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SRI LANKA’S ECONOMIC QUAGMIRE AND HOW MARGRET THATCHER SMASHED THE KEYNESIAN CONSENSUS

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By Sanjeewa Jayaweera

For quite some time, experts in economics and finance not associated with any political party have been raising the red flag about the severe economic challenges that our country was facing. Unfortunately, the politicians have consistently ignored these challenges. Many in the
private sector believed that commonsense would prevail and necessary course correction will occur, and the ship will sail smoothly.

I recently reminded a few of my former colleagues about how some of them rebuked me (in a friendly manner) five years ago when I asked the regional team of a large multinational bank, “Will Sri Lanka default on foreign debt like Greece?” My colleagues felt that I was unnecessarily pessimistic, although I thought I was a realist. Fortunately for me, one of the regional team members came to my defence and said that the scenario was not so outrageous as “Sri
Lanka was not out of the woods.” That was five years ago.

Since then, a debilitating pandemic, along with a decision to reduce government revenue by around Rs. 600 billion due to various tax cuts has severely depleted government coffers. Moreover, the loss of foreign exchange earnings due to the country being closed for tourism
has been a body blow. I, however, contend that our inability, or should I say struggle to meet the repayment of foreign debt, was always ever-present. The pandemic has just fast-forwarded it. The challenge for a country with an annual deficit of around USD 8 billion in merchandise trade having to repay USD 23 billion between 2021-2025 was always tricky. Moreover, our ability to raise additional foreign currency debt has been severely constrained as international rating agencies have continuously downgraded our ability to repay the debt.

Many have spoken and written articles recommending that the Government (GOSL) seek assistance from the International Monetary Fund (IMF). To many, other than rabid socialists, it is the most sensible of options, not that there are too many available. The GOSL, on the other hand, has articulated to neither the public, the private sector or the international creditors how they intend to avoid a possible sovereign default immediately as well as going up to 2025 whilst also ensuring that there is sufficient foreign exchange to facilitate imports.

 

Keynesian economics

One can only assume that those reposed with economic strategy and management under President Gotabaya Rajapaksa are disciples of Keynesian economic theory. Keynesian economic theory was developed by the British economist John Maynard Keynes during the
1930s. Keynes advocated increased government expenditures and lower taxes to stimulate demand and pull the global economy out of the depression.

Keynes argued that during periods of economic woe, the government should undertake deficit spending to make up for the decline in investment and boost consumer spending to stabilize aggregate demand. He rejected the idea that the economy would return to a natural state of equilibrium if left to market forces. Instead, he proposed that the government spend more money and cut taxes to turn a budget deficit, which would increase consumer demand, viz overall economic activity, and reduce unemployment. Thus, he believed the government was better positioned than market forces when creating a robust economy.

The critics of deficit spending say that if left unchecked, it could threaten economic growth. Too much debt could cause a government to raise taxes and even default on its debt. What’s more, the sale of government bonds could crowd out corporate and other private issuers, which might distort prices and interest rates in capital markets. Many who oppose Keynesian theories will now use Sri Lanka to illustrate how continuous deficit spending and funding with mountains
of debt will ultimately lead to economic disaster.

Modern Monetary Theory

A new school of economic thought called Modern Monetary Theory (MMT) has taken up the fight on behalf of Keynesian deficit spending. It is gaining influence, particularly on the left of the political spectrum. Proponents of MMT argue that as long as inflation is contained, a country with its own currency doesn’t need to worry about accumulating too much debt through deficit spending because it can always print more money to pay for it. This is precisely what our
Central Bank has been doing, one presumes at the behest of the GOSL.

How Margeret Thatcher smashed the Keynesian consensus

To understand what Margeret Thacher (MT) achieved in upending the Keynesian theory, one needs to understand the decade and a half before that. The 1960s and 70s was a time of unrivalled sociopolitical activism. In the USA, which had established itself as the leading superpower both from an economic and a military perspective, there were protests against the war in Vietnam whilst the civil rights movement gained significant traction after the death of Martin Luther King. Elsewhere particularly in western Europe, pop music, recreational drugs, a liberal view towards sex and the gay community gained wide acceptance. As a result, the 1960s is fondly referred to by many as the “swinging sixties!’

