0:08 Then what is worse is where is the central bank's bank supervision? What on earth have been doing for 24 months? Former cabinet minister of finance, foreign affairs, trade and energy. Our guest today has spent 26 years inside Sri Lanka's political system. currently serving on the committee on public finance and as a senior figure in the UNMP, the country's oldest political party. Today we get into the state of the economy and the political structures that shape it. Our guest today is Minister Ravi Karuna Nayaka. We've been running deficits for 76 years. Why has no government ever considered this a major issue? In this country of 78 years of independence, we have 42 finance ministers in this country. How to expect
0:54 this country to go? Singapore has six for the last 76 years. People feel more in trapped today than what they were before they went into COVID. Imagine that we have the sense of audacity that we basically have been collecting 1.5 billion revenue in exports or T for the last 15 years. Why I said 1.5? Because the dollar depreciates. >> So your rupee earnings have increased but your dollar earnings are the same. We converted a dead trap into a cash scout. The same thing is what should be done to Matal airport. That's the same thing that has got to be done to the ports of Sri Lanka. That's the same thing which has got to be done for Sri Lankan Airlines.
1:41 >> Welcome from the island. >> Thank you very much. >> So Minister, I actually want to start uh in a very human individual way. uh you know when we think of the IMF when you think of the economic situation here the IMF is praising the government the macro situation seems stabilized everyone thinks that we are on a road to recovery however on the ground when we talk to people that we know and we feel it ourselves um we've spoken to multiple people including bank managers and so on and so forth and we get the same story the story is that the current situation on the is worse than what it was postcoid and post 2020 economic crisis on the ground. That's what we are told that
2:27 people are pawning things in a record scale. Defaults are at a record high when we go out to certain places. I have seen people we at foot city and kes buy one strand of bean or two strands of beans because they can't afford it. I have never seen this in my entire life in Sri Lanka. Can you explain to me why exactly this is happening on the ground or do you agree with this assessment? >> Firstly, thank you Shanos for giving me this opportunity and I happen to see two young uh talent that is being doing this. I have seen it in other interviews that you have done that really provoked me to come here. Your question is very real and exactly plac in the correct picture. When a country goes into
3:12 bankruptcy, it's not an easy job to come out of it. The general feeling is that if you look at at the time the surgery goes on it's painful. If you ask the doctor he will say yes the operation is successful but the recovery process the recon conversing period makes it difficult. Now that's the time that is going on. If you ask a brutal frank question, the people feel that they are more entrapped than what they were before. As you quite rightly said, how do you come out of it? You have to have the feelood factor. >> If the money doesn't perate down to the pockets, there is no amount of how successful the country is. If you don't have the success going down to each person's purse, that is what you are
3:59 reflecting. The general public feel that inflation even though it's deflation in central bank's terms the cost of living is as high as what was worse than what it was prior to the bankruptcy. >> So economic terms is different real life living is different. You ask the real life question what is asked are the macro picture that is given which is distorted. This is why I try to reflect I try to pose the question uh from a perspective of ensuring people's voice is heard in parliament. >> Unfortunately these are taken in different contexts. Some take it in a positive turn others take it from a cynical part.
4:44 >> Sure. Easy to clip things out. We know we know the feeling. >> That's right. Now you you're very realistic in your call on pawning. I take it a little further. The central bank came in last week. I questioned them on the total uh credit creation in the country. Credit creation they've mentioned was 2.6 trillion. Out of the 2.6 1.2 billion or trillion was leasing, 340 billion is bonding and 240 billion is credit card. If you take the three together, I don't say every leasing is consumption oriented. If your company for tax purposes would like to take a leave so that you're totally tax deductible. Now on that you see 70%
5:31 is staying alive exercise. You're either living to pay your borrowings or otherwise. Now that is a very unhealthy picture. I asked the central bank the IMF in today's context is pushing for revenue. You all are looking at trying to have interest rates and then who is looking after the growth of this country? Yeah, >> if you have 70% is red for consumption oriented. >> It highlighted that only 48 billion is for long-term investment. That's the credit creation. So where on earth are we going to basically have our future uh protected now? These are the questions. I mean thank god being form of finance means we expose but but that's the knowledge that we want to give and you
6:16 could see our politics is not you know taking something on and then hacking it within government opposition but giving constructive ideas if they don't take it that's their problem. But you were as you said you were finance minister but you also foreign minister and energy minister so >> and trade minister >> and trade minister these are probably the four most important portfolios other than the defense minister also right so >> sure >> when when you were looking at all of this so we're discussing the macro picture but as I told as I was saying people don't go on dates anymore people can't afford to do anything they don't invest in themselves all the young people we speak to they have very little hope. It is very concerning, very concerning. Even us sometimes like do we really want to stay
7:04 here? Do we really want to go? All these things exist. But where do you see the situation in 2028 2032? We want to look ahead. I understand what you're saying that there's a recovery period when you take medicine. you you know it it takes a little bit of time but we don't see that the medication is working because there is no growth aspect to it. So value you see that if we have to pay our interest rates in 2028 and 2032 and all our money is going just for interest payments not even our debt just the interest payments where where is this going to go shall should we stay here first you the question I asked a question you asked and the response I gave doesn't defend what is going on I
7:49 only said the status quo >> no abs now when you when you look at it that's not the proper answer if I was at it will be different but I'm telling what is in real life situation what's going on now your question that is there first of all please since you stay the problem that exist is you all are the part of the problem >> I have three daughters myself and I have I mean me and me are my wife we have many to convince that the three of them the future is in this country but in order to get that you also must live a life that is worthwhile not to be paying somebody else's loans not to be living for the sake of living you also like to see a progressiveness in the country. Now does that happen? No is the immediate answer. Why? It is part of your other problem because the genie
