Opinion
Sustainable finance roadmap for SL – II

BY Nimal Gunatilleke
(First part of this article appeared yesterday)
Sustainable finance refers to the process of taking environmental, social and governance (ESG) criteria (developed by the United Nations Principles for Responsible Investment – PRI) into account, when making investment decisions in the financial sector. These in turn will lead to more long-term investments in sustainable economic activities and projects.
Sri Lanka, too ,joined this bandwagon in developing a Roadmap for Sustainable Finance way back in 2016/2017. It is aimed at integrating ESG criteria into financial decision-making processes in order to help build a more resilient and sustainable green economy. These sustainable finance practices are expected to promote assistance to make the businesses greener, climate-friendly, and socially inclusive.
This Sustainable Finance Road Map for Sri Lanka was launched in 2019 with financial assistance from the Biodiversity Finance Initiative (BIOFIN) from the UNDP and technical support from the International Finance Corporation. In this ‘new normal’ era of post-pandemic banking, sustainable finance is expected to become a key mover in achieving social, economic, and environmental goals in a green economic milieu.
The Biodiversity Finance Plan (BFP) for Sri Lanka (2018 – 2024), prepared collectively by the then Ministry of Finance and Media, The Ministry of National Policies and Economic Affairs, and the Ministry of Mahaweli Development and Environment, in 2019, intends to support sustainable biodiversity management efforts of Sri Lanka by mobilizing finance for investing in biodiversity by both the public and private sector.
A considerable amount of background preparatory work, detailed in three technical reports (i.) Policy and Institutional Review, (ii.) Biodiversity Expenditure Review, and (iii) Financial Need Assessment, has gone into developing this Biodiversity Finance Plan for Sri Lanka. It is expected to achieve national biodiversity targets that include conservation, sustainable management, and equitable distribution of benefits among all stakeholders, the three main pillars of the Convention on Biodiversity.
During this process, the national biodiversity and climate change-related strategic plans viz. National Biodiversity Action plan (NBSAP 2016-2022), National REDD+ Investment Framework and Action Plan (NRIFAP 2018-2022), National Action Programme for Combating Land Degradation in Sri Lanka (NAP-CLD 2015 -2024), and National Adaptation Plan for Climate Change Impacts in Sri Lanka (2016 – 2025) have been consulted for estimating the financial gap constraining investment needed for their effective implementation.
In addition, the vision of the BFP is directly linked to the following Sustainable Development Goals (SDGs), Goal 13: Climate Action; Goal 14: Life below Water, and Goal 15: Life on Land. It is indirectly linked to several other SDGs such as Goal 6: Clean Water and Sanitation, Goal 11: Sustainable Cities and Communities, and Goal 12: Responsible Consumption and Production.
The BFP has been designed to meet the biodiversity financing needs of the country by mobilising resources for investing in conserving biodiversity, promoting its sustainable use, and equitable sharing of its benefits. This is to be achieved with the participation of all major stakeholders – the government, the corporate sector, and the community. Thirteen different finance solutions viz. sustainable standards and certification, eco-labels, green lending, corporate social responsibility, lotteries, payment for ecosystem services, green bonds, ecotourism, conservation license plates, carbon markets, lobbying for public budget allocations, and diaspora savings and investment, have been identified based on the information given in national and sectoral planning documents of Sri Lanka. Each of these has been elaborated on in some detail with action plans in the BFP 2018-2022 document.
Judicious resource mobilization
Most of the prioritised financial solutions listed above are already in operation, though at a modest scale. They need to be scaled up with judicious resource mobilization to be more responsive to the conservation and sustainable development, equitable sharing of biodiversity and ecosystem service benefits. Consequently, with all this background preparative work accomplished, Sri Lanka is in a strong position to make the current adversity into an opportunity of a lifetime.
Green Bonds: One of the fastest developing financial or refinancing solutions on a global scale is coming from issuance of sustainability-linked international sovereign green bonds and other similar instruments such as sustainability-linked bonds, climate bonds and social bonds. The repayment of debt using these green bonds and the like is tied to the achievement of instituional environmental, social and governance (ESG) targets, such as greenhouse gas emission reductions. The growth of green bonds in the global capital markets has been explosive in recent times and is increasingly attracting attention of the corporate entities around the globe. Global Green Bond investments have topped US$ 500 billion in 2021 for the first time and it is expected to reach $ 1 trillion this year.
Most of the green bonds in the world have been issued to finance relatively large projects in the areas of Renewable energy, Transport, Pollution prevention and control, Water and waste management, Environmentally sustainable land-use, agriculture and forestry, Reduction in carbon emission, and Green infrastructure, and since of late for Biodiversity conservation.