In the political arena, across the world, many socialist governments were voted into power. For example, in both the UK and West Germany, socialist governments held power for most of the 1960s and 1970s. These governments underpinned their political philosophy with the concept of the social welfare state and that capitalism was not desirable. However, the aftermath of the 1973 war between Israel and several middle eastern countries caused significant economic upheaval in many countries. The oil price increased by 400 per cent, and supply was constrained due to an embargo impacting the USA and Western European countries.

In the UK, a full-scale energy crisis loomed due to a combination of a limited supply of oil and an overtime ban by the coal miners to support a significant pay increase. As a result, the government declared a state of emergency. To conserve energy, industries were told to work only three days a week, and all national television stations were switched off at 10.30 p.m. In addition, students had to do their homework in the evenings by candlelight. The following year the conservative government paid the ultimate price by being rejected by the voters.

Emboldened trade unions resorting to industrial action caused many headaches to the government and a great deal of inconvenience to the public. In addition, due to rising inflation which peaked at 26 per cent, the unions demanded higher wages, resulting in higher unemployment as many companies were unable to afford such increases. It was indeed a vicious circle.

The despondency amongst the British public due to the poor economy and the actions of the militant trade unions is aptly summed up by the comments made by the then minister James
Callaghan. He warned his fellow Cabinet members in 1974 of the possibility of “a breakdown of democracy”, telling them: “If I were a young man, I would emigrate.” Ironically. he subsequently succeeded Harold Wilson as the Labour prime minister after the latter’s surprise resignation in April 1976.

The Labour government faced continuing economic difficulties with rising inflation, a balance of payments deficit arising from significant oil price increases, and a series of industrial disputes. Events came to a head in 1976 when markets began to lose confidence in the sterling. In September 1976, the government approached the IMF for a loan of US$3.9 billion, the largest ever requested from the fund. The IMF demanded significant cuts in public expenditure as a condition for the loan, which the government accepted.

But life in the UK got worse a few years later when, in 1978, a wage dispute between Labour Prime Minister James Callaghan and the trade unions culminated in the Winter of discontent. Streets were lined with litter, some dead went unburied, and parents rushed to
feed their ill children in hospital as everyone from rubbish collectors to gravediggers and nurses went out on strike.

In May 1979, the public, fed up with the inability of the Labour government to curb the militant trade unions and bring down inflation, voted in the conservative party led by Margaret Thatcher (MT), with a parliamentary majority of 43 seats.

MT brought about many radical changes to British economic policy. The pillars on which she built her economic policies were:

* Reduce inflation through reduced money supply growth

*Reduce the budget deficit by initially increasing taxes and reducing public expenditure

*Privatize state-owned enterprises

*Deregulate the financial industry

*Bust the trade unions.

 

There is no doubt that she did achieve her objectives. She remained the PM for 12 years, and the conservative party was the ruling party for 17 long years. However, the initial years under MT were extremely tough for the British people. There was significant unemployment as her policy of increasing interest rates meant that many companies went into liquidation. I recall watching the one-minute segment on national TV every evening where the number of closed companies and how many were made redundant along with cumulative figures were announced.
In March 1981, as many as 364 eminent British economists published a letter condemning her plans to hike taxes even as her monetarist attack on inflation plunged the economy ever deeper into recession. However, MT stood firm. She famously said, “The lady’s not for turning ” in her speech to the Conservative Party Conference on 10 October 1980. It is considered a defining speech in Thatcher’s political development. As a result, she gained the nickname “Iron Lady”,
and it was widely believed that she had more “balls” than any of her male colleagues in the cabinet!

There is no doubt that her economic policies upended the Keynesian theory of governments spending money and lowering taxes to increase aggregate demand. Along with Ronald Regan, the President of the USA, she led a renaissance of conservative politics that relegated socialist parties for nearly two decades.

Space constraints prevent me from going into details of the main initiatives that underpinned her economic policies. However, I wish to share two of them as I believe these are imperatives for Sri Lanka in the current context.