8:36 generation which is seeing worldwide >> I'm being very open because I like to see this >> the they basically show the other side of the hill is greener. >> When they get to the top of the hill they say I mean I'm sorry this is baron >> because when different governments get elected they see otherwise. Now that's that type of nonsensical approach had led to this type of thing. Cut the politics out. Now can you develop this country? Yes. Is there a will? I don't see that. Now why do you say that? The question that you pose when you when you look at the macro picture and you think micro the answer is blowing in the wind. If you basically say that you're going to pay 4 trillion from uh from 28 April,
9:26 you must have generation of revenue sufficient to pay that. >> Yeah. >> If you're only going to get your remittances coming from people who work overseas or the little that you basically tax and leave from the foreign company that export insufficient. You got to export your revenues out to pay your debts. That is not happening. We only talk we show that we have cash in hand you cut your re you cut your capital expenditure and ensure we have cash in hand that's not development >> right >> that is where things have to change so I fault the people cynical thinking of the people >> as well as the younger generation for opening a can of worms without providing a solution. No, absolutely. Fair enough. Actually,
10:12 so this is going to be the main part of this whole episode. It's the solutions. >> Yeah. >> And if you say is this in Sri Lanka only? I'm sorry. No, >> it is the winds that blew from Egypt with the change that took place at that time. I forget what the name they >> the Arab Spring >> Arab Spring and it it went far from Arab to the rest of the world that is there. It's still not knowing at what this whirlpool is. That is the unfortunate problem in this. So I guess the quicker that younger generation feel that there's a rectification in the thinking process along with the elder people who must also take rectification in the way that has been driving this you'll get an answer that is there
10:59 when I think of Sri Lankans though Mr. I when we go abroad most Sri Lankans do very very very well it it's it's become a running joke almost because it's like we have the talent they go there they become the CEOs of top companies in the US Sri Lankans are the second highest income bracket of immigrants after Indians I believe or Iranians so why are we going abroad and doing extremely well but we are being extremely constrained here can you really >> if you work 10% as much as you work overseas here will be a very industrious country. Unfortunately, people go overseas, they slug themselves, >> but when they're here, they want their parents to earn for the children's living. So that is >> but is that the case with like I mean
11:46 yeah it might be the case with some >> you all may be a a small drop in a different thinking process but majority if you given option of being politics for 2018 parliament we have faced seven election if you give option of asking would you like a job or would you like a do to stay at home they'll opt the second >> absolutely agree >> so thousand rupees now see what happened now this government and this in his own political way. He looked at the present middle situation and said I will give 7,500 for April for asumous people >> thinking is okay but what do you give the message out a hardworking person who pays his taxes and brings the money to pay the give the government a right to
12:32 pay a dole to the people out of the taxpayers money they get nothing the guys who get that basically do nothing to get it >> so as incentive >> absolutely so how you work. >> So what's the alternative though? >> You've got to ensure that all of you all look at Singapore as a role model. Look at Malaysia, Indonesia, Thailand to go and see, come back and say, "Hey, that is more advanced than we are." If you look at 1948, Sri Lanka and Japan got the independence almost the same time. We had a $48 per capita. They had 49. They had no for no natural resources. We had everything. Today they have 55,000 per capita and we have 5,000. There has to be some bloody difference.
13:20 >> Think it went wrong. >> It is the the the people's thinking process the introverted non exerting mentality everything to be given for nothing. That's the way now Java in 78 changed that. He moved it from a closed economy to open economy. But every political party keeps blaming them but doesn't give a solution for the 48 year old chain that has taken. That's where we are. We're very happy blaming the next door neighbor instead of saying whether the fellow was working hard or whether he was thinking different. >> I'm glad you brought up Singapore because actually when because we we get into this topic a lot about I know you're a free market thinker.
14:06 >> Yeah. So we are also free market thinkers and but Sri Lanka is a highly socialist state. So >> in words >> in words in words yeah these labels are very miscon yeah yeah we have to put in the democratic part >> we are far from democratic >> exactly exactly and even even our socialism is like socialism for like part of it is socialism for the rich and part of it is like it's a little strange but to to come to Singapore. Uh actually Lee Konu, I have a direct quote from him because he was talking about the British Fabian Society which was essentially a a
14:52 very they advocated for socialism around the world and his point was that he realized that before distributing the pie, he had to bake the pie first. And then when I look at that, it's like we are trying to distribute a pie that we've not even baked. We don't even have the ingredients for it. We don't even have an oven. So do you see a way where you can actually change that outcome? >> Oh yes definitely. But how if the people if it's political suicide to become a little >> that's where the that's that's why Shanil I like your styles because you not only posed the question but you also asked the practically when it can be done and that's where it is who has the political guts to do so any now I can
15:38 remember when in 2001 when I was entrusted the uh trade ministry we had 340 satossa stores island wide We had roughly about 15,000 that's one is to 10 for each shop when we had required only one is to four. >> Wow. >> So what we thought was let's go from a bankruptcy we bring it into commercial thing we'll open in 24 hours take the surplus staff to work and we increase revenue but people outside say hey you're paying salaries to these guys. The people didn't know that you any case paying salaries and any case they were claiming overtime. So you brought it to constructive use. you we managed to increase 3 billion turnover for the year without having a salary cost. Now that
16:26 culture change led to them saying hey you are basically bringing this place into bankruptcy you are robbing all those names were heard but five years later they are worshiping me and say my god we saw something in the world that we never saw before >> in covid we would have existed if they not didn't have 24 hours that's the that's the political uh witch hunt you have got to go through the um the character assassination you have to live through >> where my three daughters I mean basically they had to go through this with my wife for no reason for thinking 10 years ahead. I still remember they're saying what is all this about.
