Sri Lanka Seeks India-Japan Collaboration Once Again Despite Past Fiasco

In a bid to stabilise its economy post the 2022 crisis, Colombo wants New Delhi and Tokyo to undertake large-scale projects and invest in the island nation despite the East Container Terminal debacle.

Sri Lanka is pulling out all stops to stabilise its flailing economy which suffered a major crisis in 2022, which led to the dethroning of the previous Rajapaksa government. Colombo now wants India to invest heavily in the Indian Ocean island nation in collaboration with Japan across all sectors, according to a report. India and Japan are active powers in the Indo-Pacific region, and Sri Lanka believes their collaboration will provide financial and technical support to the crisis-ridden country.

The report – A Medium and Long-Term Strategy for Indo-Japanese Collaboration To Support The Economic Transformation of Sri Lanka – was brought out by Sri Lanka-based Pathfinder Foundation earlier this year. Last week, the report was discussed in-depth at an event held in New Delhi, which was organised by NatStrat, VIF, Pathfinder, and CII.

“Japan is a reliable partner for India as well as for Sri Lanka. There are immense potential and opportunities for us to work together in advancing cooperation in areas of common interest. Some projects in Sri Lanka which were to be executed jointly by India and Japan did not progress due to several reasons, but that should not deter us from exploring new cooperation,” said Puneet Agrawal, Joint Secretary of the Indian Ocean Region in the Ministry of External Affairs.

Agrawal was referring to the scrapping of a trilateral government-to-government deal signed in 2019 under which India and Japan were to develop the Eastern Container Terminal (ECT) of the strategically important Colombo Port by the previous Gotabaya Rajapaksa government, in 2021. 

Both India and Japan at that time pushed Sri Lanka to reconsider its decision but Colombo stuck to its decision. Later, it offered the Western Container Terminal project to India but through the private route.

“India and Japan share a vision of open, free and inclusive Indo-Pacific which is of relevance to all countries in the region, including Sri Lanka … Sri Lanka needs trustworthy partners which bring in investments that are transparent and process-oriented. This will be fulfilled by India and Japan,” Agrawal said, adding that the trilateral cooperation among these three countries will be “beneficial” not just for Colombo, but also for New Delhi and Tokyo.

 India and Japan have both expressed their willingness in helping Sri Lanka develop its economy by way of putting more capital there that will also lead to job generation for the youth there.

Recently, during a visit by Sri Lankan President Ranil Wickremesinghe to India, both sides agreed to boost connectivity through water, air as well as land. Both countries have also decided to develop Sri Lanka’s significant renewable energy potential, including offshore wind and solar, thus enabling Sri Lanka to achieve its target of generating 70% of power requirements from renewable energy sources by 2030.

The Pathfinder report has made recommendations for India and Japan to collaborate in three main areas of low carbon power generation, development of Trincomalee as an energy hub, logistics and connectivity and people-to-people contacts.

India, Sri Lanka ‘Indispensable Partners’: Japan Ambassador Suzuki

According to Japanese Ambassador Hiroshi Suzuki, India and Sri Lanka are “indispensable partners” for Tokyo when it comes to achieving the vision of a free and open Indo-Pacific.

“For debt relief, Japan attaches importance to international rules and standards. We place the highest priorities on transparent and equitable debt restructuring where all creditor countries, organisations and entities, the principle of equitable treatment should be applied among all creditors,” Suzuki said.

He said while development finance has become a “major challenge” in a world today that is riddled with conflicts, the Indo-Pacific region provides several opportunities.

“Japan attaches highest priority on transparent and fair development finance which abides by international rules and standards … Japan believes in quality infrastructure principles and attaches importance to four factors – transparency, openness, economic viability and debt sustainability,” said the Japanese envoy.

Milinda Moragoda, High Commissioner of Sri Lanka to India, said economic integration is key to making Sri Lanka’s economy achieve sustainable growth. He said it is not possible for the Indian private sector to undertake the plan all on its own and that is where it can join hands with countries such as Japan.

The Pathfinder report says that Sri Lanka needs a “nationally owned long-term strategy supported by development partners” if the country seeks to exit from frequent macroeconomic dilemmas.