Privatization of State-Owned

Enterprises

Under MT, the government aggressively sold off key industries that the British government had owned. Early in her term, she sold off British Aerospace and Cable & Wireless, followed later on by British Telecom, Britoil, British Gas, and Jaguar. In her third term, British Airways, British Petroleum (or BP), British Steel, Rolls Royce, and electric and water companies were privatized as well.

Many of those companies have gone on to be successful private firms. In addition, fans of the effort note that it freed up a great deal of money in the 1980s, preventing further spending cuts or tax increases and creating competitive telecommunications and fuel sectors.

 

Union busting

One of MT’s most heated political battles came in 1984 when the miner’s union struck work. Earlier in Thatcher’s term, in 1981, the miners almost struck, but the government immediately gave in and offered concessions. Thatcher spent the ensuing years plotting to make sure
that this never happened again by changing trade union laws, stockpiling coal to blunt the impact of a strike on consumers and even having MI5 agents infiltrate the miner’s unions.

So when the miners struck in 1984, she was ready. After nearly a year, the miners returned to work without any concessions from the government. As a result, the National Union of Miners, which just 10 years earlier had toppled the Conservative government of Edward Heath, was permanently weakened. Smashing the unions meant more when they dominated every facet of economic and political life.

Will Sri Lanka adopt Margret Thatcher’s prescription?

I lived in the UK from 1975 onwards and experienced first-hand most of what I described in the preceding paragraphs. In 1979 when MT was elected to power, I was 20-years old and very much a committed socialist. I was, in fact, the General Secretary of the Student Union
for two years. However, I took to heart the famous quote, “Not to be a socialist at twenty is proof of want of heart; to be one at thirty is proof that you have no head.”

In my opinion, there is no doubt that if we genuinely want to come out of the economic quagmire that we are in, we all will need to undergo significant hardships and sacrifices. Unfortunately, that is the price we will have to pay for the extravagant lifestyle the country has enjoyed for several decades.

The pain would have been far less had corrective decisions been taken several years ago. However, we have elected successive governments who have failed to take tough decisions as
appeasing the public, trade unions, and other vested parties have taken precedence.

An example that I wish to cite in support of my above comment is that we have hardly been subjected to any power cuts in the last two decades. Whenever there was insufficient hydropower or the coal power plant broke down, the government got the CEB to generate
expensive thermal power. This was done to prevent any inconvenience to the public but at a significant cost. The CEB did not even levy a special surcharge to recover part of the additional cost. I am pretty confident that electricity prices have not been increased for the last five years.

About a decade ago, I regularly travelled to India as the company I worked for established a subsidiary company in New Delhi. It was difficult for the accountant of that company and me to go through the financial records on the system as every few minutes; there was a power outage
or a power cut. There were long power cuts during the summer months in India and Pakistan, lasting more than six hours a day. However, in Sri Lanka, despite the perilous state of the economy, we enjoyed uninterrupted power.

About 80 per cent of government revenue is spent on paying public sector salaries. In 2015 the Yahapalana government granted salary increments of Rs. 10,000 per month to public servants. The present government gave 100,000 jobs to unemployed graduates, and the state also employed a further 35,000 who had not passed ordinary level exams. Just imagine the cost being borne by taxpayers to fund a bloated and highly inefficient public sector.

I wish to share a couple of examples with the readers so that they can understand my frustration with the public sector.

In 2002 or 2003, when as the Chief Financial Officer, I offered permanent employment at the largest conglomerate in the country to a trainee graduate working under the “Tharuna Aruna” scheme, he told me “, Sir, I prefer to work as a government teacher in Mahiyangana as there is no work pressure and also, I am guaranteed a pension!” Unfortunately, that was the limit of his ambitions which successive governments have inculcated in our people.

In 1984, I went to the Inland Revenue to represent the company I was working for an enquiry. When I approached the officer concerned, I realized that she had forgotten that an enquiry had been scheduled. I was asked to sit while she desperately rang the bell for the peon to bring the file. The guy was seated only 50 feet away but pretended not to hear! The lady was embarrassed and asked me whether I could go and find the file. I lost my temper and
told her that she’d better find the file herself. Finally, she said she would re-fix the hearing, but we had still not heard from her one year later when I went back to the UK.

