India, Japan and Sri Lanka - Cooperating for a common good

Team NatStrat

The Pathfinder Foundation is an independent, non-partisan research and advocacy think-tank with a primary focus on policy research and action-oriented policy reform led by its President, Ambassador Bernard Goonetilleke. NatStrat is pleased to have signed a MOU of Cooperation with the Pathfinder Foundation in March 2023.

The Foundation has published an ambitious Report titled “Medium and Long term Strategy for Indo-Japanese Collaboration to Support the economic transformation of Sri Lanka” which was released in January 2023. The report has been developed by a panel of noted experts, who have also put forward proposals and prospects for Indo-Japanese collaboration for Sri Lanka’s progress. It is premised on the belief that as Sri Lanka emerges from several years of volatility caused by the COVID-19 global pandemic and the politico-economic crisis that engulfed the nation, it is imperative for Colombo to take substantive steps toward multi-sectoral and multi-level economic development.

 The Report provides an in-depth analysis of four key areas for Sri Lanka’s transformation:

 Low-carbon power generation

The first part analyses the role of the renewable energy sector in transforming the Sri Lankan economy and the essentiality of low-carbon power generation for achieving sustainable economic growth and development. Emphasising that Sri Lanka needs to reduce heavy reliance on imported fossil fuels to meet its growing energy demand, the report considers the sector-specific global trends, while borrowing experiences through case studies from countries like India, Norway, Sweden, Indonesia and several others, in reaching their renewable energy targets.

The report reviews existing national policy frameworks and ongoing initiatives, as well as policy gaps, issues and barriers faced in this area. It provides detailed recommendations for addressing challenges and highlights the opportunities for Sri Lanka in the solar, wind, and hydropower sectors. Finally, the analysis of this theme concludes with the identification of areas for consideration of Indo-Japanese collaboration for both the medium and long term.

Development of Trincomalee as an energy hub

In the second part, recognising that the absence of appropriate energy storage facilities is the "missing link" to accommodate weather-dependent renewable energies, the report focuses on the development of Trincomalee as an energy hub. It details the region's potential for development as a liquid fossil fuel, natural gas and green hydrogen storage hub due to its under-utilised natural geographic advantages like the deep natural harbour, long-standing infrastructure presence, and land availability.

Further, the report emphasises the potential for Trincomalee to serve as a coal delivery site and as the location for a new oil refinery that can replace the existing refinery in Sapugaskanda. It underlines why the future low-cost power generation source for Sri Lanka would be Liquified Natural Gas (LNG) and how the development of Trincomalee as an energy hub has the potential to provide storage and allied services to the east coast of India and Bangladesh. Toward this goal, the report provides a detailed look into the potential for developing Sri Lanka's sectors, like the export potential of refineries and the opportunities and challenges for developing the oil tank farms for strategic or commercial reserves. The report highlights that a new India-Sri Lanka joint venture is expected to examine this option in detail.

 Logistics and connectivity

The next part of the report assesses the logistics and connectivity in Sri Lanka, emphasising that an efficient transport system will play a significant role in the supply chain efficiency for regional and global trade and will help Sri Lanka's maritime trade and policies. It argues that the focus should be on supporting the trade and connectivity aspirations of the Indian Ocean rim countries and on linking the Indo-Pacific strategic trade corridors to derive more comprehensive economic benefits. With an expansion in the air and sea logistics network, Sri Lanka can thus transform itself into a major connectivity centre of the world.

The study takes a comprehensive look at the changing landscape, its impact on Sri Lanka's port dynamics and the geographical characteristics of the Hambantota and Colombo ports. The report examines how Sri Lanka’s location has historically been a major factor for it being a trading hub. Further, taking note of various case studies of innovative nations like Israel, Japan, Singapore and the UAE, which have pioneered growth and development through connectivity and logistics, and of countries like India, Singapore and Dubai, where all the global operators and global head offices operate and make investment decisions, the report calls for the need of development of strong maritime and logistics industry as a precursor of investments and financial growth.

 To successfully invite international participation, the report highlights several industry areas which should be developed. These include the legal environment, hard infrastructure, global indexes and communication links, capacity and skill development, cyberspace and investment policy. In detail, the report examines the potential for Indo-Japanese collaboration in Sri Lanka's connectivity and logistics sector through support in developing policies, infrastructure, strategy, services, technology, and training centres.

 People-to-people contacts

The last part of the study analyses the vitality of strengthening people-to-people contacts through three sub-sectors of education, training and skill development and tourism. The report urges the authorities and the industry stakeholders to prioritise reviewing and implementing the medium and long-term strategies to develop tourism and elaborates on the training and skill development needed for the growth of this sector.

The report also focuses on the light engineering sector, aptly highlighting it as the backbone for any heavy industry sector, the primary player of the long supply chains, and the need for both state and non-state to work in unison. It underlines the criticality of skilled workers for advancing the micro, small and medium enterprises (MSMEs). Finally, the report effectively analyses the education sector, focusing on the inequitable public school system, hands-on learning, worldview and educational attainment, second language teaching and learning, and school-community relations. The report makes a case for the potential Indo-Japanese collaboration in Sri Lanka for all three sectors.

Conclusion

The report provides a holistic analysis of the identified priority areas for Sri Lanka's transformation and the immense potential for Indo-Japanese collaboration toward these objectives. The report is to be welcomed for its strong advocacy of trilateral cooperation between India, Japan and Sri Lanka in areas that are of importance to Sri Lanka. India and Japan enjoy a close strategic partnership, and can make a positive contribution to Sri Lanka at this critical time of its economic development and reconstruction.

The Report serves as an immensely valuable resource for policymakers, strategists and anyone interested in understanding the potential for trilateral cooperation between India, Japan and Sri Lanka. It has already attracted the attention of policy makers in all three countries and  has been well received.  It is important to ensure the Report’s circulation among wide circles and promote the implementation of the ideas contained in it.

 The full text of the Report is available at https://pathfinderfoundation.org/publications.