Importance of biodiversity
Governments, major financial centers and central banks world over are greening their financial systems by developing green bond guidance, green taxonomies, regulation, and reporting guidelines. Investors worldwide are waking up to the importance of incorporating biodiversity as part of ESG risk assessments and their effective management. This is due in part to the increasing focus on this topic since the United Nation’s Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services (UN-IPBES) produced its landmark Global Assessment Report on Biodiversity and Ecosystem Services in May 2019, casting the spotlight on the alarming declines of biodiversity worldwide.
Although Sri Lanka has not yet availed herself of this innovative financial solution of investing in Green Bonds, it is ideally placed to benefit from this emerging opportunity, for Sri Lanka being one of 36 global hotspots of biodiversity. Sri Lanka has actively participated in sustainability-focused investments through the Sustainable Banking Network of the International Finance Corporation, and it is a fortuitous coincidence that the present Governor of the Central Bank, himself, has taken an active role in this global network activities in the past (see photo attached).
The Central Bank of Sri Lanka and the financial sector, in general, have been moving in the direction of sustainable financing with the preparation of the required technical details listed earlier. The latest addition to it is the ‘Sri Lanka Green Finance Taxonomy’ (a classification system established to provide guidelines for integrating sustainability into investment decisions), published by the Central Bank on 06th May 2022. Green Bond Principles (GBP) is one of several well-known taxonomies that provide guidelines specific to green bonds.
Consequently, Sri Lanka has already put in place the necessary institutional infrastructure in financial markets for entering into green bond initiatives. Furthermore, Sri Lanka has been raising international finance by issuing bonds since 2007. As such, the government and the financial institutions are quite familiar and well equipped with the necessary groundwork to enter the international (green) bond market. The BFP reports that the Government of Sri Lanka recommends the issuing of international sovereign green bonds as a sustainable finance solution to mobilize relatively large sums of debt capital for investing in large-scale biodiversity projects, combatting land degradation, arresting habitat and species loss, maritime reef conservation, coastal conservation, and sustainable energy.
All these project documents prepared with broader consultation and supported by the respective UN agencies (viz. NBSAP, NRIFAP, NAPCLD, and NAPCCI) are therefore, consistent with the global conventions as well as national-level policies and strategies on biodiversity, climate change, and land degradation.
The Wildlife and Forest Conservation Departments have carried out several biodiversity and ecosystem management projects, including the preparation of two pilot scale novel Landscape Management Plans – one for Sinharaja Rain Forest Complex and the other for Hurulu-Kaudulla-Kantale with financial support from the Ecosystem Conservation and Management Project (ESCAMP 2018-2022) of the World Bank. These plans are available as excellent opportunities for consideration in raising funds from international capital markets for restructuring at least some of the ISBs into Green Bonds. Similarly, Forestry Sector Master Plan first prepared in 1995 is being revised to meet the present-day forestry sector needs which again, together with NBSAP, NRIFAP, NAPCLD, and NAPCCI are good candidates for similar capital investment considerations during the debt restructuring process.
Sustainable energy
With respect to sustainable energy, especially the generation of electricity has become one of the most critical issues at present in Sri Lanka. The UNDP and ADB joint assessment of ‘Sri Lanka’s Power Sector – 100% Electricity Generation through Renewable Energy by 2050’ provides opportunities for green-bond solutions, among others in this area. Sri Lanka being one of the 43 countries of the Climate Vulnerable Group which are disproportionately affected by climate change, has signed the declaration at the 22nd COP meeting of UNFCCC in Marrakech, Morocco, in 2016, to reach these ambitious renewable electricity generation targets by 2050.
However, the UNDP-ADB joint assessment records that the Long-term Generation Expansion Plan (LTGEP) for Sri Lanka, 2015 – 2034 ( http:// pucsl.gov.lk/english/wp-content/uploads/2015/09/Long-Term-Generation-Plan-2015-2034-PUCSL.pdf) envisages adding at least two more coal-fired power plants, one in Trincomalee (2 x 300 MW) in 2029 onwards and the other in the Southern Region (3 x 300 MW) from 2027 onwards. The report however cautions that stiff resistance from local communities and possible litigation moves by environmental groups may lead to change this long-term generation plan. According to the same report (table 41: p 113), several thermal power plants are likely to be retired from operation due to their age -related mal-functioning and these capacities also will also need urgent replacements to ensure Sri Lanka’s growing electricity demands. Therefore, actual future coal-based capacity addition to our national grid may be much lower than planned. The same report adds that by 2050, the 100 percent Renewable Energy scenario can potentially save US$18-US$19 billion on imported coal as compared with the base case scenario, which relies heavily on coal.
