The IMF Trap, China's Debt & Why Sri Lanka Could Be Heading for Another Crisis

0:00 When the central bank bombing went off, my dad was just down the road. My brother's friends from his office got glass in their eyes because the windows shattered. So even like, peace, I didn't call. I was one of those guys. You had a very successful career in banking and finance. And then you came back to Sri Lanka. You're a political commentator. You're an advisor to Sri Lanka's main opposition party. What on earth were you thinking? And then, yeah, around... Four years ago, Mr. Prevadas asked me to join the working committee of the SJB. For example, Indiraq Daan made plans to invade Sri Lanka when the North and East and the South started having issues. The nationalist base was like, they're going to take over Sri Lanka with this $500 million. Once we take this, we'll have to give them all our deeds to

0:45 our land. Sri Lankan government lost Rs. 900 billion of tax revenue, corporate tax revenue, in 18 months after the collapse. The mandate is for AKD. That's why AKD rocks up in parliament every time some controversial thing happens. He comes as finance minister, makes a speech in parliament and votes. But if you're in a low margin sector, how the hell are you buying a low shot in a country where 17,000 is the power to live? The rupee is going to keep depreciating against the dollar. It depreciated last year about 5-6%. This year it will do the same. You say what you want about Goethe. The man wrote a manifesto and he went for it. Implementing every single thing, even while the country is crashing. Like his family is under 30. That's right. So accountability, where is it?

1:30 Mr. Kusum, welcome from the island. Thank you very much for having me, guys. I appreciate it. Mr. Kusum is fine, but Kusum is also probably better. Kusum it is. So just to start, I know that you've had a very successful career in banking and finance. You've done that for over a decade. And then from what I understand, you came back to Sri Lanka. You're a political commentator, you're advisor to Sri Lanka's main opposition party. What on earth were you thinking? Yeah, it's a bit of a roundabout way, okay? So a quick background. My father was a banker, 55 years in banking. My brothers are both bankers, so I also ended up in banking, something I didn't really want to do. I actually, when I was applying to universities,

2:17 I was saying, let's do anything but... something finance related. But then I remember my brother at the time said, oh, it'll, you know, if you do accounting and finance, it'll open up avenues for you. You know, you don't have to do bank, you can do other things. And I believed him. So I did accounting and finance. And then after I finished, he had moved to Dubai, where I was born in Dubai. And he said, oh, you know, this place is going, do you want to come and get a job here? I said what kind of industry? He said well the banking industry. So I thought okay well this looks like it's going to be banking then and finance everyone's like oh yeah go try for a bank, try for a bank. Because it makes sense right to optimize your earnings that's the sector you would go to finance right. So I ended up in Dubai working for a local Abu Dhabi based bank but it was based in Dubai city center. I worked there for

3:03 one and a half years. It was really interesting like I was basically entry level job but just you know the society. working with different nationalities like Indians, you know, Pakistanis, Filipinos, you get all these cultural little things, you know. So that was really interesting, but I got very kind of fed up with the life in India. Like the money was great, but then you just ended up blowing most of it. On the weekend, you'd go out somewhere, you'd go to a mall like that. Everywhere you go, there's a mall in Dubai, right? And this is more so now, but even in 2007, 2008, when I was there, just malls everywhere, you just end up spending all your money. So I was just telling my parents, I'm kind of lonely, kind of bored here, and I'm spending all my money. They all said, you can go to Dubai and save. This is not going to happen. So I'd like

3:49 to come back. So they were like, yeah, I'll come back. So then came back, got into the FCC bank, and I really enjoyed working there. So I was there for 10 years, working in corporate finance, learned a lot. But honestly, like three, four years into it, I realized I can't do because I watched my brothers do 30 years, 25 years in banking, my father did 55 years in banking. I just looked at it and I just, I can't do this for another 30 years. So I, and my father at the time, and my mom was like, um, convinced me to do CIMA. I don't know if you know CIMA, yeah, so the managed accountancy. So I was like, oh God, more accountancy. So I just said, I looked around and one of my friends at the bank was doing a master's at Columbia Uni in international relations. And he was saying it's really fun, you learn a lot of interesting things that we've never heard of. And I'm like, oh, okay, this sounds

4:37 good. So I applied for that. And I actually, for the first time in my life, found something that I like studying. Like, you know, I've never been like a bookish kind of person. I read to pass the exam, basically. Even the universe like that, like you do what you can, make sure you get a decent pass mark that your parents don't get too pissed off and that kind of thing. But when I got into... Exactly, just finesse it. Yeah, exactly. But when it came to the last, like, the bits of this international relations course, I just kind of realized that I really enjoyed the intersection between politics and philosophy. Like philosophy in international relations and I started learning more about economics and philosophy as well. So this is the other thing that I went to university, but everyone I spoke to, British kids from other countries, they were doing this thing called PPE, which was politics, philosophy

5:25 and economics, which is apparently, I didn't realize at the time, it was the most popular degree program in the whole of the UK. And actually, if you look at most of the MPs, most of the people in finance, they all started with a degree in PPE. It was like a random thing that everyone was doing. And I never understood the link. I'm like, that's a very random thing, like philosophy, politics, economics, what do these things have to do with each other kind of thing? Because I was in finance brain. So in your finance brain, you don't think of philosophy. Politics is like, yeah, politics is not something you take seriously. Economics, okay. So PPE, later on, I realized, okay, this is this intersection between philosophy and economics and philosophy and foreign policy is actually really, really interesting. And from there, when I had the chance to sort of, we had a couple of family enterprises in travel, like travel

6:12 trade businesses. So those were kind of picking up. So I decided to leave banking and take up that while pursuing. So I started doing more writing, more reading. I started interviewing people like my lecturers, some of their colleagues, previous past lecturers, just to get a bit of understanding of foreign relations and international relations. that kind of thing. I even applied for a PhD and got into the program and did the first six months, but I ran into a technical problem with my research because I was doing research into political radicalization to violent extremism related to the Easter bombings. So that required a study of Islamism and the fundamentalist form of Islamism. That would have required interviews with clerics, Imams, that kind of thing, going East. language barrier, it was going to create