That we need to restructure and privatize most state enterprises that are losing significant amounts of money as was done by MT in the UK is a given. To do that, the government needs to “bust” the trade unions. The public will need to undergo certain hardships as industrial action will disrupt our life. But, in my opinion, the sacrifice will be well worth it. At least we will leave a better place for our children.

The industrial action resorted to by health workers as well as the principals and teachers is absolutely deplorable. Furthermore, the cancellation of the East Container Terminal to be awarded to India and Japan and the reported grant of salary increments amounting to Rs. 9 billion for a year to CEB staff reflect how the GOSL is caving in to unreasonable demands made by trade unions.

Margaret Thatcher, from 1979 onwards, showcased to the British people and the world at large what can be achieved by strong, determined and courageous leadership. A quote of hers that our political leaders will do well to remember “If you set out to be liked, you would be prepared to compromise on anything at any time, and you would achieve nothing.”



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Your six-year-old needs a tablet like a fish needs a smartphone

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THE GREAT DIGITAL RETHINK — PART II

Nordic countries handed tablets to toddlers and called it early childhood education. Now they’re taking the tablets back, handing out pencils, and hoping nobody noticed. Meanwhile, the Global South is still signing the tablet contracts. Someone should probably warn them.

The Tablet Arrives in Preschool

It is 2013, a government minister stands in a preschool in Stockholm, handing a shiny tablet to a four-year-old. Press cameras click. A press release announces that Sweden is building the digital classrooms of the future. The child, who until recently had been learning to hold a crayon, now swipes confidently at a screen. Innovation! Progress! The future!

Fast forward to 2023, the same Swedish government, or at least its successors, announces that preschools were wrong to make digital devices mandatory. Children’s reading comprehension is declining. Books are going back on the shelves. Pencils are making a comeback. The preschool tablets are being quietly wheeled into storage, and nobody wants to talk about the press release.

What Finland Actually Did — And Is Now Undoing

Finland has long held a special place in the global education imagination. When PISA scores are published and Finland sits at or near the top, education ministers from Seoul to São Paulo take note and wonder what they are doing wrong. Finland is the benchmark. Finland is the proof that good education is possible.

Which makes it all the more significant that Finland, in 2025, passed legislation banning mobile phones from classrooms. Not just recommending restraint. Not just issuing guidelines. Banning them, with teachers empowered to confiscate devices that disrupt learning. The law covers both primary and secondary schools. It came after years of evidence that children were distracted, and that Finland’s own PISA scores had been falling.

But the phone ban is only part of the story. The deeper shift in Finnish primary education has been a quiet reassertion of analogue fundamentals. Early literacy is being treated again as a craft that requires time, patience, practice and, crucially, a pencil.

Sweden gave tablets to toddlers. Then took them back. The pencils were in a drawer the whole time.

Sweden’s Spectacular U-Turn

Sweden’s reversal is arguably the most dramatic in recent educational history, because Sweden had gone further than most in embracing early-years digitalisation. The country had not merely allowed devices in preschool, it had in places mandated them, treating digital interaction as a developmental right alongside physical play and social learning. There was a logic to it, however misplaced: if the future is digital, surely children should encounter that future as early as possible.

The problem is that young children are not miniature adults navigating a digital workplace. They are human beings in the early stages of acquiring language, developing fine-motor-skills, building concentration and learning to regulate their own attention. These are not processes that are enhanced by a swipeable screen. Research on early childhood development is consistent on this point: young children learn language through conversation, storytelling, and physical manipulation of objects. They learn to write by writing, by the slow, muscular, tactile process of forming letters with a hand.

By 2023, Swedish education authorities had seen enough. Reading comprehension scores were down. Handwriting was deteriorating. Teachers were reporting that children were arriving in primary school unable to hold a pen properly. The policy reversed. Books came back. Cursive writing was reintroduced. The national curriculum was amended. And Sweden became, instead, a cautionary tale about what happens when you swap crayons for touchscreens before children have learned what crayons are for.