17:12 >> What is the resistance that you would have gotten? Cuz I I know that you did try to um in your time you did try to liberalize a lot of things but you were met with a lot of resistance. What was what were the core components that you were being >> what we were thinking Chanel is liberizing is not just giving a freedom for the wild to the private sector you bring competition in >> the competition basically means private sector government sector you inter intertwine at a time where you feel best deemed fit so that competition comes in because I believe government can't do businesses their thinking process is not okay I being a businessman professional accountant coming into politics can role manage it in different ways but it
17:58 may not be the successors that come. Now you don't need to think of the success that come that doesn't have it then take certain contingency steps as to from where we are but people don't accept it in that way because they all think anybody that comes into politics is a crook they don't want to think otherwise now lean new had the sagacity to think otherwise took bold decision and don't go to hell with it the way forward later they basically help you now sa like you quoted lean new Singapore airlines because they the workers wanted a strike and he basically said go ahead and strike. >> Yeah. Next moment they basically said what do you mean the airline will come to close so close it >> why can't we do the same thing >> absolutely Sri Lankan airlines when we
18:45 basically told the staff that this is a way out the surgery has to be taking place or in increase the fleet in order to ensure you have more flights we have 21 >> when we should have 30 but we don't need to be subsidizing a Mr. who to fly from Hong Kong to London at the expense of Shani Loyenos flying to India. >> Yeah. Right. >> This is the problem that takes place. So we are we must be if we want to have a loss leader let it be loss leader to bring tourists into the country >> not to have fifth freedom flight of flying Hong Kong to London which we don't get anything except a loss of 100,000 rupees per traveler. that our our decision maker love to see a 90%
19:30 load factor and a 15% bottom line loss. They don't understand how to relate it. That's the issue. >> And how do how do they get away in their position of running this like they are running it? Because any private company with shareholders, they'd be out in a week >> definitely. But the the insulation that they have basically in government is just the longevity of the government. Now if you look at in today's world the cold one created issue unwanted issue but the answer is not what they have provided is completely a misconception of from start to water. So is this done by the politician? I said no it is also by the government servant. That is where
20:17 now I can come here and just slam the government but that's not my intention because I have seen this through I have been a victim of correct assassination and I don't want a successor to basically see that this is the case but corrective action can take that's what I am basically doing >> you mentioned >> I I learned this from I I would say from Ronald Re >> and from Ran Vikram Singh Ran Vikram Singh used when he came in in 22 he basically said you He showed what should be done and what is not being done right and I guess that's the same thing that needs to be done now >> like what you mentioned contingencies of what kind >> when I mean now he basically at that time it was going to IMF I'm not a great
21:03 believer of IMF >> I basically said do what they say but don't do what they do >> right >> right because they love to say what's going on in Africa when the countries are bankrupt >> right >> there only two three that really made it And that was uh Korea. That was Malaysia because Mahhat told IMF to Bagarov and then you basically had Indonesia which had because the vice president very very professional lady came in there that was semi >> right >> now rest of it it has been basically the same fested wound going on and on and on without a success story. So what basically has got to be done at that time was go to IMF cut down your revenue oh sorry increase your revenues cut down your expenditure ensure p get into capital expenditure ensure that the
21:50 ballooning government services reduce we spend 1.5 at that time you spending 1.6 6 trillion of our revenues out of which is 63% is goes to salaries. So that is you don't need to have IMF coming and telling us to do that >> right >> you have got to do yourself that is the culture change that needs and you basically have to now one thing I basically say UNMP has done virtually 90% of the development of this country but they also young one of the lots basically didn't pursue the professional approach and as a result they got a tainted Okay. Then you had various governments coming in. Now
22:35 you have the UMP doing on the economic front, Mahindra Raja Pako on the war front. You had basically simo on the household transfers, >> right? >> You you know two free kilos or rise from moon type of approach. Then you had this government that said all these guys are pack of buffoons, idiots and corrupt. They came in and what did they do? They basically suddenly found you know wishful thinking from opposition is far different from practical running of the country. >> Now 76 years that is from independence to time that 24th September when took over the total debt of our country was
23:21 28.1 trillion. Then to today which is 17 months the debt has increased by 4.2 trillion. Now we are 32.3. Now what have you asked the question we are whether it's in 32 we'll be able to pay our loans. Now 4 trillion has increased in this 17 months. >> Have you got a reciprocal increase in your uh on your balance sheet if you look at from the credit side? >> No. >> Yeah. >> You are paying more loans than what you were paying then. You you are in more debt than what you were then. So what is the reciprocal gain we have got for the 4 trillion debt that we have created? >> What is it? Do we have >> no we don't nothing at all. Then where
24:09 has it? It's gone for consumption. >> Right? >> Then the four the four 17 months have yielded four trillion 76 years has yielded 28 trillion. Now you calculate and see what the thing that's the political talk. Now >> as you mentioned like for 76 years I think of the 77 years of independence we ran a surplus only for one year. We've been running deficits for 76 years. Why has no government ever considered this a major issue? >> Shel the issue there is I don't say deficit management is bad. As long as the deficit goes into asset creation. >> Sure. >> If it is capital expenditure that helps
24:55 to build houses >> to ensure business venture capitals. If you're going to be basically looking at expressways, if you're basically looking at job creation, entrepreur trainers for the younger youth, you know, capital knowledge being transferred, education, universities being created, fantastic. If you are borrowing at 3% and ensure you get a revenue return of cost benefit analysis of 6% then 3% plus super >> but if you borrow at 10% and put into a revenue yielding which at 2%. >> That's your killer. >> Right. I get what you're saying. >> That's what you're doing. So you must ensure when you have your culture change or your adaptable change in your youth generation get them to think of that
25:42 area where you basically target what you want to get or what you want to give because they have one sector you have to assist people are the elder who are differently able situation on that type of thing you have got to ensure X amount is skeptic aside that you can't compromise and give it for them to live not for them to suffer. >> That is the problem in our country. We give ashasuma that is transferred with earlier Janosavia. It was earlier do whatever it is they are hardly able to live. So you create pers out of their living. >> You're essentially creating a very vicious cycle. Yeah. Just giving people absolutely just to stay in that.