‘Least cost principle’
The Ceylon Electricity Board’s long-term generation planning is based on the “least cost principle” which has led to its focus on significantly cheap coal-based capacity development. However, they have not considered the environmental and health cost externalities in their calculations. Inclusion of the cost of carbon emission, air-quality and health related issues and other externalities would provide a more realistic picture of benefit/cost of the use of coal for electricity generation. Unfortunately, the natural resource economists have not yet brought these environmental and health costs associated with coal-fired power plants in Sri Lanka to the attention of the CEB. Alternatively, it may be that the information available either from Sri Lanka or our neighboring countries have not been taken into consideration in the calculation of ‘least cost’.
Unless these developments are taken into consideration, the roadmap developed as a part of the LTGEP, while making provisions for increased adoption of renewable energy in the electricity generation mix, is unlikely to be the basis on which the Sri Lanka can transform its power sector into a 100 percent RE sector by 2050. Consequently, there is a pressing need for updating the LTGEP with the global shifts to renewable energy sources mandated by the Sri Lankan government in compliance with the UNFCCC recommendations. Such projects could be very attractive for international donors, and they may rank very high in eligibility for Green Bond investments.
COP 26 summit
Furthermore, at the COP 26 meeting of the UNFCCC held in Glasgow in 2021 set a new gold standard on the ‘Paris Alignment of international public finance’ to move away from Coal – the single biggest contributor to climate change by the end of 2021. Sri Lanka along with Chile, Montenegro and their European partners pledged that no new Coal Power Plants to be constructed in their respective countries. Alok Sharma, the British Minister of State at the cabinet office who was also the COP 26 president announced that more than 40 countries reached a deal and pledged to phase out coal – the dirtiest fossil fuel – by the 2040s. Two notable exceptions apparently had been the USA and China although the US has pledged to end public financing for fossil fuel projects abroad without any carbon capture and storage technology, by the end of 2022.
In the light of these recent developments, there is more than a silver lining in our gloomy horizon that through effective engagement at the future negotiations with the IMF and the lenders/creditors, Sri Lanka can capitalize on its current debt restructuring process to transform some of her International Sovereign Bonds to Green Bonds for funding Non-conventional Renewable Energy projects. These projects typically involve renewable energy generation and emission reductions among other benefits. Shifting from a coal power to a solar power project in Sampur in eastern Sri Lanka may be one such project put forward by the national Thermal Power Corporation of India recently although the details of the agreement have not been made public, as yet.
Enormous potential
There is an enormous potential for Sri Lanka to tap into these green/sustainability bond markets to finance its infrastructure projects/investments such as in waste management, renewable energy projects, biodiversity conservation, public transportation, climate change adaptation and mitigation. As shown above, large/medium/small scale green investment project plans have already been prepared and the sustainable financing infrastructure is already in place, and what is needed is a matter of prioritizing these differently sized projects in consultation with appropriate stakeholder groups.
Sri Lanka is a relatively small island with unparallel diversity of physical, biological and cultural features. Most of her leading agricultural exports are in the hands of a diverse set of smallholders which, in a way, are more resilient to cataclysmic changes that may come with the vagaries of the climate from time to time. Therefore, the biodiversity finance projects need not only conserve and sustainably utilize the natural resources but also take adequate measures to distribute the benefits equitably among these smallholders who had been the backbone of the Sri Lankan enterprise.
Finally, although Sri Lanka has been caught somewhat unawares in a fierce tropical storm, the charting out of it seems to be reasonably well laid out by the technocrats with the support from the international agencies. In order to steady the ship in these visciously turbulent waters, obviously we need a matching political leadership with a clear vision, calm but stern demeanor and strong commitment to steer the ship out of the rough seas to calmer waters. The least we need at this critical moment of despondency is a mutiny on board the ship which will only help those prying to grab the best of – as some would call it – ‘this unsinkable aircraft carrier’ in the Indian ocean. Concluded.
The author can be contacted at nimsavg@gmail.com
Opinion
End of an Era: Passing away of Raja Uncle (Mr. Rajapaksha)

1935 – 2025
With heavy hearts, we share the passing of our dear neighbor, mentor, and cherished friend, Raja Uncle — known formally as Mr. Rajapaksha — who passed away peacefully on April 1, 2025, at the age of 89.
For over 50 he was a constant and beloved presence in our community — someone whose actions spoke louder than words, and whose kindness left a mark on every life he touched. Gentle in spirit, firm in values, and endlessly thoughtful, he helped shape the heart of Bogahawatta with his humility, quiet strength, and unwavering dedication.
He carried himself with grace and dignity — slim, well-groomed, and strikingly handsome, with a calm confidence that made people feel at ease. He never tried to be a person who gave orders — instead, he led through respect, active listening, and thoughtful action. His leadership was never loud — it was steady, consistent, and deeply human.