Australia: Banning Phones at Lunch

Australia’s approach to primary school digitalisation has been somewhat less ideologically charged than Scandinavia’s, and accordingly its reversal has been more pragmatic than philosophical. Australian states and territories arrived at phone bans largely through the accumulating pressure of parent complaints, teacher frustration and growing evidence that smartphones were damaging the social fabric of school life, not just in classrooms, but in playgrounds.

Queensland’s ‘away for the day’ policy, introduced in Term 1 of 2024, was notable precisely because it extended beyond lesson time to cover break times as well. This was a direct acknowledgement that the problem was not simply digital distraction during learning, it was the way that always-on connectivity was transforming childhood itself. Children who spend every break time on a phone are not playing, not resolving social conflicts face to face, not developing the unstructured social skills that primary school has always, if accidentally, taught.

The cyberbullying dimension added particular urgency in Australia, where research showed that many incidents of online harassment between primary-school children were occurring during school hours, facilitated by the phones sitting in their pockets. Banning the phone at the school gate did not solve the problem of online cruelty, but it did remove the school day as a venue for it.

The Science of the Pencil

The cognitive argument for handwriting in primary education is, it turns out, and far more interesting than the popular ‘screens bad, pencils good’ slogan suggests. The research on note-taking in university students, the finding that handwritten notes produce better conceptual understanding than typed notes, has a more fundamental parallel in primary education.

When a young child learns to write by hand, they are not merely practising a motor skill. They are encoding letters through physical movement, which activates memory systems that visual recognition alone does not reach. Studies in developmental psychology suggest that children who learn to write letters by hand recognise them faster and more accurately than those who learn through typing or tracing on screens. The hand, it appears, teaches the brain in ways the finger-swipe does not.

This does not mean that digital tools have no place in primary education, nobody sensible is arguing that children should graduate from primary school unable to use a keyboard. The question is sequencing and proportion. The emerging consensus, hard-won through a decade of failed experiments, is that foundational literacy and numeracy need to be established through analogue means before digital tools are introduced as supplements. Screens can follow pencils. Pencils, it turns out, cannot follow screens without catching up on what was missed.

The hand teaches the brain in ways the finger-swipe does not. And it took a decade of falling scores to rediscover this.

The Rest of the World Is Still Buying Tablets

Here is the uncomfortable part. While Finland legislates, Sweden reverses course and Australia bans phones from playgrounds, a large portion of the world’s primary schools are doing the opposite. Governments across South and Southeast Asia, Sub-Saharan Africa and Latin America are actively expanding device programmes in primary schools. Tablets are being distributed. Interactive whiteboards are being installed. AI tutoring apps are being piloted. The logic is identical to the logic Finland and Sweden followed 15 years ago: modernise, digitalise, equip children for the future.

The vendors selling these systems are not telling ministers about the Swedish U-turn. The development banks financing device programmes are not adjusting their models to reflect the OECD’s inverted-U curve. The international consultants advising education ministries are largely still working from a playbook written in 2010.

The lesson of the Nordic reversal is not that screens are evil, it is that screens at the wrong stage, in the wrong proportion, without the right pedagogical framework, undermine the very foundations they are supposed to build on. That lesson is available. The question is whether anyone is listening.

What Primary Schools Actually Need

Literacy and numeracy are not enhanced by early device saturation. They are built through reading aloud, through writing by hand, through mathematical reasoning with physical objects, and through the irreplaceable medium of a skilled teacher who knows their students.

Technology in primary education works best when it supplements a strong foundation, not when it substitutes for one that has not yet been built. Sweden and Finland did not fail because they used technology. They failed because they used it too extensively, and without asking what it was actually for. That question — what is this for? — is the one that every primary school system in the world should be asking before it signs another tablet contract.

SERIES ROADMAP Part I: From Ed-Tech Enthusiasm to De-Digitalisation | Part II: Phones, Pens & Early Literacy (this article) | Part III: Attention, Algorithms & Adolescents | Part IV: Universities, AI & the Handwritten Exam | Part V: A Critical Theory of Educational De-Digitalisation

(The writer, a senior Chartered Accountant and professional banker, is Professor at SLIIT, Malabe. The views and opinions expressed in this article are personal.)