26:28 >> That's right. You make them servants of your political agenda, >> political system also. Yeah. >> So make them live on it. >> So then how do we change that mindset of people because again Mr. Ravi if you think of the stateowned enterprises you're speaking of and that change and wealth creation our state employment offers more security than the private sector does for people. That is why like so many young people in university their first choice is to go into the government sector and get a pension. >> Yeah. because they it's a risk to be in the private sector. Wages are so low. Our banks lend to government institutions with like zerowed uh risk indexes compared to the private sector. If we want to go get a loan,
27:16 they will go through us like a fine comb and they will look at everything, everything. >> But they still won't give it. And they still won't give it. either give it for 20% interest or whatever but why but if a government institution goes to people's bank >> people's bank even the NDB thing which we will get into take it take anything you want do whatever you like with it how did that come to be and how do you even change that >> s that is the thinking process which has been put to place because you have a apex body central bank their job is to basically look at the the economy of the country and assist in government's fiscal policies I'm sorry monetary policy >> with that particular process you have
28:02 given them unwanted uh headache without giving them responsibilities now they were crying for them independence and going to the bankruptcy IMF insisted they got it they no better than when they had independence they're worse than what it was I'll come to that later >> coming on when you are basically having a a limited share you have unlimited wants >> and a limited share to supply that unlimited one then you have got to make the best use of the limited resources. Now when you look at the limited resources, you're looking at whether you want people to live for today or give them knowledge to live for tomorrow. >> Right? >> Then you use the confuser statement. Let's give them a fishing rod rather than give a free fish.
28:48 >> Right? >> That's the way that you basically got to change. Now this government or I'm sorry all governments they have not had the political sagacity or the guts to basically look at living for tomorrow. They want to live for today. As I said if you basically give them an option they'll take the path of least resistance. The issue is that they don't want to go. You ask that they prefer working a pension. They love to get a pension of 10,000 instead of work for 100,000. Insecurity they they don't trust themselves to work hard enough for the problems to that attack yet. That's the >> it's also a lack of like inspiration that comes from the private sector also, right? There's not enough case studies
29:34 of people that have succeeded enough to have a good enough impact on the people that are like in this public sector mentality to want to come even want to come and like get into that private sector and start businesses and innovate if that makes sense. >> That is because I don't think you insulate them with the risks that they take. Now two of you all are doing a business. >> Sure. >> Now if you are going to be taxed 30% on this innovativeness that you're doing. >> Yeah. before you start off you'll get basically went off because 36 onethird of your revenue is going for somebody who didn't even think of assisting you to do that business. >> Absolutely. >> That's the issue. >> So I mean we we we bring up this. >> So if you basically encourage you all >> Yeah. >> I believe that's the reform. I believe I believe create the entrepreneur give him
30:21 the assistance broaden your tax base instead of killing the guy who pays the tax. >> Yeah. No, I mean we're very much on the same page there and I think most of the guests that we've spoken to also on that same page. So it seems like we have the answers but what is really the practical constraint of doing that? What's what's so hard? No, the problem is you also I mean there's no point just taking one-sided when you give the central bank >> the authority of being independent and you basically tell them do nothing but only be independent helps you nothing. M >> but if you tell them you have to be creating 10% growth a year, 5% growth a year, you name it. >> Then you say you have to create 50,000 jobs a year. >> You have got to have your external
31:07 resource developed by 20% per year. Then you are getting them into business. Otherwise the guys who basically get from you know from the universities they select on a merit basis. >> Yeah. Yeah, >> they select probably the least enterprising guy but the most studious guy. >> Right. >> Right. Then the most industrious guy will go into the private sector. He'll work three, four, five years in a private sector. If he feels that the company is not providing him the opportunity for him to growth, he'll go into a private company, start his own company. So good guys will go out but they won't be decent makers. >> Right? >> The guy who was not industrious will be the will be a decision maker. So a guy who like you who said I want to go and
31:52 get a loan >> that guy doesn't know how you what trouble you what troubles you have to get to that point >> that guy looks and say no no no you are going to use 100,000 to take your girlfriend for a dinner or something and bust it up so forget it >> that's the approach that your this country is Singapore for what it was Indonesia for what it was Thailand for what it was they looked at different They encourage decision making doesn't mean everything is right. >> Absolutely. >> Out of 10, nine may be right. Eight may be right, two may be wrong. But that is decision making. But here it will look you're basically trying to be making a corrupt society. These are the fear psychosis that you are given.