A founding member of the Bogahawatta Welfare Society, Raja Uncle gave more than 40 years of devoted service to the betterment of the Bogahawatta community. In the 1980s, as the area grew and safety became a concern, he established the neighborhood watch, restoring trust and unity in a time of change.
He organized road cleaning and repair efforts, worked alongside neighbors, and played a vital role in the construction of the Bogahawatta Welfare Society headquarters, which stands today as a symbol of unity and progress.
He also cared deeply for everyday needs. For nearly 20 years, before running water was available, the community well was a lifeline. When it fell into disrepair, Raja Uncle would quietly take the responsibility to clean and maintain it, asking for no recognition. I had the honor of helping him at times, and I saw the pride and purpose behind every quiet act.
When I served as president of the local youth society, he became my mentor. With his help, we organized a talent show, community art exhibition, built a mini library, and gave young people opportunities to lead. His daughter Tharanga, the society’s secretary, worked beside him — a reflection of the values he passed on.
He also shaped my personal journey. He introduced me to a temple, and gently guided me toward a spiritual life I still hold close today.
He was our protector. If a stranger walked down our lane, he would calmly and respectfully inquire about their purpose, ensuring the safety of every home and child. During a heated argument in my youth, he stood nearby for over an hour, silently watching until it ended, and then walked me home. He didn’t lecture. He didn’t judge. He simply cared.
Every April, without fail, he was the Master of Ceremonies at the Sinhala and Tamil New Year festival. His voice, his presence, and his joyful warmth brought the entire community together in celebration year after year.
In times of sorrow, he led with compassion. He would gather neighbors to visit grieving families, sometimes traveling great distances, and delivered eloquent eulogies that offered comfort and honored lives with dignity.
What truly set Raja Uncle apart was his love — especially the remarkable bond he shared with his wife. Their marriage was the most loving I have ever witnessed. They were the love of each other’s lives — gentle, respectful, and unwavering. He never raised his voice. They never let conflict come between them. Their partnership was built on trust, affection, and shared values.
In July 1980, as public servants, the two of them stood together in protest against unjust government layoffs. They both lost their jobs, but they stood by their beliefs. They started a business together, overcame hardship side by side, and were eventually reinstated. In time, Mrs. Rajapaksha rose to a top-level position in Sri Lanka’s Department of Immigration and Emigration — a testament to her brilliance and their shared resilience.
They raised their children in a home of dignity and purpose. In a country where less than five percent were admitted to university at the time, all three — Tharanga, Lahiru, and Lasitha — were accepted. A rare and proud achievement rooted in hard work and love.
His family grew across the world — Lasitha became a British citizen, and Lahiru a citizen of Australia. Raja Uncle visited them often, maintaining the same closeness and warmth across any distance.
And perhaps the most remarkable of all: he helped lead a place that was once a quiet, forested area in the 1970s into a thriving, respected neighborhood — one so valued that even a Defense Secretary of Sri Lanka chose to make it his home. This was not the work of ambition, but of vision and service — built slowly, over decades, through trust and integrity.
To me, as his next-door neighbor, he was one of the most steady and trusted influences in my life. He showed me that a meaningful life isn’t defined by what we achieve — but by how we treat others, what we give, and how we listen. I shaped my life after him.
Although I haven’t been as closely associated with him since leaving Sri Lanka in 2000 and becoming a citizen of the United States, his memory has remained with me every step of the way. These are just a few of the memories I carry — as much as I can recall. I still wish, from the bottom of my heart, that he could be my neighbor forever — to guide me, to listen, to share his quiet vision.
He touched so many lives, across generations. There are countless stories, small and great, that live on in the hearts of those who knew him. His presence will be remembered not only through words, but in the community he shaped, the values he carried, and the lives he quietly uplifted over these 50+ years.
May his soul rest in peace, and may we carry forward the spirit he lived by — humility, strength, compassion, and quiet dedication — just as Raja Uncle did, every single day of his extraordinary life.
Opinion
Some aspects of China’s development model

by Shiran Illanperuma
China’s rapid development over the last few decades has been the source of much debate among economists. Some claim China as the model par excellence of market liberalisation and the superiority of private sector driven growth. Others equally argue that China’s model is one of planning and state intervention.
On 28 March, I was invited by Nexus Research to deliver a presentation on China’s development model alongside former Ambassador to China Dr. Palitha Kohona. Unfortunately, the contents of this presentation have been misreported in an article in the Island published on 4 April (Dr Kohona: developing countries should covet China model). The article claimed that my presentation touched on “low-cost labour, foreign direct investments, and global trade agreements”. In fact, such simplistic tropes were precisely what I had intended to counter.