7:01 an ethical issue for me because I had to be a translator and whether they'd be honest about how they answer. So I was running into a lot of technical issues with interview. So I had to abandon that PhD. I haven't abandoned the PhD thing altogether. But yeah, so in the midst of all this, I ran into an academic who basically introduced me to someone in the media and they asked me to come on TV a few times. And then someone else recommended me to Mr. Sajjid Premadasa. in 2019 so I did a few papers for him for his manifesto for the presidential election at the time and I worked on that campaign and got to know a few of the other MPs just from working on their campaign and then yeah around four years ago Mr. Premal Das asked me to join the working committee

7:46 of the SJB and I was already in advice on foreign policy so then last year or was it the year before Might have been the year before he made me advisor to the Leader of the Opposition, so through the Opposition Leader's Office on Political Economy. So that's kind of a long story, but that's where I ended up here on this podcast with you guys. Was that all taking place as you were still a corporate? So I left the banking sector in 2017 and we ran our own business search for another five or four years. So yeah, so basically between 2018 to today, that was a bit of an overlap between our family businesses and what I was doing here. But now I'm just doing this full time. Yeah. You decided it. I'm done with this finance. I wanted something. Yeah.

8:34 I mean, it's just that it's an opportunity to learn stuff, you know, and getting lucky and being linked to this. Chebby helps open doors when it comes to meetings with people, get to go abroad and meet dignitaries and, you know, being in the room in some contexts is interesting. You get to learn a lot. Because if you're interested in politics, if not, you'd be really bored. But if you're someone who's had any interest in politics and economics, you would generally find these rooms very interesting. Just even the personality plays, how people react to each other, the hierarchies that automatically you see in a room and you go into it. That stuff, I find it really, really interesting. Why the SJV, though? So basically, I'm a Colombo boy, Colombo liberal. a westernized upbringing, not a westernized upbringing, but I grew up westernized. My parents

9:21 are not westernized at all. They're very, you know, Sri Lankan, Sinhalese, Buddhist, all that. But I just had a westernized upbringing. I can't really explain it any better than that. I've gone in Dubai, but lived there only like four, five years and then moved back to Sri Lanka. But I guess this is when we started having English TV. So I remember a time when we only had four channels. Right. And MTV was one of them. And MTV was the one that had English programming. So you'd get sitcoms and, you know, Tundercats and cartoons and stuff. So from there, it was just, then MTV started in the 90s and then music and then movies. And then we had, you know, the, you know, I remember one of the first movies I saw in the movie was Speed with Keanu Reeves. So these, like the Hollywood kind of thing. And you just get into that, like, westernized sort of culture. You were very young at this point. Yeah. Four or five years old, basically. Makes sense. Makes

10:08 sense. Yeah. Well, so considering, well, before this started, I was just telling Inosh, I was like, I wonder why Khosu decided to enter the cesspit that is Sri Lankan politics. Yeah, yeah. Because he doesn't seem like the type who would really enjoy what goes on. That's the thing, because I'm not in politics, that's the fact. Makes sense. I'm basically in the advisor, back in office kind of thing. But I am front office as well for media work for the party. I represent the party in the media on, like... Sirius TV news for Face the Nation and stuff. But other than that, I'm pretty much a back office guy. I've never been retail politics, as you can probably tell. If I had to speak to a group in Sinhalese, it would not go very well. And most people look at me. I would not be someone you'd vote for. I'd be like, who is this guy? Where is he from? That kind of thing. It's a bit an atheist, English speaking, extremely

10:57 liberal. So not your son of the soil kind of guy. Yeah, I'm not sure how you're surviving the political world, to be honest. But I understand. It's a lot different than people think. So the people that I interacted in the SJB and its leadership are all fairly liberal. They've got a worldview that's not dissimilar to mine because they're all UNP's, right? So I'm a UNP voter. As I said, I'm a Colombian liberal, grew up voting for I would become single. I've voted every single time I've had the opportunity to be the UNP voter. I've never voted SLFP, never voted SLPP, never voted left of center. Good or bad, I mean, the UNP is is a disaster right now. I have to tell you, it was the best choice at the time, in my opinion, I was to stand by that choice. I don't know if people will say differently. And it is difficult, right? Because if you think about it,

11:43 growing up as a UNP, I was always like, that was a time when I was very young, I remember having an argument, I must have been about 12 or 13 years old, because one of my cousins said, we should just give Jaffna to the LTT, because it's already a de facto LTT control. It's already a de facto separate state. That was his argument. And I actually thought, you know what, if you can stop the bombings, because we were in Colombo, my parents, my father worked in Fort, my brother worked in Fort in the banking sector. So when the central bank bombing went off, my dad was just down the road. My brother's friends from his office got glass in their eye because the windows at ANC Greenleys, like, shattered. So this stuff was kind of really visceral to us. We felt it. So we were like, peace at any cost. I was one of those guys, like, you know, if it's, you can call it appeasement, you can call it whatever, capitulation to the LTT,

12:32 whatever you want, but we just want bomb stock. Obviously, this was never a serious thing, like no way that Jaffna was ever on offer or, you know, the LTT were never going to say, okay, just give us Jaffna. That was, it was just a conversation that we had. But I remember thinking about this later on and realizing that, well, were we right to think that way? Because end of the day, most people would argue that the ends justify the means in terms of the war. in terms of now the war's finished. There's no more killing like there was. There's no more suicide bombing. The price you pay is the whatever 10,000 to 40,000, whatever number had to die for this apparently. So this is kind of the trade-off that we're all living through in Sri Lanka. So every year when there's a Human Rights Council meeting, every year when there's a Remembrance Day, the war, Remembrance Day, the

