Features
Property tax: a new tax Sri Lanka is going to be introduced in 2027
Expanded budget deficits and continuous borrowing by successive governments pushed the Sri Lankan economy into a recession. These heavy borrowings placed a significant burden on the shoulders of today’s citizens. The previous government was compelled to seek assistance from the IMF to revive the economy, which led to increased tax rates, a broader tax base, and the introduction of new taxes. The present NPP government has introduced some tax revisions. However, it too must increase revenue in order to address the economic crisis and promote sustainable growth. This is why the country is going to introduce property tax in 2027. In other words, the government’s tax demand increases in the near future. This note is to provide a brief introduction on property tax that we will have to pay.
Property tax
Governments may impose various types of taxes, though some countries choose not to levy certain kinds. Property tax is no exception. After considering the taxation of income and expenditure, many countries also tax stocks of wealth. Such taxes may be imposed on individual pieces of property—payable by the owner and classified as impersonal in rem taxes (those imposed on objects or activities)—or on the total property holdings or net worth of a person, making them personal taxes.
When we hear the word property, the related concept of wealth also comes to mind. However, there is a distinction between property tax and wealth tax. Property tax generally applies to real property, while wealth tax is levied on total net wealth (all assets minus liabilities). Some countries, such as Spain, Switzerland, Norway, and France, impose both taxes simultaneously. Property tax, however, is widespread globally, though it remains relatively novel in Sri Lanka. Property tax is generally divided into two categories: real property taxes and personal property taxes, both of which are often referred to as ad valorem taxes (taxes based on the value of property).
Real property (realty) is defined as land and whatever is erected or growing on the land or permanently affixed to it. It also includes subsurface features such as mineral deposits. Real property taxes are levied on the ownership of land and buildings, with the tax base being the property’s monetary value. Because real estate cannot be moved or hidden, and its ownership is a matter of public record, it provides governments with a highly reliable tax base. These taxes are typically assessed annually, based on market value as determined by local authorities. Elected or appointed officials are responsible for valuing the property and notifying owners of the assessed amount. A distinctive feature of real property taxes is that the tax rate is set each year according to the jurisdiction’s revenue needs for that budget cycle.
Personal property, in contrast, refers to any asset that is not real property. Like real estate, personal property is taxed based on its value, but unlike real property, its value is usually not assessed by government officials. Instead, individuals and businesses must determine the value of their taxable assets and report it to the tax assessor. Taxable personal property generally falls into three categories: household tangibles, business tangibles, and intangibles. Household tangibles commonly taxed include automobiles, recreational vehicles, pleasure boats, and private aircraft. Business tangibles include inventory, furniture, fixtures, machinery, and equipment. Intangible assets most often subject to tax are marketable securities such as stocks and bonds.
Determination of tax rate
An individual’s property tax liability is calculated as the product of the tax rate and the property’s assessed value—the value assigned by the local authority. In most cases, jurisdictions (local authorities) attempt to align assessed values with market values. However, if a property has not been sold recently, its market value may be unknown, requiring the tax authority to estimate based on the market values of comparable properties. The degree of divergence between market and assessed values depends on the accuracy of the estimating process.
Empirical evidence shows that many jurisdictions perform poorly in assessing property values, leading to situations where properties subject to the same statutory tax rate face vastly different effective tax rates. In the United States, for example, thousands of jurisdictions operate their property tax systems independently. None include a comprehensive measure of wealth in their tax base, and there are significant differences in what types of property are excluded and what tax rates are applied.
Some communities grant preferential treatment to new business facilities to encourage investment, while few tax personal wealth beyond homes. Assets such as cars, jewelry, and financial securities are usually exempt. Generally, structures and the land on which they are built form the core of the property tax base, though effective rates vary widely across jurisdictions.
For businesses, calculating property taxes can appear complex, but with the right tools and a sound understanding of the fundamentals, the process becomes more manageable. The cornerstone is determining the assessed value, typically carried out by a government assessor who evaluates factors such as land, buildings, and improvements. Equally important is establishing the tax rate, commonly referred to as the mill rate. The mill rate represents the amount of tax owed per Rs.1,000 of assessed property value and is determined annually by local authorities in line with revenue requirements.