China’s development model challenges many of the axioms of neoclassical economics. If low-cost labour were the decisive factor for take-off, then investment should be pouring into much-cheaper labour markets in sub-Saharan Africa. On the contrary, rising wages in China have not led to the outflow of capital one would expect under such a model. This is because the advantage China offers is a healthy and skilled workforce (relative to price) and an infrastructural system that keeps non-wage operating costs (such as transport and energy) low. This, combined with a domestic value chain, is China’s main strength and why economic growth has been combined with rising wages and standards of living.
While foreign direct investment (FDI) has been a huge part of China’s success story, it is possible to overstate their importance. First, FDIs only really took off from the 1990s onwards, yet to begin there would be to ignore the decades of work done to develop the country’s agricultural self-sufficiency, basic industrial system, and institutional structure. Second, what has mattered for China is the quality of FDI, which is determined by government policy. By the standards of the OECD Foreign Direct Investment Regulatory Restrictiveness Index, China remains fairly selective on what FDI is allowed and encouraged. FDI is promoted not as an end in itself but as a means to acquire technology that should be transferred to national champions.
Role of Local Government
A significant portion of my presentation for Nexus Research was on the role of local governments economic policy – something that is often neglected (though there is a growing literature on the subject). China has a fairly decentralised system of governance, a product of its vast size and geography, as well as the institutional changes and experiments in direct democracy during the period of the Cultural Revolution.
Chinese economist Xiaohuan Lan, in his book How China Works (2024), has said that “In China, it is impossible to understand the economy without understanding the government.” While the central government in China formulates indicative plans and the overall goals and trajectory for development, implementation of these plans is delegated to local governments. Local governments have a broad remit to interpret these plans, experiment with implementation, and compete with each other for investment. This leads to a much more dynamic and decentralised development process that encourages grassroots participation.
A comparison between China and India on the share of public employment at different levels of government is very revealing. For China, over 60% of public employment is at the level of local government, with federal and state governments comprising less than 40% of employment. In contrast, less than 20% of Indian public employment is in local government. India, therefore, despite its much-touted linguistic federal system, is far more centralised than China. The weakness of Indian local governments remains a significant barrier for its development.
The Role of SOEs
State-owned enterprises (SOEs) are the elephant in the room when it comes to China’s development model. Chinese political scientist Prof. Zheng Yongnian said in 2011 that “the state sector is in fact important for China’s macroeconomic stability.” This is a radically different approach from neoclassical economics, which views macroeconomic policy purely through the lens of fiscal and monetary policy.
Broadly speaking, SOEs in China perform four ‘macroeconomic’ functions. First, they conduct the low-cost production of upstream inputs such as metals, chemicals, and rare earth minerals. Second, they manage essential commodity reserves and intervene in commodity markets to stabilise prices. Third, they engage in countercyclical spending on public works during economic downturns. Fourth, they are deployed to respond during emergencies and external shocks such as the 2008 Sichuan earthquake and the COVID-19 pandemic. The through line in these functions is to keep costs low and smoothen out business and commodity cycles. This is why China has not yet faced a recession comparable to many capitalist economies.
As a consequence of this model, SOEs remain a significantly large part of the Chinese economy in quantitative terms. According to data compiled by the Peterson Institute for International Economics, SOEs accounted for around 75% of the aggregate revenue of Chinese firms in the Fortune 500. While it is true these firms are often not as profitable as the private sector, this is by design, as they pass on low prices to domestic manufacturers.
China has entities such as the State-owned Assets Supervision and Administration Commission of the State Council (SASAC) which facilitate the centralised governance and oversight of SOEs. This model is crucially different from the Temasek model often discussed in Sri Lanka. Under Temasek, SOEs are almost entirely market-oriented and depoliticised. This is not the case in China, where SOEs continue to play crucial social and political functions.
The Role of Competition
What confuses most observers of China is the fact that it very obviously has a fiercely competitive and dynamic private sector. How then to reconcile the preceding elaboration of the role of local government and SOEs with a competitive private sector? Local governments and SOEs provide the basic institutional framework and economic building blocks for the private sector to play its role in capital accumulation and innovation.
The competitive cycle in China could be broadly divided into four phases. In the first phase, incentives created by the central and local governments lead to a flood of investment in desired sectors and sub-sectors, resulting in the establishment of new firms and production capacity. In phase two, these incentives are eased, leading to fierce competition and survival of only the fittest firms. In phase three, once the market has reached a stage resembling monopoly, one of three tactics may be used: 1. Firms are forced to compete internationally and export; 2. monopoly firms are broken up by the state; or 3. monopoly firms are nationalised or brought under stronger state supervision. The system is designed to resist the market’s natural tendency towards monopolisation.
Political Leadership
The Chinese state has an exceptional ability to maintain what political sociologist Peter B. Evans calls ‘embedded autonomy’. It is close enough to the private sector to understand economic conditions and formulate policy but politically independent enough from capital to resist capture by private interests. This is a key difference between China’s development model and the developmentalism of East Asian states such as Japan and South Korea, where large private firms (zaibatsu in the former, chaebols in the latter) dominate political life.