13:18 LTT Memorial Days, this is the stuff that comes up, right? But I can't... look back with hindsight and say, oh no, I should have supported the war more stringently. Actually at the time I said, if we can win a few battles and then get them to negotiate, like when the tsunami happened. Everyone was like, it's great, let's all get together. But I guess growing up in Kalamu, we just kind of misunderstand the nationalist sentiment. A lot of people outside Kalamu will look at our leaders sitting down with Prabhakaran and the LTT leadership. they know people who died at the hands of the LTT, like their friends, neighbors, their villagers. They're not going to see this the same way that you and I see it or that I saw it. So understanding that took a little time. Because I just thought everyone would just want no war. I thought that would be just the given. But that's

14:07 not as easy as that for a lot of people. Because if you surrender some territory, what did those people die for? And that's a very valid, you can never dilute that argument when someone says, when Nama Rajpaks talks about war heroes and sacrifices made during the war. We understand it as propaganda, we see what he's doing. But to a lot of other people there's a lot of truth to it and absolutely, there is some truth to it. Well that's interesting because you're suggesting that you were very idealistic at the time and you just wanted the bombs to stop which most people want the killing to stop. But I've read your writings and you invoke Mearsheimer a lot, you invoke Chomsky, So that kind of tells me you are a very realist thinker, very structural, analytical. I'm curious as to,

14:57 because you dig deep into foreign policy and you advise on political economy, what's your take on Sri Lanka's current geopolitical position? And what's your view of the current government's foreign policy? OK. So if I can just, for the benefit of your audience, just start at the beginning of international relations, right? International relations is about the relationships between states, nation states. So one of the first things you learn in international relations is that nation states exist in a system of anarchy, in that there is no system. Now we understand anarchy to mean chaos, but that's not strictly what anarchy means. Anarchy means a lack of a hierarchy, a lack of a supreme authority. Like if we lived in anarchy, there is no policeman for me

15:45 to complain to. There is no higher power. It's just you and me. That's kind of what anarchy means. So technically speaking, with the concept of sovereignty and national boundaries, nation states exist in this, according to international relations theory, this state of anarchy where there is nobody to appeal to a higher power to appeal to. Now the... Not the United Nations? Well, the Board of Peace now. The Board of Peace dated to the Board of Peace. Oh, I'm sorry. Yeah, that's the thing. So exactly right. But in reality, what we kind of understand and what the world even now explicitly moving towards is these spheres of influence, right? Whereas a country exists in a certain physical space, like Sri Lanka exists at the southern edge of India. There's nothing we can do about that. There's nothing we can change about that,

16:31 right? So that sphere of influence determines how we act, because we automatically know who Big Brother is in this region, right? And this big brother, India, is more important than big brother in the United States or big brother in China. Why? Because they're closer to us. Anybody that wants to attack us. Because I know that nowadays foreign policy and international relations is looked upon from trade, investment, economics. But that's not the basis for international relations. International relations and realism, for instance, is primarily concerned with national security and the existential threats that your nation state will face. So in that sense, we exist in India's sphere of influence. This is not necessarily a controversial statement, right? Even the JVP at its outset was a

17:19 reaction to what they felt was Indian imperialism. But even in that, they accept that we are in a sphere of influence because it's just a reality. Like India is just a hegemonic power in this region and we are part of their southern security calculus. Like when India thinks about its four borders, the southern border, we are part of that security calculation. And that's been part of the reason why we are where we are the war for instance it's not controversial to say for instance that the 13th amendment uh the provincial council system all of this is an indian insertion into sri lanka's constitution this was done under some duress and that this is something that a lot of sri lancans especially in the villages they are taught it's part of the culture like india did try to dominate us now maybe that sentiment has diluted

18:06 But there is a conversation to be had about this, and it's a real thing, because most people aren't aware, for example, that Indira Gandhi made plans to invade Sri Lanka when the North and the East and the South started having issues. I think it may have been after the first set of pogroms, where Indira Gandhi and the RAW, they got together and they hatched a plan to take over select runways, airstrips in Sri Lanka, fly in paratroopers, and start taking over certain areas. This became... Sorry, because by RAW you mean raw? Raw, the Indian intelligence. And so Indira Gandhi died. She was assassinated. So that plan never worked out. But this was how far it had gone. And then later on, you know, for instance, the

18:53 LTT were trained not just in the south of India, but in major RAW bases around India, in the north, Chakravarti, all these places, right? And then we know, for instance, that the south of India was essentially an area that was very friendly to LTT activity, training camps, ideology, all that. So when you take all of this together, India and Sri Lanka have had a contradiction and a contest, right? So India's, for example, language issue, before it came here, it was there in India, where the south rebelled against Gandhi. Gandhi had a project to make Hindi a link language. Now that's how they framed it. But a lot of people will look at it as language domination because that's why the Tamil people of the South, the Southern states, marched against it because they were like, this is language domination. That same

19:42 strain of language, linguistic nationalism, found its way to Sri Lanka and this WRD, right? So this kind of, this informs part of our history and our foreign relations. So our foreign relations, the first thing we have to do is deal with India. And our dealings with India is, painted by our history with, you know, Tamil nationalism, the LTTE, and now with Chinese expansion, right? So in the last, since the post-war period, and I talked about this on an interview recently, what we've seen is a steady shift, a pivot away from India, which Mahindra Rajapak's government did very intentionally, because they saw that in the, during the war, they almost brought, the UNHRC tried to bring sanctions against Sri Lanka. Right at the end of the war,

20:32 we defeated a UNHRC resolution. Not defeated, we actually got it, actually in the post-war period, just after the war. If you read the UNHRC resolution, they commended the Sri Lankan government. They welcomed the end of the LTTE, the end of hostility. So it was a very different wording to what happened later on, because we made some commitments to the international community. We just didn't even try to keep them. And why didn't we feel that pressure? India would have put pressure on us. But then Mahindra Rajvaksa brought in China and said, we have an alternative development partner. So now we, I mean, so now what? Now you have to be more overt in how you pressure us. Well, wasn't India anywhere at a point where it was too weak to? I mean, yeah, you would say weak, but Sri Lanka is such a small market and India is such a big country that you could easily have funneled in money. I don't think money was a problem. It's just, they just were asleep. I think Indian