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Government is willing to address the past

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Minister Ratnayake

Minister Bimal Rathnayake has urged all Sri Lankan refugees in India to return to Sri Lanka, stating that provision has been made for their reintegration. He called on India to grant citizenship to those who wished to stay on in India, but added that the government would welcome them back with both hands if they chose Sri Lanka. He gave due credit to the Organisation for Eelam Refugees Rehabilitation (OfERR), an NGO led by S. C. Chandrahasan, the son of S. J. V. Chelvanayakam, widely regarded as the foremost advocate of a federal solution and a historic leader of the Federal Party. OfERR has for decades assisted refugees, particularly Sri Lankan Tamils in India, with documentation, advocacy and voluntary repatriation support. Given the slow pace of resettlement of Ditwah cyclone victims, the government will need to make adequate preparations for an influx of Indian returnees for which it will need all possible assistance. The minister’s acknowledgement indicates that the government appreciates the work of NGOs when they directly assist people.

The issue of Sri Lankan refugees in India is a legacy of the three-decade long war that induced mass migration of Tamil people to foreign countries. According to widely cited estimates, the Sri Lankan Tamil diaspora today exceeds one million and is often placed between 1 and 1.5 million globally, with large communities in Canada, the United Kingdom and Australia. India, particularly Tamil Nadu, continues to host a significant refugee population. Current figures indicate that approximately 58,000 to 60,000 Sri Lankan Tamil refugees live in camps in India, with a further 30,000 to 35,000 living outside camps, bringing the total to around 90,000. These numbers have declined over time but remain one of the most visible human legacies of the conflict.

The fact that the government has chosen to make this announcement at this time indicates that it is not attempting to gloss over the human rights issues of the past that continue into the present. Those who suffered victimisation during the war may be encouraged that their concerns remain on the national agenda and have not been forgotten. Apart from those who continue to be refugees in India, there are more than 14,000 complaints of missing persons still under investigation according to the Office on Missing Persons, which has received tens of thousands of complaints since its establishment. There are also unresolved issues of land taken over by the military as high security zones, though some land has been released, and prisoners held in long term detention under the Prevention of Terrorism Act, which the government has pledged to repeal and replace.

Sequenced Response

In addressing the issue of Sri Lankan Tamil refugees in India, the government is sending a message to the Tamil people that it is not going to gloss over the past. The indications are that the government is sequencing its responses to problems arising from the past. The government faces a range of urgent challenges, some inherited from previous governments, such as war era human rights concerns, and others that have arisen more recently after it took office. The most impactful of these crises are not of its own making. Global economic instability has affected Sri Lanka significantly. The Middle East war has contributed to a shortage of essential fuels and fertilizers worldwide. Sri Lanka is particularly vulnerable to rising fuel prices. Just months prior to these global pressures, Sri Lanka faced severe climate related shocks, including being hit by a cyclone that led to floods and landslides across multiple districts and caused loss of life and extensive damage to property and livelihoods.

From the beginning of its term, the government has been compelled to prioritise economic recovery and corruption linked to the economy, which were central to its electoral mandate. As the International Monetary Fund has emphasised, Sri Lanka must continue reforms to restore macroeconomic stability, reduce debt vulnerabilities and strengthen governance. The economic problems that the government must address are urgent and affect all communities, whether in the north or south, and across Sinhalese, Tamil and Muslim populations. These problems cannot be postponed. However, issues such as dealing with the past, holding provincial council elections and reforming the constitution are not experienced as equally urgent by the majority, even though they are of deep importance to minorities. Indeed, the provincial council system was designed to address the concerns of the minorities and a solution to their problems.