China’s development model cannot be understood in isolation of its leadership system. The Communist Party of China, which has around 100 million members (almost five times the population of Sri Lanka!), has been key to the process of China’s development. The party remains committed to developing Marxist-Leninist philosophy and applying it to the country’s concrete conditions. It retains deep roots in all levels of Chinese society, engaging in consultation during the policymaking process.
To what extent China’s model can be replicated by other countries is an open question. While the CPC has often invited academics and political parties to study its system, this does not equate to the party attempting to export said system. There is no real ‘Beijing consensus’ that is equivalent to the ‘Washington consensus’. On the contrary, President Xi Jinping, in 2023, cautioned that modernisation “cannot be realised by a cookie-cutter approach”.
“For any country to achieve modernisation, it needs not only to follow the general laws governing the process but, more importantly, consider its own national conditions and unique features.”
(Shiran Illanperuma is a researcher at Tricontinental: Institute for Social Research and a co-editor of Wenhua Zongheng: A Journal of Contemporary Chinese Thought. He is also a co-convenor of the Asia Progress Forum which can be contacted at asiaprogressforum@gmail.com)
Opinion
Sri Lanka’s Foreign Policy amid Geopolitical Transformations: 1990-2024 – Part IV

Sri Lankan Foreign Policy since the End of the Cold War
By the end of the Cold War, Sri Lanka’s foreign policy priorities were predominantly shaped by its armed conflict with the LTTE, despite pivotal shifts in its regional and global geopolitical spaces. The significance of the country’s foreign relations was largely viewed through the lens of its strategic needs in the ongoing civil war, often overshadowing other broader regional and global developments.
The Indo-Sri Lanka Peace Accord of 1987 and the subsequent establishment of the Provincial Council system under the 13th Amendment to the Constitution failed to bring lasting peace and merely perpetuated the vicious cycle of violence. Meanwhile, the uprising (1987-1989) led by the Janatha Vimukthi Peramuna (JVP) and its ruthless suppression deepened the political and social turmoil and tarnished the country’s democratic credentials, further constraining the government’s ability to focus and react to broad external strategic developments. As a result, the critical shifts occurring in South Asia, the Indian Ocean, and the global strategic environment after the Cold War were more or less overlooked in Sri Lanka’s foreign policy decisions.
Following the decisive military defeat of the LTTE in 2009, Sri Lanka underwent a significant shift in its politico-strategic needs, marking the beginning of a new phase in the country’s foreign policy. With the conclusion of the protracted civil war, a different set of issues came to the forefront and decided Sri Lanka’s foreign policy and geopolitical priorities. Accordingly, the evolution of Sri Lanka’s foreign policy in the post-Cold War era can be divided in two distinct phases, with the end of the war in 2009 acting as a pivotal turning point.
Enduring Crises and Foreign Policy
under President Premadasa
When Ranasinghe Premadasa assumed the presidency after a violence-ridden election, Sri Lanka was mired in multi-faceted crises. The Indian Peace Keeping Force (IPKF), initially deployed to supervise the Peace Accord, quickly found it embroiled in violent conflict with the LTTE in the North. Maneuvering the IPKF’s withdrawal without alienating India became a delicate and daunting challenge. Meanwhile, the brutal suppression of the Janatha Vimukthi Peramuna (JVP) insurgency in the South only deepened the country’s instability and culpability, further intensifying international backlash over human rights violations.
Despite facing significant challenges, Sri Lanka’s foreign policy lacked coherence and strategic direction. The government’s foreign policy responses were often reactive, addressing events in isolation rather than within a broader strategic framework. Decision-making appeared to be driven more by immediate political considerations than by long-term objectives. As a result, Sri Lanka became entrapped in a foreign policy dilemma, struggling to manage multiple crises across various fronts simultaneously.
One of President Ranasinghe Premadasa’s key achievements was persuading/pressuring India to withdraw the Indian Peace Keeping Force (IPKF) from Sri Lanka in 1990. However, it also strained Indo-Sri Lanka relations in the short term. One of the key achievements of President Ranasinghe Premadasa was persuading India to withdraw the Indian Peace Keeping Force (IPKF) from Sri Lanka. However, this success came at the cost-damaging Indo-Sri Lanka relations.
During a public meeting on June 1, 1989, President Premadasa demanded the complete withdrawal of the IPKF from Sri Lanka by July 29, 1989, giving India just two months’ notice. India was taken aback by the manner in which this demand was made and made it clear that Sri Lanka could not impose a unilateral deadline. India was only prepared for a phased withdrawal and had limited options. In response, India made a misguided decision to train a Tamil National Army.