21:18 foreign policy was sleeping for a while until the likes of Jayashankar came in and sort of took an actual stance on what was going on. Because if you told any Indian politician in the 80s, 90s, 70s, that China would have this kind of footprint in Sri Lanka, a footprint that includes, I'm not like an anti-China guy or anything like that, I'm just telling you the facts, right? For all of the commentary on Western domination, ILF domination, Indian domination, there's only one country that has a 1990 lease on a port that built an artificial island as FDI just off the coast of a regional rival, India. There's only one country that's by far the largest credit, the single largest credit to Sri Lanka. Okay, so I think when people say, oh,

22:04 Chinese investment is benign, US investment is imperialistic, these are clearly not the case, right? And understand if the US wanted, I don't know if you remember the Millennium Corporation Grant, it was like $500 million, and the nationalist base was like, they're going to take over Sri Lanka with this $500 million, once we take this, we'll have to give them all our deeds to our lands and because that was part of the thing was they built they were going to build digital land register to make it easier to allocate land efficiently right and there was something in some road project that they were going to fund slightly they're like they are trying to do a road in sri lanka it was like a like this thing where oh it's an imperial thing like 500 million dollars meanwhile our major export destination is the usa so if they wanted influence they would do

22:53 what trump did and just put like a two percent or five percent tariff they don't need to spend $500 million to help a land registry to dominate Sri Lanka. This is the kind of thinking that it's in the media. This is not me picking up on a fringe thing, but this is on, I thought, Professor Tisintan, who the late Tisintan, passed away recently. Two articles across three days in the island and daily news just blasting Western imperialism, blasting the MCC. I mean, just completely ideological, just nonsense. So that kind of thing we have to avoid. just to get to the question on our foreign policy with this government, what we see is that there are opportunities for Sri Lanka in terms of investments from India. And I know this from first hand from going to India and meeting officials in India.

23:41 They want physical connectivity. They want more ferry connectivity. They want grid connectivity. They want industrial zones to work with Sri Lanka companies. Now, some of this is real business. Some of it is geopolitics. They want the kind of purchase that China has in Sri Lanka, which they should rightfully have. They're the ones who should have this purchase because we are in their sphere of influence. China's all the way somewhere else. How did they get all this purchase? What was India doing during that time? So from that point of view, this government has sort of, I mean, ideologically, if I can just go into politics for a second, Anurkumar Desanaka went to India during the campaign. and he visited a bunch of factories, I mean the Amul dairy factory, and one of the things he said in the

24:31 speech to, I think what was shown in the media here, was that his government is for technology transfers, but not for foreign direct investment. Like he said that we don't want investment, like in the sense, there is a belief that foreign capital comes and it takes over natural resources and then they make profit out of it, right? This is kind of the thinking that I have a bad feeling pervades this government. Right. Which is why, I mean, I haven't seen sophisticated capital investment in Sri Lanka in the last two years. Can you think of any, the only thing that came up was a $500 million, a Big Ben style project, which is another mixed development project in the Port City. Okay. That was advertised. It was, it's basically a seven star, five star, whatever development resort, mall,

25:19 Port City. It was, they only mentioned the name of a, Special investment vehicle. I think it was something like Silver Line or some random name. No names of promoters, but that was one of the largest FDI tickets that we got that this government has had. Isn't the largest one the Sinopec refinery? The Sinopec refinery? I mean the largest in the Port City. In the Port City, right. But if you take the total FDI, I think the majority of the FDI comes from Port City projects. Right. Not FDI into Sri Lanka. But just check me on that. Right. But either way, When you look at countries like Vietnam, Bangladesh, Taiwan, they're more advanced. But let's take Vietnam. Vietnam was a country that roughly had

26:07 a slightly lower GDP per capita adjusted for purchasing power parity in 1990. So they had about 2,000, 2,500? In the early 90s. In the early 90s or 1990. Let's say we had roughly the same. But today they are about $5,000, $6,000 ahead of us in that And they also had a war. Their war was probably more destructive than us, it was shorter. But how did they get to where they are? They are now in semiconductors manufacturing, automotive manufacturing, they're doing high technology exports. So what did they do differently? Do you feel like the president or the government is separating foreign policy from economics? No, I think it's a different question. Why I mentioned the FDI thing is that I think FDI

26:55 is part of the thing where this government is missing out because there is a link between geopolitics and FDI. You can see Adani. Adani is not here just to make money. Adani is also an instrument of geopolitics. Absolutely. So what is it? The China Harbor Engineering CHEC, the CMPORTS, the one who do Harbantala. These are not just investment makers. Clearly for geopolitics. Absolutely. So in that sense, Indian companies also want to come here. some for business, some for geopolitics, some for both. But I'm just not seeing the volume. Given the interest that I've seen, the interest is there. One Indian official mentioned Nepal, and said that even though they have a few issues with Nepal, they helped fund

27:40 the grid, and they did the contracts for the power sharing agreement. They made them open source so that anyone can look into it, question, you know. So you can see how they're thinking about this, right? And they said they have already planned for another reactor, So they are full on into being like, we will help you with your energy. Right. So of course, from a national security point of view, you'd say, maybe we shouldn't have grids connected, but you know, from a national security point of view, you'd say, maybe we don't need physical connectivity. So for one Indian official mentioned, Bahrain, he said Bahrain's economy runs on Saudi people coming there for the weekend and they come on a causeway, which is a bridge, essentially a massive bridge. And they come, they spend, a small amount of the GDP every weekend and then go back

28:27 to Saudi. So that's one of the way they're pitching it for our tourism sector. To the north of Sri Lanka, connect the south of India, get that. So a ferry is good, but a road is you can triple the number of people coming in. Then they're doing something called, there's an Indian Transnational Highway that's started and being discussed. It connects Myanmar, Thailand, and India. So they were taking how Sri Lanka could very easily be part of this transnational hybrid if you just extend a bridge from some part of the eastern southern tip of India to Manau or something like that. So this is the kind of thing that they're thinking about. So yes, there are security risks, but there is investment opportunities. Like clearly, we met a group of businessmen and industrialists as part of like a think tank and as part of