Unresolved grievances tend to reappear in new forms when not addressed through political processes. Therefore, they need to be addressed sooner rather than later, even if they are not the most immediate priorities for the government. It must not be forgotten that the ethnic conflict and the three decade long war it generated was the single most destructive blow to the country, greatly diminishing its prospects for rapid economic development. Prolonged conflict reduced investment, diverted public expenditure and weakened institutions. If Sri Lanka’s early leaders had been able to negotiate peacefully and resolve their differences, the country might have fulfilled predictions that it could become the “Switzerland of the East.”

Present Opportunity

The present government has a rare opportunity to address the issues of the past in a way that ensures long term peace and justice. It has a two thirds majority in parliament, giving it the constitutional space to undertake significant reforms. It has also demonstrated a more inclusive approach to ethnic and religious minorities than many earlier governments which either mobilized ethnic nationalism for its own purposes or feared it too much to take political risks to undertake necessary reforms. Public trust in the government, as noted by international observers, remains relatively strong. During her recent visit, IMF Director General Kristalina Georgieva stated that “there is a window of opportunity for Sri Lanka,” noting that public trust in the government provides a foundation for reform.

It also appears that decades of public education on democracy, human rights and coexistence have had positive effects. This education, carried out by civil society organisations over several decades, sometimes in support of government initiatives and more often in the face of government opposition, provides a foundation for political reform aimed at justice and reconciliation. Civil society initiatives, inter-ethnic dialogue and rights-based advocacy have contributed to shaping a more informed public about controversial issues such as power-sharing, federalism and accountability for war crimes. The government would do well to expand the appreciation it has deservedly given to OfERR to other NGOs that have dedicated themselves addressing the ethnic and religious mistrust in the country and creating greater social cohesion.

The challenge for the government is to engage in reconciliation without undue delay, even as other pressures continue to grow. Sequencing is necessary, but indefinite postponement carries risks. If this opportunity for conflict resolution is not taken, it may be a long time before another presents itself. Sri Lanka may then continue to underperform economically, remaining an ethnically divided polity, not in open warfare, but constrained by unresolved tensions. The government’s recent reference to Tamil refugees in India is therefore significant. It shows that even while prioritising urgent economic and global challenges, it has not forgotten the past. Sri Lanka has a government with both the mandate and the capacity to address that past in a manner that secures a more stable and just future for all its people.

By Jehan Perera

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Strategic diplomacy at Sea: Reading the signals from Hormuz

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The unfolding tensions and diplomatic manoeuvres around the Strait of Hormuz offer more than a snapshot of regional instability. They reveal a deeper transformation in global statecraft, one where influence is exercised through calibrated engagement rather than outright confrontation. This is strategic diplomacy in its modern form: restrained, calculated, and layered with competing interests.

At first glance, the current developments may appear as routine diplomatic exchanges aimed at preventing escalation. However, beneath the surface lies a complex web of signalling among major and middle powers. The United States seeks to maintain deterrence without triggering an open conflict. Iran aims to resist pressure while avoiding isolation. Meanwhile, China and India, two rising powers with expanding global interests are navigating the situation with careful precision.

China’s position is anchored in economic pragmatism. As a major importer of Gulf energy, Beijing has a direct stake in ensuring that the Strait of Hormuz remains open and stable. Any disruption would reverberate through its industrial base and global supply chains. Consequently, China advocates de-escalation and diplomatic resolution. Yet, this is not purely altruistic. Stability serves China’s long-term strategic ambitions, including the protection of its Belt and Road investments and maritime routes. At the same time, Beijing remains alert to India’s growing diplomatic footprint in the region. Should India deepen its engagement with Iran and other Gulf actors, it could gradually reshape the strategic balance in areas traditionally influenced by China.

India’s approach, in contrast, reflects a confident and increasingly sophisticated foreign policy. By engaging Iran directly, while maintaining working relationships with Western powers, New Delhi is positioning itself as a credible intermediary. This is not merely about energy security, though that remains a key driver. It is also about strategic autonomy the ability to act independently in a multipolar world. India’s diplomacy signals that it is no longer a passive player but an active shaper of regional outcomes. Its engagement with Iran, particularly in the context of connectivity and trade routes, underscores its intent to secure long-term strategic access while countering potential encirclement.