In an effort to pressure India into withdrawing the Indian Peace Keeping Force (IPKF) from Sri Lanka, President Premadasa sought to leverage the South Asian Association for Regional Cooperation (SAARC). In July 1989, Sri Lanka boycotted the SAARC Ministerial-level meeting in Islamabad, Pakistan. Furthermore, Sri Lanka made it clear that it would not host the SAARC Summit scheduled later that year in Colombo. The Sri Lanka informed SAARC countries that the Summit could not precede in Colombo as long as the IPKF remained stationed in the country against its will (RavinathaAryasinha, 1997: 54)
After V.P. Singh of Janata Dal became Prime Minister of India in December 1989, the withdrawal of the Indian Peace Keeping Force (IPKF) from Sri Lanka was expedited. In contrast to Rajiv Gandhi’s position, I.K.Gujral, the External Affairs Minister in the Janata Dal government, stated that “Tamil security is an internal matter of Sri Lanka.” He expressed hope that the Sri Lankan government had learned from the lessons of history and would no longer deny the country’s ethnic minorities their due rights (Sunday Times, 29 April 1990).
However, the rescheduled Summit for Colombo in 1990 was ultimately not held there. The Maldives insisted on hosting the summit in Malé, coinciding with the 25th anniversary of it becoming a Republic. The failure of the planned 1990 summit in Colombo also reflects the complex regional dynamics at the time.
After the withdrawal of the Indian Peace Keeping Force (IPKF) in 1990, the Liberation Tigers of Tamil Eelam (LTTE) swiftly reemerged as a formidable military and political force in the North and East of Sri Lanka, setting the stage for the onset of Eelam War II in June 1990. In the 1990s, parallel to the expansion of Sri Lankan Tamil Diaspora, the LTTE’s international influence grew significantly.
Its front organisations in Western countries became increasingly active, openly fundraising, pressuring host governments on behalf of the LTTE, and even facilitating the transportation of arms and supplies to the conflict zones in Sri Lanka. This growing international network of support posed a substantial challenge to the Sri Lankan government. Moreover, the LTTE frequently framed its actions as a response to alleged human rights violations by the Sri Lankan government, using this narrative to justify its activities and gain international sympathy and support. The complexities of this issue—encompassing both military confrontations and political maneuvering—posed a formidable challenge that required a comprehensive strategy and sharp diplomatic acumen.
The Premadasa administration failed to fully recognise the growing significance of the international public sphere and the increasing prominence of international human rights frameworks. These were often dismissed as instruments of the LTTE’s propaganda. The Sri Lankan government held a largely negative view of Western countries that raised human rights concerns, perceiving these countries as supportive of the LTTE. This perception, coupled with a failure to distinguish between the LTTE and the broader ethnic conflict, impeded the government’s ability to formulate an effective strategy in response to international criticism.
Despite his unconventional approach, President Premadasa recognised that the Foreign Ministry was in disarray, lacking direction amidst the decisive challenges facing the country. In response, he established a Foreign Affairs Study Group, chaired by Dr. Gamani Corea, to address the situation (Dayan Jayatilleka, 2017). The group completed its report on restructuring Sri Lanka’s foreign policy and diplomatic missions, but before it could be presented, President Premadasa was tragically assassinated. Following his death, President Wijetunga, the caretaker president, assumed office but hesitated to take any new initiatives on the matter.
Change Vision and Restructuring under President Chandrika Bandaranaike Kumaratunga
The efforts to instill a new policy vision and reshape the Ministry of Foreign Affairs (MFA) began after the People’s Alliance (PA) assumed power in 1995 under the leadership of President Chandrika Bandaranaike Kumaratunga. By the time Kumaratunga assumed the presidency, the MFA was in disarray—lacking direction and burdened by excessive politicisation. To address this, President Kumaratunga appointed Lakshman Kadirgamar as Minister of Foreign Affairs. Drawing on his extensive experience as an international civil servant, Kadirgamar implemented reforms to streamline recruitment, promotions, and diplomatic postings, restoring some order to the MFA. At the same time, the government sought to bolster Sri Lanka’s democratic image on the international stage.
Strengthening the country’s credentials as a functional democracy was viewed as essential for garnering global support in addressing the LTTE military challenge. In this context, internal policy reforms were expected to provide strong backing to a foreign policy with a clear vision and direction.
The PA government marked a significant departure from the antagonistic stance of its predecessors towards international human rights bodies. Recognising the growing influence of the global public sphere on national policies, the PA government made a deliberate effort to engage with key international human rights organisations, such as Amnesty International, Human Rights Watch, and the United Nations. These engagements included open dialogues aimed at addressing concerns about Sri Lanka’s human rights situation.