29:16 like a chamber of commerce. And they were all out, like they were so interested in just coming because they see there's an opportunity here and businesses look for cheap labor, cheap energy, good infrastructure. We don't have a lot of those things at the moment. So that's kind of where we need to get to. But for that, you have to prioritize investment. If you prioritize investment, other things will fall into place and then you'll see, okay, our energy costs are amongst the highest in Asia. We're paying the highest energy costs in Asia. So why would a business company invest here if they have to pay some of the highest energy costs? we don't have, we have very strict labor laws. How, why are they going to do that? So there's all these other issues, but if you use your geopolitics, because we are in a certain position, whether we like it or not. So are we going to just play defense the whole time or are we going to? Because we, 2009 to 2019, we had

30:06 so much Chinese investment, right? Billions, tens of billions of US dollars. Have we used it? Have we maximized it? Have we done the best we could have with that investment? clearly not we have an airport that doesn't have you know planes we have a port that just just recently come into full capacity we haven't updated our Colombo port which is one of the best in I mean China is the winner in that essentially China's the winner every look they don't care about the return you know they don't care about the financial return of it look you know I know I'll come across as a bit of a China whore it's it's weird I'm not you know I I actually admire the Chinese system a lot like a hell of a lot and it's happening in India as well where A lot of the Chinese success in the last 10, 20 years has come from various provinces within China competing with

30:51 each other. Even these car companies, they come from a specific part of China and they compete with other provinces. And when you compete provincially, the chances of technology transfer, expertise transfer is much, you can literally even spy on your competition. So that the diffusing information within a province becomes much quicker. Right. Right. And then you fight more resources and the state allocates resources based on who's doing the best BYD is here because they did the best they are not the company that whose president is close to Xi Jinping that's not how it worked in China right the best companies made it out of China and now they're dominating parts of the world they're dominating it right the Japanese cars cannot compete with these cars right so these

31:37 China has won in numerous ways but if someone tries to tell me that They are completely benign in Sri Lanka. Like it's not a factual statement to make. Like look at the port, the Hambantara port. It was funded by the Exim Bank of China. That's one of the largest financial institutions in the entire world, probably a top five bank. And they lent to the Sri Lankan government and they lent to the Sri Lankan government and the Chinese company for a port that was completely unviable. And coming from the banking sector, I can tell you like I work in Kalutera, right? I worked in Kalutera for three months and the largest loan I did was like 7 million rupees but I also did like 100,000, 200,000 rupees facilities. I did a loan for a lady who's like 60 years old. She was just

32:27 below the borer age limit. She wanted a three-year facility for 200,000 rupees to put up an iron rod stall to sell fruits outside the temple. Even for that I had to do like a cash flow. I had to show that this is It's freaking viable. Who is the borrower? I can't see how Exim Bank approved hundreds of millions of dollars for a port in Maklala. I just can't buy it. There was no feasibility report. The feasibility report that we did with the Dutch company, they actually said that it would make way more sense to develop Trincomenley or the Klamo port than building a new port altogether. From a financial perspective, right? Sure. I mean, you have to have some, like, yes, it's national infrastructure. But when you're taking borrowings, you have to have a feasibility and financial viability to some point. Or you

33:14 have to say, okay, we are going to fund, the government will fund this much more when that comes along. You have to plug that gap from somewhere. So what happened was there was no funds, basically, and there was no business. So they're like, why should we invest in this if there's no business? Then why would we build it? It's bonkers. It's completely bonkers. Actually, I do want to get into the Humbantot quote in particular because It's a very fascinating thing to me. From what I understand, the Defence Forum in Asia had also explicitly classified Hambathora as one of three People's Liberation Army dual-use facilities. Now, look, I get it. If I was China, I'd do the exact same thing. It's real politic, right? I don't know if it's dual-use or really. Can you classify as

34:00 dual-use? Well, from my understanding of this and you can completely disagree with me, but the Chinese in their string of pearls strategy, for those who appreciate board games, they might like this analogy, but I think the United States geopolitically plays the game of risk, while China plays the game of go. And for those who don't know go, go is essentially you want to surround your opponent, not for a decisive victory, but you want to surround your opponent and if you surround them before the battle, you've already won. Whereas in risk, the United States wants to cut off the supply and gain control immediately. That's why they are very military focused. They're very naval focused to get a foothold. And China understands they can't play that game. So

34:48 they come to ports, etc, etc. And the reason that I think that it may be dual purpose, not right now, Oh okay, yeah, someday, potentially. That's how they think. They are 100 years ahead, you know, they have a 99-year lease. Xi Jinping's going, he's not going to be alive in 10, 20 years. Yeah, that's 100%. So they're thinking is so far ahead. And when you think about the port in Myanmar, Bangladesh, Sri Lanka and Hamantar, all three of them essentially surround India. Now they're not dual use. However, it kind of starts with, all right, let me get this area, let me build it up commercially. Oh, then let me build some infrastructure for some submarine docking. And the next thing you know, in 30, 40 years is dual use. But

35:35 none of us will have wanted that, right? Considering all of that, what is the... And India kind of responded to that by getting management rights in the Mata Laya Port area as well. So where do you see this playing out for us in terms of... Do you have any advice? What would you advise SJB in terms of this game that's being played? I mean, the thing is that it's about hedging, right? So, like I said, in 2009, 2019, we had this opportunity to hedge successfully and we got money into the economy. It's just about how you use it. So, again, with India, there is opportunity for investment. It's about what are you trying to invest in? Now, if you're going to... do a