32:37 >> Well, okay. So actually let's touch on the entrepreneurship part because that is something that we >> for us that's a very core important sort of element and I'm well aware that the majority don't really care about that but this I think mi correct me if I'm wrong if you can actually get a very entrepreneurial society going where people have the fishing rod any party can stay in power for a decade or two without having to have a slugfest in political campaigns just by giving people that material benefit and I don't mean handouts but that opportunity. So when we think about starting a business here compared to the regional average it's about 60 days here and the regional average is about 15
33:24 days if you want to go get uh capital there's nobody here to go to >> there's like hatch I believe there's a Sri Lankan >> uh government fund and one more fund I forget what that is >> but even then there's no funding mechanism so when you were finance minister Did you see that as a really big issue? >> Not only we saw it as the issue, we made it a a pedestal to ensure that you go into success. I I I must say that idea came from uh Mr. Rani Vikram Singh and uh two other cabinet colleagues uh mipal citizen as well where we said we have 170,000 A level students
34:10 >> and out of that only 55,000 get into local universities. Then you had basically a gap of 110. >> Now that was a fundamental right that was lost out where you want to go to university but they are saying I'm sorry we only 55,000 seats. Then you had private sector universities >> which was charging a fairly decent price. We I encourage as finance min 215 to ensure that you give free interest free loans >> right >> for them to basically ensure you get the degree. M >> now they got the degree and they basically paid the loan back but interest free >> so you are creating capital >> now we took that element of that interest where the banks didn't charge we took it into the into the budget
34:58 >> so to the extent now that was capital expenditure worthwhile >> then we basically looked at the younger generation because I was very keen to see young entrepreneur because I was a young entrepreneur my father also died when I was 11 years my mother was made to this thing and we basically came up the hard way. I was even though I'm a chartered accountant I studied >> and a person who really I need to mention his name Biran Hlock he taught me a completely different approach you know so studying and basically got to that particular point and today we are having hands-on experience going to that factory you know how hard to work you know how difficult to be professional mix the two together you are basically
35:43 sailing I mean I was made best fire of Asia not for nothing because we slo to it >> but other people never basically look at it from the merit perspective so I want to create that younger generation that you're yearning to get to unfortunately the world that Sri Lankans don't think the same way or the thinking not that it can't be done it can be done we have we have to force ourselves to do it I I like that public financial management act which restricted expenditure to a certain degree but it didn't encourage one thing they should have created encouragement if you earn you could spend that into capital expenditure >> right >> this is the lopsidedness of woriing IMF
36:30 >> instead of woriing our own knowledge we had some very talented people when I was finance minister I had Dr. Samaratunga very efficient secretary but he may be thinking from a government servant point of view >> right >> you mix our entrepreneurship with his knowledge then we had a very good 17 DJs one of them are DSTs now akinata and basically then it was then at that time Chandra Kanak was a DST likewise you know you basic I'm mentioning because my success story was ensuring that they trust trusted on me, I trusted on them and we had a house on fire and it was moving. We moved revenue from 8.5% of GDP to third 15%. Without a hell of a
37:18 fuss, but we made a slumber awaken. So not that it has not happened, it is happening. So, so that's the culture chain. That is the way I guess this country needs if you want to be what our peer countries are like Singapore, Malaysia, Thailand. Not that it is the best but it is better than what we are in 10 years. You're going to take very rigid political decisions which cut across certain inefficiencies that are there which will hurt some of the people who are living in lap of luxury not doing anything and then get to that point your success story there. >> So you mentioned basically putting that excess revenue into capital expenditure
38:04 while controlling your normal expenditure. >> Yes. Yes. >> So we believe that expenditure goes up the lift and revenues up the stairs. Right. >> So you have to change that culture. >> Right. >> Right. And I used this uh sentiment that was basically looked at with Mr. Modi. He was based in a conference and one of the foreign I forget his name but he mentioned your uh he was referring to Sri Lanka as a nation island in poverty in a ocean of prosperity. And I thought that really awakened my sense of feeling. What the hell are we doing? >> For a foreigner to tell you're sitting on a gold mine but not knowing that you're in one.
38:50 >> Yeah. Yeah. I completely get it. Actually, I had I had a meeting with a client and he was like, "You wanted seafood and then he saw the price of seafood." He's like, "Aren't you guys surrounded by an ocean? How is seafood so expensive?" I was like, "That's a good point. I have no idea why. I really don't know why that is. Right. And I assume that's like for all sorts of corrupt like like police market. >> No sir. You look at one further. The same crab that is caught in Sri Lanka. You go and eat in Newton circles in Singapore, >> right? >> It's cheaper than what you need in a I don't want to mention a good restaurant here. >> So now you you basically are looking at what the city is. So our same old crab
39:38 caught here we still lang can't eat it cheaper than what we going to fly to Singapore and eat in Singapore. >> No. >> So that's the economies of scale advantage they have. >> Absolutely. It's ridiculous though. But actually that brings me to the whole point of your revenue creation instead of the stairs we take the elevator. How do you actually create wealth for that revenue where you have enough to put into your capital expenditure? Because you need to create that wealth, right? And correct me if I'm wrong, Minister, but to me, money is like money is just an illusion, right? It's it's it is not just hard cash. When we think of money, we think of hard cash, but you basically create wealth like Singapore did using financial services. This is just wealth being created in a digital board in the
40:24 ether somewhere. How do we actually create that? Because I feel like when we think about increasing our revenue, we think of, okay, let's make some garments and sell a t-shirt and get cash for it. But we're not actually thinking about scaling our revenue from a financial services point of view, from a high value services point of view where overnight you can change that. >> Can I take the example of tea? >> Sure. >> It's a good example to take. Now we have been growing tea for 150 200 years, >> right? >> Mhm. from the 1850 they British came I don't know exactly what year they brought but we'll say 200 250 years sure >> now we have not even had a dollar auction all our sales I mean we consume
41:09 2% of the remnants of the tea and all the good te are exported now we have to get in dollars now imagine that we have the sense of audacity that we basically have been collecting 1.5 billion revenue in exports or t for the last 15 years why I said 1.5 5 because the dollar depreciates, >> right? >> So your rupee earnings have increased but your dollar earnings are the same, >> right? >> So you are basically 10 12 years at 1.5 billion. >> Now if you had the dollar auction, you won't give the exporter or the importer to speculate on your rupee devaluation and depreciate. Right? >> Right. Then there was another situation you blend because sometimes >> the p is basically looked at from a