The PA government’s commitment to international human rights standards and norms was demonstrated by its ratification of several major international human rights conventions. Additionally, the PA Government worked to strengthen domestic human rights institutions, particularly the Human Rights Commission of Sri Lanka (HRCSL), further solidifying its dedication to human rights both within Sri Lanka and on the international stage. These efforts were seen as essential for two reasons: promoting domestic reconciliation and enhancing Sri Lanka’s international credibility.
In light of the geopolitical implications of India’s strategic rise and changes in the South Asian geopolitical landscape, developing strong ties with India remained a key achievement of Sri Lanka’s foreign policy under the People’s Alliance (PA) government. After decades of mutual suspicion,
accusations, and tensions, both countries recognised the importance of normalising their relations. President Chandrika Bandaranaike’s new vision and foreign policy approach provided a significant opportunity for a fresh start towards rapprochement. The Indian government’s diplomatic shift, marked by the Gujral Doctrine introduced by External Affairs Minister I. K. Gujral in 1996, further paved the way for improved bi-lateral relations. Indo-Sri Lanka relations had not been as cordial for decades as they were under President Chandrika Bandaranaike Kumaratunga. A key testament to the South Asian policy of the Kumaratunga administration was the 10th SAARC Summit held in Sri Lanka in 1998. During this summit, informal discussions between India and Pakistan, initiated through the personal efforts of President Kumaratunga, marked a critical development in the regional strategic context.
Under President Premadasa, Sri Lanka’s relations with Western powers, particularly Britain and the United States, began to deteriorate rapidly. For a small country like Sri Lanka, which was grappling with a significant internal armed conflict with international Diaspora linkages, navigating the post-Cold War global strategic landscape became a critical challenge. Nearly two-thirds of Sri Lanka’s export market was tied to the West—primarily Britain, the United States, and the European Union. At the same time, the LTTE’s international headquarters operated from Western capitals. Given this, Sri Lanka paid a steep price for its adversarial stance toward these Western powers. In contrast, one of President Chandrika Bandaranaike Kumaratunga’s notable achievements was her efforts to foster better relations with the West. By implementing internal democratic reforms and adopting the PA’s approach to the ethnic crisis, she created a more favourable environment for diplomatic engagement. This foreign policy shift paid off: In 1996, the United States resumed arms sales to Sri Lanka, and the US “Green Beret” corps began offering advanced training to the Sri Lankan security forces. This military support included specialized training missions by the US Navy SEALs, the US Air Force Special Operations Squadron, and the US Army’s Psychological Operations Group. The proscription of LTTE as a terrorist organization by the United States in October 1997, followed by similar designations from the United Kingdom in 2000 and Australia in 2001, dealt a severe blow to the LTTE international operations.
The dynamics of the crisis, however, posed significant obstacles to the continued implementation of this policy. Negotiations with the LTTE, which began in October 1994, collapsed on April 17, 1995, when the LTTE withdrew from both the talks and the ceasefire after four rounds of discussions. The hope of achieving a negotiated settlement with the LTTE was dashed within six months. The conflict with the LTTE once again became the central focus of foreign policy, but this time, the government’s
approach shifted from defensive to more assertive.
With the onset of Eelam War III, the government launched the Reviresa operation in November–December 1995 and regained control of Jaffna from the LTTE. In September 1996, the government conducted the Sath Jaya operation, which led to the recapture of Kilinochchi. However, the situation began to change in 1998. The government’s attempt to establish a land route to Jaffna failed, resulting in heavy human and material losses. By late 1998, military camps in Kilinochchi, Mullaitivu, and Elephant Pass fell to the LTTE. Between 1999 and 2000, the Sri Lankan government forces suffered continuous setbacks on the military front.
Similarly, the proposal for the devolution of power, which had been incorporated into a draft of the new constitution, became entangled in political debates with the United National Party (UNP). The country had shown readiness to accept devolution through widespread public awareness campaigns, such as the Sudu Nelum movement. However, when the proposal was only presented to Parliament in August 2000, it was rejected by the UNP. As a result, the People’s Alliance (PA) government was unable to fulfill one of its key political promises to both the Tamil people and the international
community.
In 1999, another attempt was made to resume talks with the LTTE, this time with the prospect of third-party facilitation. President Kumaratunga explored the possibility of securing international involvement, with potential facilitators including France, a joint Commonwealth team, and the Vatican. By March 2000, the Government of Sri Lanka and the LTTE agreed on Norway as the mediator. With Norwegian facilitation, a Ceasefire Agreement was drafted between the Sri Lankan Government and the LTTE, scheduled to be signed on April 11, 2001. However, two days before the signing, the LTTE
unexpectedly declared that they would not proceed with the agreement, without providing any explanation for their decision.
(To be continued)
by Gamini Keerawella
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