36:24 song and a dance about a multi-development project for a mall and a, you know, real estate is not the kind of investment that's productive. This is what happened between 2009 and 2019 is that we had all this GDP growth. But it's GDP growth based on what? Infrastructure. Infrastructure. Construction boom. And construction boom is necessary. Every country has some kind of construction boom. But after you have to follow the productive sectors, right, you have to have things happening on this infrastructure, not Just people going from Columbus to down south. That's not the only thing. But Kusum, it would make sense, right? Let's say the Chinese investment in Hamapurna in particular. Now, if the Chinese give us a billion dollars and they say, here's a billion dollars, we'll build this up. But hey, part of the condition is only Chinese workers. So we're not creating jobs, we're

37:10 not creating employment. It's coming from Chinese state bank, which essentially is just the Chinese funding themselves. So can I tell you what I would say in this? Okay, it's okay, I'll give you all of this. But you have to bring the latest BYD factory to Sri Lanka in a five-year period. And in that period, you have to train 200 of our engineers. They can go to China. If you want them to work in China for five years, do that. Send people abroad because they'll learn she didn't come back. And you can say, okay, semiconductors. We're not going to be in semiconductor manufacturing any time in our lifetimes, right? But let's start. Let's bring down the basic, you know, testing kit and just, you know, and we'll give you the

37:57 land. We'll give you the small little fishing port somewhere and then you build it up. Yeah, go for it. But then like, for example, the physical connectivity, physical, if you build a bridge between India and Sri Lanka, when, if there was a war, it's a really bad thing. But if there's no war, you control the visa program. You control the entry points. And you have a steady stream of tourism. So how you manage the security angle is up to you. But you can't say, no, security, we're just not going to do anything. You can do that. That's kind of what we're doing. But I'm saying there's an opportunity there. So I'm saying there's pressure. If you give India, I'm just saying it's a very extreme example, but if you give India land connectivity, and you say, we'll give you land connectivity to Sri Lanka, we'll give you that. What do you give us back in return? How about a nuclear

38:46 security umbrella? How about nuclear fusion technology? How about you send your best nuclear scientists here and help us with getting nuclear energy here? Because now nuclear energy is probably, they found it, I mean, not that they found it, but there's a lot of promise with thorium reactors instead of uranium. So it's not, you can't produce bombs with the thorium, it's what I'm not expert on that. But I'm just saying, these are just, There's just ideas that you should always get something back. Instead what we did was, we'll give you this project, you give us something on the table and we'll shake hands on it. So that's, and then what happened? Like people just bought three Range Rovers and a Aston Martin and then, you know, that's parked in . So this is what happened in the last 10 years and everyone knows this. Like

39:32 everyone knows this is what's happened. Like if you say luxury apartments, There's about 100 people that own all the luxury apartments in Colombo or can own them. A hundred odd people, did you say? I would say, what do you think? Fair enough. I mean, how many people are going to afford a 200 million rupee, thousand square foot apartment? There's not that many people in Sri Lanka. I mean, okay, if you count their kids and all, there's probably a lot of people, but the people in control of the money, there's about 100, 200 people. How many people can, are you guys into the stock market? I'm not, but. No, not the local, yeah. So basically, the local stock market is also like, there's probably like. Oh, it's a disaster. It's a disaster. It's like 100 people or two, you know, 50 people that can, take it up or down in a day if they really wanted to. The SEC is not going to do anything about it. That's true. Well, that's interesting that you talk about this because then what would the leverage of Sri Lanka really be? Let's say you go into these negotiations with these countries. My take is if you don't have leverage,

40:22 it doesn't matter the size of your state, but small states in particular, if you cannot go into a meeting with some form of leverage, like big nations don't care. But the thing is they're here for a reason. They're here for reason. China is here to project power in the Indian Ocean. The United States is here because this is part of their, what is it called, the Asia-Pacific strategy, right? India is here because they are part of their southern calculus. That's why they didn't give us $4 billion in credit lines during the economic collapse just because they love us, right? It's because they know you don't want anarchy on your southern border. That's just not a thing you want. We even had the Easter bombing. So then that means there's a terror cell on the India southern border. You don't want any of these things. So

41:11 you need to manage that. That's part of leverage. The other part of leverage is we are one of the most busiest, we are on one of the busiest sea lanes in the world. I saw the stats were insane, like some 70% of all oil that goes to China or something goes through. So there's all sorts of leverage that we have. But you never say this stuff explicitly, right? You're going to go into a meeting with the Chinese and say, you know, mostly oil comes just past that. We never know something. Now, if it was someone like Trump, that's the kind of stuff that they do because they have all that power. But there are little ways you can do that. So no one can say that Lakshman Khadir Khan is going to walk into a meeting with an Indian or a Chinese diplomat and feel overawed. and say, oh, we'll just do anything you want, give me some money, I'll give my party and that. Because they were people who had ideas, they had substance, they had strategies, they had vision. There's nobody been like that in our system since

41:58 then. So when, if I'm just saying, I don't mean to put like Sri Lanka and Sri Lankans down, but the level of person, government official that I met in India, there's not a thing, there's not many in Sri Lanka, like in our politics, there's plenty of Sri Lankans, but that's not in our politics. Not the caliber. The caliber, just the way they think. I mean, I don't know how to use the word caliber, but it's just, they're just not on the same level. Like it's like you watch like Australia play cricket and then you watch Ireland play cricket. It's just not the same thing. Like, so you can see that these people are working from a point of an overarching strategy. Whereas we are not, even our ministries aren't like linked to each other. They just do their own things. Why do we lack their thinking though? As a country, you think? I think we just fell into a trap where the incentives are just all wrong. Like the public

42:48 service was politicized in the 70s and the 80s by successive governments. So then the people that went into the ministries, the civil service, these were not people who were the best the cream of the crop because the pay was crap, and it was a relatively easy job. You don't have many prospects, but you get a pension. So it attracted a certain type of person into that. So then that's the civil service. Then the political class, from JR Jai Vadanas and Lali Tatlatan Muddali and SWRD Bandai Naikas, whatever the criticisms of these DSN Naikas, whatever the criticism of NN Perera, these are people that would walk into any room anywhere in the world and sit with any intellectual and they could have a conversation. Like any one of them. And I would ask your audience, if you guys like politics,