Iran, for its part, views the situation through the lens of survival and strategic resilience. Years of sanctions and pressure have shaped a cautious but pragmatic diplomatic posture. Engagement with external actors, including India and China, provides Tehran with avenues to ease isolation and assert relevance. However, Iran’s trust deficit remains significant. Its diplomacy is transactional, focused on immediate gains rather than long-term alignment. The current environment offers opportunities for tactical advantage, but Iran is unlikely to make concessions that could compromise its core strategic objectives.

Even actors on the periphery, such as North Korea, are closely observing these developments. Pyongyang interprets global events through a narrow but consistent framework: regime survival through deterrence. The situation around Iran reinforces its belief that leverage, particularly military capability, is a prerequisite for meaningful negotiation. While North Korea is not directly involved, it draws lessons that may shape its own strategic calculations.

What emerges from these varied perspectives is a clear departure from traditional bloc-based geopolitics. The world is moving towards a more fluid and fragmented order, where alignments are temporary and issue-specific. States cooperate on certain matters while competing with others. This creates a dynamic but unpredictable environment, where misinterpretation and miscalculation remain constant risks.

It is within this evolving context that Sri Lanka’s strategic relevance becomes increasingly visible. The recent visit by the US Special Envoy for South and Central Asia, Sergio Gor, to the Colombo Port; is not a routine diplomatic courtesy call. It is a signal. Ports are no longer just commercial gateways; they are strategic assets embedded in global power competition. A visit of this nature underscores how Sri Lanka’s maritime infrastructure is being viewed through a geopolitical lens particularly in relation to sea lane security, logistics, and regional influence.

Such engagements reflect a broader reality: global powers are not only watching the Strait of Hormuz but are also positioning themselves along the wider Indian Ocean network that connects it. Colombo, situated along one of the busiest east–west shipping routes, becomes part of this extended strategic theatre. The presence and interest of external actors in Sri Lanka’s ports highlight an emerging pattern of influence without overt control a hallmark of modern strategic diplomacy.

For Sri Lanka, these developments are far from abstract. The island’s strategic location along major Indian Ocean shipping routes places it at the intersection of these global currents. The Strait of Hormuz is a vital artery for global energy flows, and any disruption would have immediate consequences for Sri Lanka’s economy, particularly in terms of fuel prices and supply stability.

Moreover, Sri Lanka must manage the competing interests of larger powers operating within its vicinity. India’s expanding regional role, China’s entrenched economic presence, and the growing attention from the United States all converge in the Indian Ocean. This requires a careful balancing act. Aligning too closely with any one power risks alienating others, while inaction could leave Sri Lanka vulnerable to external pressures.

The appropriate response lies in adopting a robust foreign policy that engages all major stakeholders while preserving national autonomy. This involves strengthening diplomatic channels, enhancing maritime security capabilities, and investing in strategic foresight. Sri Lanka must also recognise the growing importance of non-traditional security domains, including cyber threats and information warfare, which increasingly accompany geopolitical competition.

Equally important is the need for internal coherence. Effective diplomacy abroad must be supported by institutional strength at home. Policy consistency, professional expertise, and strategic clarity are essential if Sri Lanka is to navigate an increasingly complex international environment.

The situation in the Strait of Hormuz thus serves as both a warning and an opportunity. It highlights the fragility of global systems, but also underscores the potential for skilled diplomacy to manage tensions. For Sri Lanka, the challenge is not merely to observe these developments, but to position itself wisely within them.

In a world where power is no longer exercised solely through force, but through influence and presence, strategic diplomacy becomes not just an option, but a necessity. The nations that succeed will be those that understand this shift now and act with clarity, balance, and foresight.

Mahil Dole is a senior Sri Lankan police officer with over four decades of experience in law enforcement and intelligence. He previously served as Head of the Counter-Terrorism Division of the State Intelligence Service and has conducted extensive interviews with more than 100 suicide cadres linked to terrorist organisations. He is a graduate of the Asia-Pacific Centre for Security Studies (Hawaii).

By Mahil Dole
Senior Police Officer (Retd.), Former Head of Counter-Terrorism Division, State Intelligence Service, Sri Lanka

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