Reasons to pay
There are several theoretical bases for imposing taxes. One rationale for wealth taxation is the benefit principle: public services, such as road modernisation, increase the value of real property and should therefore be financed by property owners. This argument can be traced back to seventeenth-century natural-law theorists, who viewed one of the state’s primary functions as the protection of property. From this perspective, property owners are obliged to contribute toward the state’s expenses. Logically, such reasoning supports a comprehensive tax base that includes all forms of property—both tangible and intangible.
Property tax can also be understood as a user fee, since communities rely on it to finance essential public services such as education, healthcare, and policing. In this sense, the tax is not merely a levy but the cost of accessing and maintaining vital services that benefit society as a whole. Beyond theory, Sri Lanka faces practical imperatives for broadening its tax base and strengthening its fiscal framework. Expanding property taxation could play a critical role in addressing the country’s debt crisis while fostering long-term economic growth and development.
Impact, incidence and effects of the tax
The impact of a tax refers to its first point of contact with taxpayers—that is, the person who initially pays it. In the case of property tax, the legal liability usually falls on the property owner. Local governments assess the value of land and improvements, and the owner must pay tax based on this assessment. Thus, the immediate burden is borne by the property holder, whether an individual, household, or business. Because property taxes influence both investment and location decisions, most European countries allow businesses to deduct them: of the 27 that levy property taxes, 23 permit deductions from corporate income, thereby reducing the effective burden and encouraging investment.
The incidence of a tax, however, concerns who ultimately bears the economic burden after adjustments in behavior, prices, and markets. Although property owners are legally responsible, the real incidence may shift. Landlords may raise rents to pass part of the burden to tenants, while businesses may shift costs forward to consumers through higher prices or backward to workers through lower wages.
The question of who ultimately bears the burden of the property tax has long been debated. Three main perspectives can be identified: the traditional view, the capital tax view, and the excise-on-capital view. Under the first, property tax is seen as an excise tax on land and structures.
Since the supply of land is fixed, landowners cannot escape the tax and thus bear the full burden. In many cases, the tax becomes capitalized into land values: prospective buyers discount the purchase price to account for future tax liabilities. As a result, landowners effectively bear the tax indefinitely. Capital tax view holds that if property tax is treated as a uniform tax on all capital, then the entire burden falls on capital owners.
Since capital income is concentrated among higher-income households, property tax in this view is progressive, contradicting the traditional view. According to final view property tax rates, in practice, vary by jurisdiction and property type, meaning it functions as a set of excise taxes on capital. Capital tends to migrate from high-tax to low-tax areas until after-tax returns equalize. This reallocation affects returns to other factors of production depending on their mobility. Land, being immobile, cannot escape the tax, while less mobile forms of capital are more likely to bear the burden. Over the long run, even the overall supply of capital may respond to property tax rates.
Property taxes have a range of economic and social effects. Firstly property taxes provide a stable and predictable source of income for local governments, often funding essential services such as education, infrastructure, and public safety. Secondly, when designed well, property taxes can contribute to equity by taxing wealth more directly than income or consumption taxes. However, poorly assessed property taxes can be regressive, disproportionately affecting those with lower incomes relative to property value. Thirdly, property taxes on land are often considered efficient since land is immobile and cannot be hidden, making it a strong tax base.
Taxes on improvements (buildings) can, however, discourage investment in property development or maintenance. Fourthly, high property taxes may influence housing decisions, business location choices, or patterns of land use. Preferential rates or exemptions can also create distortions, such as attracting businesses or encouraging certain types of development. Fifthly, because property taxes are highly visible and often unpopular, they can provoke resistance from taxpayers, influencing local politics and policymaking.
Sixthly, as a tax on real estate, property taxation can distort economic choices. It may encourage substitution away from real property toward other inputs, or toward consumer durables in states where personal property is taxed less heavily. This can discourage housing production and consumption. Finally, property taxes may also affect location decisions. Since rates vary across communities, industries that rely heavily on real estate tend to locate in lower-tax areas. At the same time, businesses also weigh the public services financed by local property taxes when deciding where to operate.