43:34 just go and read anything DSN Naikas wrote, his own writing. Go and read anything SWRD Bandai Naikas wrote. I'll tell you one of the best Sri Lankan writers that I've ever read is SWRD Bandaranaik. There was a late academic called Dr. Harishan Rambukwal who published Bandaranaik as SWRD's personal memoirs, the memoirs he wrote when he was at Oxford for instance. And you can see this guy that his writing is like there's nobody in Sri Lanka that writes like this right now. It's just where he constructs sentences. and the way he thinks and some of the things he was a member of Sri Lanka's aristocracy, right? He is, and when you're talking about aristocracy in Sri Lanka at the time, Ceylon, that's the British colony, right? You're getting

44:19 the best education in the world through this British colonial system. You rock up at Oxford as the son of Scyon of one of the most powerful and you think, these are my people, right? These are the people that are going to accept me. They'll understand me and I'll understand them. Instead, he found himself somewhat ostracized because British high society was like even this guy's just a Sri Aanthan. He's educated, he's well ready, he speaks well, he's nobody. And then in his diary, SWRD wrote, I'm paraphrasing, but he wrote, I realized then that before becoming their equals, I needed to become their master. And what did he do? He entered the Oxford Debating Society. And he became within a year the best debater in Oxford. And he wrote like, the first time he really gave us a powerful speech and he stopped. and the applause

45:07 he got. And he stood up and in walking, he realized that people were giving him an applause that he hadn't, the kind of applause you don't regularly receive as a speaker. And this was one of those moments in his life when he realized that I do belong here. Because that self doubt was creeping in. And this, it just gives you a window into the kind of people that they were. They are very flawed people, right? Very flawed. But they're intellectually like concrete. There's an ideology there. that's deteriorated and it's understandable because those kinds of people have no reason to go into government right yeah there's no reason to go in politics what what are you going to achieve very little like you know you might get your name on a plaque somewhere and for most some of those people that doesn't matter but the people that it matters they'll come into politics all day long and they'll stay as long as it takes right to get their name on a wall

45:53 somewhere to get a cricket ground and after them to have a bill in their name so this is kind of where we are like The incentives are all wrong. Like, so we keep saying now they've passed something to take away the pensions of MPs. MPs already get paid nothing. Like, what is it like a hundred thousand rupees altogether? Yeah. Right. So, so we are really depending on 225, very charitable, altruistic people to put aside all their personal like ambition and just serve the country. This is the system that we are expecting. Then this is the outcome that we're going to get, like pay people for the job that they want to do. Yeah. Give them a competitive salary. If you get into the cabinet, you need to have some qualifications, some business experience, something to show that you belong on the cabinet, not that you're the big guy in your party. That shouldn't be the case. Like you can be

46:39 a big guy in your party, but you can be an MP. But if you're on the cabinet, if you're the Minister of Education, or the Minister of Finance, now the Minister of Finance in India has a double economics degree. Right? So she's been in government for 25 years. She's worked in the finance ministry. That's the person you need. Jaishankar is a foreign policy expert. He's written books on the subject. He was the foreign secretary. And mind you, even with India, all of India's greatness, the first foreign secretary to become foreign minister. Because it just doesn't happen. The civil service and the political class, they have a... It's separated. But this guy was a foreign secretary. And ideally, once you finish as foreign secretary, he went to the corporate. He was working for Tata, for a defense contractor, essentially. But they more than said, you know, I need you... to be the, so he said, okay, I'll leave this multi-million rupee

47:28 like salary and I'll come work for the government. And why? Because he's going to have, he's not just going to come there to be Modi's mouthpiece, right? He's there to tell Modi, this is what you should be doing. And that's what we need. Like now, right now, Amrkubar Lissanaik is the finance minister, the president, the defense minister. So you got him, this is the smartest guy. And before this, when I asked, I was on a debate show with Lakmarli, I think she's Lakmarli Fonseca, a member of parliament from the Nationalist for the MPP. I told her, What is the point in having... We are here because we've had these concentrations of power. Your party came in saying system change. So why did your president take up the finance ministry and still holding on to it? No, no, he's the most capable person. I'm like, with all due respect to Arun Kumar, he's not the most capable person to handle finance in the country or in the government. I just don't think so. Then she said,

48:16 there are really capable deputy finance ministers. And one of them is Sarasana Surya Piram. Two months later, he was out of the ministry as the deputy minister and he became a secretary and that's never happened in all of us with all the PBJ and all the Charita Ratwattas it's never happened that you've had a sitting MP a deputy finance minister just wake up one day and then take up the the one most senior civil service positions in the country it's never happened and people are like this government this is a good government they're doing governance as well like just look around do they not so it's a worry for me like we We asked for this diagnostic, governance diagnostic report. It literally says, precedent holding ministries,

49:01 other portfolios such as finance is detrimental to governance. It literally says that. And that was two years ago after economic collapse and we're still doing the same thing. And it's all fine until it's fine, right? But when something collapses… Yeah. But he could be the most competent person on planet Earth, but having four or five ministerial portfolios is a tough task for anybody to govern, you know? But what was his rationale when he made the decision? It's just the thing that's done, right? Because the President has always been the Defence Minister. Yeah. Right? And the Finance Minister has always been the President. But how would Gota be a put his brother? So, you know. But how do you think this party took that? Because why would they accept that, you know? Because they're... I mean, he's the reason... That they're there anyways. So,

49:47 what I keep telling people about the majority in Parliament is... The NPP didn't really earn this majority. The NPPs, whatever you think of them as a party, they won because of the wave of Anwar Kuan and the Sennacher. That's the only reason they won. So next time around, don't expect a 160 or 159 majority. That's not going to happen. Because people have already seen that most of the... And remember guys, this is a very, not a really important point that people miss, right? A member of parliament, when you are elected into parliament, you are elected from a constituency. So you serve that constituency. Yes, you belong to a political party. but you're primarily meant to represent your constituency. Here what's happening is the people are basically going by what the party says. And I think previous governments also there is that to a certain extent.