41:55 different aspect. So you blend you get from different area different qualities blend and do it. They two three very senior people didn't want to do that because they were doing it very successfully and and they were having kparies outside or into their might they were able to do it outside but they didn't want others to do it. >> Then what happened was you had a non tea growing Dubai you a non tea growing kata that basically brought tea blending. So you had son tea exported to Kata Dubai. They brought Kenyan tea. They brought Vietnamese tea. They blended and see they made a brookbones tea and then exported. >> But salon key lost his place. >> Now those are the sense of stupidities that we pursue without knowing what the
42:40 endgame is. >> But I mean if the answer is so clear, I mean the dollar option thing is a great point right? >> But look way we try to bring it. It was stopped by three four very big exporters. players. >> Yeah. So when then they say who are these guys who come today to make policy? We have been 30 years in the trade >> earning the same amount. >> Now they are earning the same amount. We want to change the 1.5 billion to 2.5 increase. Yeah. >> But the guys who have been in the trade who have basically made their name also in the trade. They said who are the young Turks that come and make the decision on our behalf and ruin the industry. So when you have one statement that comes from very senior guys, you basically get caught up. you worried to take the lease and political cabinet doesn't have the guts to do so. This is the problem. Then textiles you
43:28 basically had I mean we have been going on sense of we have basically looked at early we had the kota board then they made moved vertically forward because kota went off then they give the country the opportunity but we have not moved forward from thinking of developing a textile industry. We basically look at getting hangers or something but not look at 80% that goes on for textile >> we still import 40 50% of our wans I think needs are well looked at and because now we have been in 40 I can remember 76 >> Henry garments and you basically that story has been told 45 years of success story we still import our
44:13 textile so no positive then tourism Another success story. Low hanging fruit. >> Low hanging fruit. >> Low hanging fruit. We don't basically give the We send our qualified people to mall leaves. They earn $600 a day. The same hotel which is better here. We earn 150 and do nothing. So this is the change that has got to be done and we have got to look at it from a holistic picture rather than just one radical change. The >> radical change. So when you look at the whole is this a competition issue >> competition without the desirable hunger in the trade now we collect a sis for uh tourism NTD 1%
44:59 right and then basically you use that for development of the tourist industry >> but we have today a trade that doesn't invest in themselves now what do they say they say polit politicians come and We can't deal with one studying person. Now let me my mind goes again to another one. In this country of 78 years of independence, >> we have 42 finance ministers in this country. >> How do you expect this country to go? Singapore has six for the last 76 years. >> Right? >> Education, we have 32 education ministers for this 76 years. Singapore has three. I'm sorry four if
45:45 I'm not wrong. >> Right. >> So you could see long longterm national interest is looked at. >> Look at the change in India. >> I mean India is a country we need to we we have five six my belief in diplomacy is that we should be friends with all enemies with none. >> Right? >> And with co India being close has to be a very close affinity. >> Cashri China is a deep pockets very important for economy. USA very good for human rights and diplomacy and we've got to be very close with them. They have give market taxes without loans being created. EU is a very friendly with being British Commonwealth with UK coming in absolutely essential must think of them. Then Japan that is there then you have got Russia that is
46:31 thinking outside the box. If we have this lot and you basically look at instead of being in bed with anybody >> but being friendly with everybody >> I think we'll move forward. Then you basically look at market taxes. We don't need loans give market taxes. >> Yeah. >> That's what you all are looking at. >> Now market taxes is the most important element in today's context. >> Then you basically ch at the initial stage you asked a very valid question. Is there a worthwhile living in this country? And I said yes. I have convinced my three daughters. Now they in business. They are basically thinking completely different far better than I would have taken. Right? My eldest daughter who basically put a lot of
47:17 effort in. Now I see the second daughter coming and moving and the third daughter without getting involved she has more influence because the thinking process is in the modern world right the digitalized era. Now when you say I am asking IC and see from your entrepreneurship that is there if today you have a 100,000 rupee earning that you done overseas if you want to import something to this country you pay taxes at the point of entry right you pay duty care pales all of them and you bring it in >> then when you come in here you basically have to sell on that sale invoice,
48:02 you'll pay 18% tax >> on top. >> Yeah. 18% on on what you import. Yes. 18 18% VAT, 2.5% SSCL. Then you'll pay if you go to a restaurant 1% on NTD and 10% service charge. Now if you are the owner of that company, you while consuming assuming you know comes to your restaurant with you the owner. Now you earn the profit of that. >> Then further the tax you collected from him you give to the government. >> Now you make profit on that. You paid 30% on your tax. >> Now you as a company you want to take into dividends. >> You take that out. You pay dividends 20% or 30% that is there. End of the day
48:47 what the hell have you worked for? >> Yeah. That is where I was pursuing that we should have on the basis of very broad base ensure that you have a maximum of 17.5% tax >> and also uh indirect tax. I'm believer that indirect tax also required until you uh vets or uh the present SSCL it is rigorous that is more fair because you have a input output basis. >> Why would you say that that's fair? Because I I'm not really a big dealer than that because I feel like that is the an equal consumption tax even on the poorest. The poor and the rich are paying the same thing. Right. >> Sil you also must upgrade yourself to think big because if you say I am a person who earns 60 million to come under the threshold now it has been
49:34 reduced to 36. Then what happens is you basically are unable to take the input tax. But assuming you are 36 million and you say I am opting to pay that. >> What do you do when you go and buy this computer? You'll have 18% wet recall when you pay your sales. >> Now you collected from the you collect of the consumer 18%. You set it off against the computer that you invested which you paid 18% tax in it. >> Right. >> So when you set it off virtually it has come without tax. >> Right. Right. >> That's the progress approach. >> I get what you're saying. >> Right. Now when you think of that why I said this this country requires indirect tax also. Maybe that's harmful but it is useful. You have to have revenues also but you must have the revenues do and
50:21 ensure that you basically give the people feeling their re tax revenues are used properly. Sure expressways elevated. Now another classic I give this as I like that younger guys are questioning me. If you go on the expressway, you get in the car and you basically when you get into the first outward point the gate, you get a person seated there. You a chit >> right now. You go that you go out into the next one, you have the same chit collected and basically you have money paid and you come out you are,340 such people >> on your right hand side. If you go in Katunaka you'll have etc. M >> your number plate is attracted onto the uh CCTV you this thing it automatically
