scope again. Now, when the Productivity Commission goes and investigate an issue, does it? I mean, how do you define the scope? For an example, if they feel, for an example, in the Sri Lankan context, let's assume hypothetically that we have a productivity commission, and for an example on a constitutional issue, can they like what stops them from going on that direction? You know, there's a constitutional issue, whether it's constitutional or not. Of course, it's a matter of the Supreme Court, but is there a way that someone, as a parliamentarian, requests because there may be some economic implication as well on that. So, is how how do you really you know mark that you know have that demarcation, or else say for example, it could be the drug issue, it could be something coming under the the law and order, the police, the military. How do you really define that broader thing? And because there's there's an economics for many of those things. So how do you any thoughts on on your end?

Speaker 1  42:12
So it's interesting in the National Productivity Commission Sri Lanka law. It actually specifically mentions the areas that it will work on.

Dhananath Fernando  42:26
Right.

Speaker 1  42:26
So, it, for example, it mentions it. It focus areas would be streamlining regulation, promoting healthy competition and contestable markets, catalysing structural transformation, and there are a few other areas. Outside of this, the commission will have no mandate. Within, say, some of the sectors, someone can argue military. Military is also in business. Can the Productory Commission look into it? It depends on who asks. So, if the government asks or Parliament asks them to look into it, then someone can check whether it's in the mandate or not, and someone can also argue saying this is not in your mandate. I think that's healthy, that people will constantly ask, is this in your mandate or not? But you know, all it needs is a good head of legal for the commission who will be asked their opinion: Is this a matter for us or not? And then they will probably guide. But in the act, at least it specifies the focus areas that it's possible.

Dhananath Fernando  43:27
We are the final stages of our conversation. Anushka, let's assume that we set up a productivity commission, and let's say you are a commissioner hypothetically. Which, if you, I mean, okay, the treasury secretary will inform you which areas to investigate, but

Speaker 1  43:43
Parliament or Cabinet Parliament or Cabinet can collectively

Dhananath Fernando  43:47
inform. But if you were to consider on investigating or analysing certain sectors, which one would you recommend, or which one would you first prioritise in the Sri Lankan context to analyse under the Productivity Commission?

Speaker 1  44:00
Okay, I'm going to cheat and give a couple of things. Maybe a couple of sectors and maybe an an issue. So the sector, no surprise, or rather topic or sector, no surprise, trade. I think right now we have no professional entity in government or group in government that is rigorously looking at trade protection, trade liberalisation, impacts on firms and workers, impact positive impact on growing exports and so on. It's very ad hoc. We now respond to the Trump tariffs. Something else will come along. It's very reactive. So I would say that the Productivity Commission in Sri Lanka, similar to how Australia had to do it way back in the day, big topic will have to be what is that right level of trade liberalisation and phasing out protectionism, tariffs and para tariffs. That's a professional task with a lot of consultation needed. So I would say big. Priority. The other big priority, I think, is around agriculture. How do you improve agricultural productivity? To what extent do you want to? You know, what is this balance between self sufficiency and productivity and role of government in buying, role of imports in ensuring food security? I think it's a big unanswered question in Sri Lanka, and the only way I feel you can resolve it is if you have a long-term focus on rigorously analysing it, getting data from. They should be able to get data from even your, you know, oligopolistic rice mill people. Get the right data, get the production data, get the consumer welfare angle and really get something there. So I would say that is the other segment. In terms of topic, I think this contestability of markets, and in certain markets we know it's a problem, right? And the productivity commission will probably have a big role to play in even introducing these ideas to people. Why do why are contestable markets good for consumers? So I think from a topic point of view, a programme of work that looks at this competition policy issues, and in fact in the act itself, it specifically mentions exploring competition policy issues and recommending to the government. So, again, to recap: trade, agriculture, and this point of competition.

Dhananath Fernando  46:31
Thank you, Anushka. Anushka, anything that I I missed out, and whether you want to comment on the Productivity Commission, which which has a strong memory that you think that we can adapt to the Sri Lankan context, or anything that we should not do that they have done, what should avoid, or whether anything that we can learn from the mistakes, including what we have seen from the New Zealand Productivity Commission. Your final thoughts, Amishka?

Speaker 1  47:00
I think to summarise, it would be these kind of institutions can't be built overnight and can't be sustained and confidence built overnight. You have to allow them to operate for many years, but at the same time, these institutions have to deliver some results, deliver some impact in the short to medium term to build public confidence, you have to give it extreme independence and autonomy to do the work. But like in Australia, there shouldn't be any compulsion for the government to listen to everything that they recommend. The third is staff. I think we have to really answer this question: Where is the talent going to come from, and how do we pay for it? Going outside of the usual government structures, and finally, I think it's about the stakeholder engagement, public transparency. That was a big takeaway for me, Dana. The genuine way in which they approach having to listen to people, and not just staying in Canberra in their offices, going out there having a very methodical, non-ad hoc approach to consultation and building it into how they work.

Dhananath Fernando  48:06
Thank you, Arusha. Thank you very much. Today we discussed about the Productivity Commission. As we mentioned at the beginning, this is a part of a series that from the Canberra Fellowships, and we will title this podcast series from Canberra to Colombo and reforms that work and many Sri Lankans, I mean, always want to migrate to Australia. I think what we need to realise is why you want to migrate to Australia and why Australia the Australia that we see today is why it is like that is because of these institutional structures, including the institutions like the Productivity Commission, and that has been, as Anushka mentioned, it has given a significant time period to build public trust and also the operational capacity, and that's how the Australian economy brought the competitiveness to the economy. Of course, there are many other reforms which we are going to discuss on the monetary side, on the state-owned enterprises side, and also on the foreign trade side. So, Anushka, thank you very much for all all insights, and we are looking forward to see you in another episode from Canberra to Colombo and on the reforms that works.


Transcribed by https://otter.ai