50:32 Because if you take, just to shift to politics really quickly, the main thing that this government said in the manifesto was that they were going to renegotiate the IMF program, reduce the cost of living, renegotiate IMF program, bring new DSA, build more fiscal space, make investments in productive sectors and social assistance. This was their whole game. So if you're voting for them, you would have at some point come across this. So then two years later, when you haven't put a new DSA, you're going ahead with the same IWF program, you haven't increased social assistance, you haven't increased any sort of, you know, there's no increase in education spending or health spending relative to GDP. There's nothing like that. So those MPs should be sensitive to that, like when they come back to me and be like, am i doing like you

51:18 haven't done anything for me but what are you doing in parliament but that's just not happening right they'll feel it right for now people are happy now when sureish salida former national security guy got arrested that's a big thing yeah it's a big positive when normal has one of these court cases and roniel's wife gets brought in there'll be that's red meat to the base some people will be happy but a lot of people in another year's time when the constant keeps when things keep getting crunched up as the cost of the cost is not going to decrease that's the problem. So on this wage is suddenly from somewhere we have economic growth or a wage increase. In another two years people are going to be like these guys are shit what are we doing here like let's change these guys and then at that point look I'm from a liberal party and I tell you liberal parties don't win in Sri Lanka. Liberal parties just don't win because we're just not populist enough we're

52:05 not nationalistic enough so we'll always lose. So who else is going to come? You know the next person who's going to come right and then good luck again. Same thing that happened with Gautabe, right? I was crying out loud. I was telling people, look, Gautabe has no idea what he's doing. He released his manifesto about a year before the election. And the manifesto was very clear on tax cuts. And we were already in the fiscal consolidation period. We were already in an IMF program. Like we had already decided to increase tax to GDP because our tax to GDP was too low. Everyone was telling us this. And Gautabe came and said, no, we haven't cut taxes. Taxes are too high in Sri Lanka. The JVP agreed with it. The corporate sector agreed with it. The Ceylon Chamber of Commerce put a full page advertisement saying what a good idea this would be. And the day they passed the tax legislation, there were multiple business people who put advertisements out saying what a great thing this

52:52 is for the country. Not a single one of them apologized. Not a single one of them. Find me one corporate sector guy, one guy who came up and said, you know, we were wrong about supporting these tax cuts. Find me one guy, there's not one person. And right now the people from the CCC are from the Ceylon Chamber of Commerce, Hulang Kamo for instance, great guy, I've met him. He's advising AKD as well. the very people who were advising for the tax cuts. So I'm sitting there at the bank thinking, tax cuts. Like what? Tax cuts. Because honestly, VAT was too high. We were paying at the time like 20, maybe even 22% for VATs. Okay, so Sridhar has this problem where everyone feels overtaxed. But the tax revenue is also just not enough relative to GDP. That's because we have one of the most regressive tax systems in the world where We

53:40 had a ratio, I don't know about now, but we had a ratio of about 80-20, 80% is indirect taxes. Indirect taxes is BAT, sales taxes, import duty, those things. These are regressive by definition, right? Anybody will tell you because the lower you are in the income bracket, the more of your income you spend for consumption. The higher you are, it's minuscule. It's nothing. So if you keep taxing consumption, you're obviously going to get more tax revenue from the poorer people. And then you come to income tax. We have amongst the lowest income tax to GDP ratios in our peer group. We have amongst the lowest corporate tax to GDP ratios in our peer group. Between 2022 and 2024, that was an 18-month period. The IMF, Sharmini Kuratio, the IMF director, former IMF director, she gave a speech. She

54:28 said the data is that Sri Lankan government lost or had to forego 900 billion rupees of tax revenue, corporate tax revenue, in 18 months after the collapse. After the collapse, just from the tax cuts, the Treasury lost 800 billion rupees in a single year. Did we make any, so when you have a tax cut, who benefits? The people who benefit are the people who pay the most in tax, right? Who pays the most in tax? The people with the highest incomes. So the people with the highest incomes benefited the most from the tax cuts. So after the economy collapsed, did you hear about special tax for very rich people? Do you hear about a super tax on super profits? Did you hear about one single one-off tax on

55:14 profits over five billion? Because remember, Ravi Karnal and I brought a one-off super tax as finance minister under IHAPALNIA in the first year of IHAPALNIA, something like 15% special tax on profits over two billion for one year or two years, just the basic super tax, and everyone paid it. This government did nothing of the sort, even this government, left progressive government, like Marxist-Lenist, they're still maintaining a highest income tax rate of 36% and to pay to and the other thing is I have friends who in banking who stayed on in the industry and they'll be making 1.5 million bucks a month they are paying 25 27% tax that sounds like okay reasonable but if you add how much tax they pay at the fuel pump how much tax they pay on import duty on VAT and

56:03 1.5 million rupees a month is the aspirational class these are the people you want saving money, investing their money, starting businesses, building homes. These are the people you want doing this stuff. But if they're paying 20% tax, but meanwhile, we had a presidential candidate, the guy who was Adar Derna, Dilij Jaivera, who when all the MPs gave their salaries because they had to do financial disclosures, some MPs like Sajid Freyman Dasser said 300,000, Rania Likram said 180,000. One of the lawyers said 1.2 million a month. Dilij Jaivera said, 16 million rupees salary a month. That was his monthly income. That's what he disclosed in the papers. So I'm just thinking, your 16 million, your highest tax rate would only be 36%. Whereas my friend who's making

56:51 1.5 million a month, he's paying 28%. So there's a 6% gap between you guys. That's it. So you can see this tax system is completely bonkers. People who shouldn't be paying so much, that person should be paying about 20%, who's making 1 million, 1.5 million. Ideally, the person who's making 200,000 should be paying like 1% of that, right? And that is the case, I think, in some cases. But again, they're paying indirect taxes. But isn't this part of the IMF pressure that's coming about to put a broad base of taxpayers? Because I always hear them say, your base of taxpayers is not big enough, you need a broader base. But I feel like they don't really understand the regression of it. They made the base smaller in the first year,

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