51:09 no no wasting time you go through without any problem now why don't you have e CCTVs all over >> right instead of having,400 use,400 to develop you know flowers and sales points and have more restaurants on the way point in this entire expressway you only one >> one that is there for restaurant services. So imagine if you want to go to the toilet, you live in Columbbo. If you want to go to Hamad, which is the longest point or to the Mat airport, you won't be able to go to a toilet unless you take a go out of the system and come back. >> This is the lopsided development in this
51:56 country. No, I get >> not that we are unable, we don't have the opportunity to brace the system and ensure that you have that uh political will to break the system. So I actually want to go back to u like the whole uh startup >> side of things because as you said like the tea the textiles the tea especially they were very against what you were trying to do that would actually help their own industry compete globally. I think you agree with me because we've spoken about this is that businesses here especially the big corporates I have so many criticisms of them because they >> are totally happy just being insulated within here with no desire to compete
52:44 globally. Can you explain to me how in the future especially with AI we have the opportunity to quantum leap certain things but in this day and age with India growing so fast Tamil Nadu is like 13 14% a year right now growth rate I believe how could we possibly in six 7 10 years let's say how could we possibly are we going to be a country where we simply stick amongst each other like Cuba M >> and we are happy just competing with ourselves and we're going to get crushed globally. Is is that where we are headed? Is that our future? Is that what we have to say is the truth? If >> we go the way we are going now, you have given the prescription, the disease and
53:29 the prescription. >> But if you want to come out of it, you've got to dare the system. You have India which is basically a 5 trillion economy in the next year. >> 5 trillion. >> As you said, Tamil Lad is growing almost 1 trillion that is there. forget all of them 5 trillion and if you take 3% of that our GDP can go up by about 6 7%. I mean we are just 5,000 per capita when India is basically less than but a more robust economy. We have got to look at globally and act locally. >> What we think is that we think the entire world is inside Sri Lanka >> not Sri Lanka is in the world. That's the mentality that our political leadership going to the social thinking
54:16 and all. >> I must say the social thing I remember Jaw was stating you are a socialist until you first get your median rupees. >> Right. Yeah. >> So uh or your women's rights are there till you marry. >> Right. So, so these are things that basically have been politicians who have been you weather the world and you see with experience they say and unfortunately fortunately we are there to learn but today's generation we don't learn everybody tries to teach the others >> right I get what you're saying so how actually just to touch on the whole VC how do you view this whole VC environment that we are in for young entrepreneurs to get capital funding innovation we seem very risk averse to
55:03 Anything that seems a little bit risky, seems a little bit sci-fi. Oh no, that's not >> I would when I was 215 finance minister I encouraged uh uh spend of the central bank can be told that you direct economy into such areas >> where the banks are given a direction to invest 2% of your total lendings to youth at this particular rate. women likewise, small and medium microenterprises likewise. Unfortunately or fortunately then they had a a situation that they went through >> but they don't pursue because the banks
55:49 are always looking at what is able to make best profit. >> Sure. >> Which you can't fault them because they have got to do for their depositors interest. >> But the economy has to be looked at. Yeah. >> Now what does that equator reserves? You use that idle reserves to bring in this particular thing. Right? You have the supply side that is there. Now our country believes or our central bank believes that controlling the economy is anti-inflationary approach. Everything is inflation. >> You kill the inflation and you think you're economistically good. No way. That is where you said people feel more entrapped today than what they were before they went into covid.
56:34 >> Mhm. >> Not that they have gone into covid. They have been taken into the covid. >> Yeah. >> They have been taken into the death trap of the economy. Now that is where I believe central bank is lot of theoretical economies that don't know what the real life situation is >> and guiding the businessmen who are fighting for survival in the economic world >> in that battle >> and here am I questioning and what do we get we basically get onslaught from them what are you questioning us we know it better and they screw it take the advant take the case of can I use the example of NDB >> yes please let's go ahead >> NDB is a case of case in point we
57:19 basically asked them they came two days before to the central bank and they were trying to be muted in answering that question here is a national tragedy that has come about into a genius that has used the financial weakness in the recon the system >> you're talking about the 13 billion >> 13 billion that is what is reported now >> it started with 176 transaction that took place in 20th AP 20th March which they immediately went to one person who basically was a whistleblower came up and told because she want to protect herself >> that came out then it led to >> Friday it was the 370 because 380 which they reported 76 but by Monday it became 13.2 because apparently it was been
58:05 going on for 24 months. Oh forget the bank has many corridors you know that has to keep checking one is the internal audit one is the external audit one is the bank supervision units that are there all of them then what is worse is where is the central bank's bank supervision under central bank act 80 section 2A they are mandated to look at it and they're on online supervision as well what on earth have been doing for 24 months In the financial reporting of NDB's uh reports in page 347 for year 24 and 25 there was a report of 3.1 billion and
58:52 12.1 billion as financial assets >> and what has that been perus because when you have such a huge increase >> it is leads to fictitious transaction or fictitious assets then has The central bank independent unit looked into FIU >> suspicious transactions. What is all this about? They should have flagged it and this money has gone out from NDB to another bank. Now that bank in outstation has basically used that and that money majority of them have gone out of the country. But I would say I with all responsibility the financial system should not be tested without any fear at all. There is no run on any bank required because they
59:37 have taken money not from depositors from the NDB's capital reserve right but that doesn't mean that you have to exonerate central banks role that should be done >> I am there nothing personal but I have been personally going on because I believe when we were running the economy central bank was part of the problem not the solution they made life to make credit creation at 28% 22% was a difficulty they gave all the excuses now at 28% lending through consumer spending there's no problem. >> Why were they against the creation? >> Because they don't see that they see money transactions coming in will create inflation. Inflation creation means central bank has to be involved in mopping that up. They don't >> so they are saying that if we create money that will create inflation. We don't want that problem.