Empirical evidence further illustrates these dynamics. In 2011, China introduced property taxes in Shanghai and Chongqing, targeting second homes and high-end properties. A 2021 study found little effect on housing prices, mainly due to the narrow tax base, low rate, and generous exemptions. By contrast, a German study (March 2021) found that higher property taxes were fully passed on to rental prices within three years, though the pass-through was weaker when housing supply was inelastic. More broadly, property taxes tend to be capitalized into purchase prices, lowering what buyers are willing to pay, while in rental markets, part of the burden may also be shifted to tenants.
Decisions to be made
Sri Lanka is expected to introduce a property tax in 2027. However, several key decisions must be made before implementation. First, which level of government will be responsible for imposing the tax? In many countries, property tax is administered by local authorities. In Sri Lanka, it must be decided which layer of government will have the authority to levy and collect the tax.
Second, the scope and rate of taxation must be determined. Property can take many forms, but for real property, land and buildings are the main categories. If buildings are included, should the tax apply to all types—including residential houses? Since houses vary greatly in size, facilities, and value, questions arise as to whether very small houses should be taxed. In some countries, only second or additional properties are taxed. With respect to land, it must be decided whether all types of land will be taxed. For example, paddy land presents a special case, as profit margins in paddy farming are often extremely low, or even negative. This calls for certain exemptions, deductions, or abatements. Common exemptions internationally include those for non-profit organizations, historical properties, or primary residences (homesteads).
Third, the treatment of depreciation and improvements must be clarified. Property assessors typically evaluate factors such as age, condition, and maintenance in determining depreciation, as well as any improvements or renovations that increase value. Since different assessors may apply varying standards, this can result in inconsistencies in assessed values.
Why is the property tax so unpopular?
Several explanations have been offered. Because housing transactions occur infrequently, property tax assessments are based on estimated values. If these valuations are inaccurate or biased, the tax is seen as unfair. The tax is also highly visible: unlike income and payroll taxes, which are withheld from wages and remitted by employers, property taxes are typically paid directly by homeowners, often in large quarterly or annual installments. These lump-sum payments can feel like a financial shock. Some property owners, particularly the elderly, do not have enough cash to make property tax payments and may therefore be forced to sell their homes. A high property tax rate also affects property values. Other things equal, a heavily taxed property will sell for less. This means that while current owners may feel burdened, new buyers are not necessarily worse off once the lower purchase price is taken into account.
One ambitious reform would be to replace the property tax with a personal net worth tax. This tax would be levied on the difference between the market value of all a taxpayer’s assets and liabilities. Unlike the property tax, such a system reflects a truer measure of ability to pay, since debts can be deducted. It would also allow for exemptions and progressive rates. However, because people often hold assets and debts across multiple jurisdictions, a net worth tax would need to be administered at the federal level.
Conclusion
Alongside the need to address technical and political barriers to reform, the construction of more effective property tax systems also depends on improving levels of tax compliance. A key foundation of compliance is the presence of credible and fair enforcement: few taxpayers will willingly comply if they believe there are no consequences for evasion or if they suspect their neighbours are not paying their fair share.
It is well known that taxes are unpopular. However, Sri Lanka needs to broaden its revenue base and is preparing to introduce a new tax in the near future. In the past, widespread corruption undermined public trust, and many citizens paid taxes reluctantly, while some were able to evade them altogether. Today, with corruption more effectively controlled and public confidence in government improving, the conditions are more favourable for introducing a property tax. Still, such a measure must be implemented carefully to maintain public support and fairness.
Importantly, property taxes are widely considered the least harmful form of taxation, as they have the smallest negative impact on household and business economic decisions compared to most alternatives. For example, in 2010 the OECD ranked tax instruments by efficiency, from most to least: property taxes, value-added tax (VAT), personal income tax, and corporate income tax.
by Dr. Tikiri Nimal Herath✍️
Emeritus Professor
tikiriherath@gmail.com
Features
Your six-year-old needs a tablet like a fish needs a smartphone
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.)
Features
Government is willing to address the past
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
Features
Strategic diplomacy at Sea: Reading the signals from Hormuz
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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