1:00:22 >> Absolutely right. Why trouble trouble that that is the craziness. Your problem is not politicians. Your problem is the central bank. Your system change should be central bank. Not to be independent. I I fa ran Vikram Singh for giving independence without resultant accountability and responsibilities that flow with it. That's why I said give them growth rates develop part of it because if you exclude your monetary aspect to them they are not held responsible in the econ entire economic system where they have to report to parliament >> right >> nor anywhere. >> Yeah >> that's where the problem is. So isn't there no criteria for these? It's not a standardized procedure like okay because in my mind if there are high frequency
1:01:10 uh deposits or trades or very high amounts that gets flagged this intelligent person used it below the Rada 5 million >> right now then but that is exactly the case when it goes to another bank when you have 76 accounts coming to that particular one it is suspicious transaction. Now if it was suspicious transaction was it reported to the bank one to the other then the receiver should say we have got this coming is it suspicious then the central bank should basically look at it from both and say hey there have been a similar going here there and everywhere have we not looked at it then if it is suspicious transaction is the FIU unit come back what on earth have been doing for 24 months >> so are they not interested have they
1:01:56 been paid off >> they could be paid off But I don't want to subscribe to that thinking. I believe it is incompetency and arrogance. Right? That's those are the things that are there. Somebody has to basically point the gun and now say it is right. >> Fear >> fear obviously. Now I I mean I as a member of parliament I'm being questions are not answered. They come arrogantly try to think they know it all. Right. Thank god that is there a way being shown in a manner which is not so dangerous at the moment but it could be if they're not handled in this manner. Now I brought this up in committee of public finance and the answer we got as members were putrid they say we don't want it can't be exposed at this moment what exposed for 24 months they were hiding it
1:02:41 >> can't be exposed because they afraid of rocking the markets >> Darthy to rock the market they rocked many banks many financial in before what have they done for that because we didn't have the guts to take these officials that think they have a ho around them >> I'm saying is I want you younger generation to think I am I'm not a politician who's a businessman. I'm a businessman being a chartered accountant coming with both experiences and putting it in. And I want you all to see that every politician is not a joke as well. I mean we may be but that is not the way that we are looking at it. We also have certain inputs that are there which has helped us to come to where we are and I
1:03:28 want you all to take this forward. That's why I particularly came for this interviews. I like the style you'll asked and uh we've got to show the world that we also have talent and we don't need to be woriing the white skin only. >> Absolutely. I would argue that we have much better talent in a lot of areas because >> so tourism, financial sector, insurance, blue economy on the seas, the logistics that we have. Then you look at basically the talent of working talent that we have got. My gosh, we have a sky is the limit. >> Um, I mean look at agriculture. We are blessed with one of the best fertile soil, but we import 1.1 trillion agriculture items into the country.
1:04:15 >> But these are because of uh market mafia. No, I I think it is basically the lack of interest because you look at the farmer from a guy who is just downtrodden just doing sustainable agriculture but you have to make him commercialize that's the way that you've got to do I mean ensure I suggest the best way is taxing give them blue chip companies or the profitm companies we will make your at the moment 30% taxes to 10% if you basically ensure that the uh the agriculture is commercialized >> right >> you make profit take that off tax deducted >> see IMF can be told go to hell >> I mean you're bringing revenue this
1:05:00 >> a sector >> what you want if you want to bring revenues for development say okay we want 10% of GDP in revenue >> right in this area >> but don't tell us what we are going to collect from pay or whether we got to collect from advertising or you got to collect from entrepreneur correct the tax use it >> I get what you're saying yeah and these are like sector cars the IMF can't come and be like >> absolutely can't and when I asked them this time they said no we are not imposed that now look at we have port city >> we have bo we have EDB but the poor institutions don't have the capacity to sell you don't have them a tax incentive nobody will come for the love of the country Sri Lankans may do so because it's our nation >> but others will come when they Say
1:05:47 economic opportunity either critical mass. >> Yeah. >> If not the economic advantage and the economic advantage is not there you basically have to sell it by creating it. That is why free free trade agreements are required market taxes. This is the way to go forward. Now you don't need to be tapping. Now we have tapping the US market >> and you have a businessman who's running USA. Now Donald Trump suddenly a internal policeman has become external salesman >> right so he's changing his philosophy now we must know how to integrate in the system >> so if we have a huge surplus in USA and we have a negativeness in the other countries you basically pa Americans you
1:06:33 come to Sri Lanka export to India using us we have duty free access >> right right >> that's where the thing is >> like a like a hub towards other big markets But do you think with the current government's say ideology that's even uh something that we can look forward to something feasible that will even happen because it would be going against their let's say ideology that >> my dear you know now you asked the question do you want to live here or not if you want to think like them and live like them is different >> right >> these are enriched country to enrich ourselves or is it enriched country to enrich just a handful of people we want to enrich all >> so if you want to think then forget the way they are thinking Yeah, >> you got to make them think the way you're thinking. >> Big >> large. >> No, absolutely. It's just that those ide
1:07:22 in a convoluted manner they they have not changed from the UMP policies. >> They're only shy to adopt it. >> Right. Yeah. >> Right. So they they are dating without without a woman in shorn, you know. So they're getting there, >> right? Can't they basically move >> flirting a little bit? >> I I want to bring because to continue this I want to bring up because you said banks and you gave a very actually very feasible solution towards putting a certain section of their revenue for certain sectors and people and groups. >> Yes. >> But I I don't want to go to a bank to go get a loan for my business. I want to be able to go to an investor and have an investor equity ecosystem >> where I can go to you and say Mr. Ravi
1:08:08 this is my business plan this is my idea these are my sales blah blah invest in me >> and you say >> great let's do it take that risk I'll put in the money >> but there is no environment for that here I have knowledge and from like certain people in the tech industry friends who work in it if you're aware but IFS at WSO very very big companies right >> yes >> they are planning to remove all Sri Lankan operations so they're on a firing layoff spree right now as we speak and these are the upper middle class young people who work in tech. >> Yeah. >> Now is the I would think that the government would consider that a very serious problem and intervene and offer some sort of incentive to WSO2 or these IFS companies from the US
1:08:54 >> to keep these workers here to keep operations here. What happens when they gone? So they are taking the compensation money that they get from these US companies and all of them are leaving because why would they stay? Are they leaving or they're migrating to the next point? They're using the same company because what happened was this government brought in 36% tax. I'm sorry 30% taxes and 15% for export and getting the people to pay pay to 36. That is the issue. Now they are basically going to IMF's madness trying to impose will on Sri Lanka without knowing what the ground situation is. They come and say you're working you earning 2 million pay
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