India, Japan studying ways to restart trilateral cooperation with Sri Lanka

India, Japan studying ways to restart trilateral cooperation with Sri Lanka

India, Japan studying ways to restart trilateral cooperation with Sri Lanka


The three nations are looking into methods to resume trilateral cooperation more than two years after Sri Lanka cancelled a joint India-Japan MoU for the East Container Terminal (ECT) project in Colombo, envoys at a conference said on Thursday in New Delhi.

Trilateral relation between India-Japan and Srilanka

  • Historical ties: Due to their proximity to one another and their long history of contact, India and Sri Lanka have close historical and cultural links. The Indian-born religion of Buddhism is widely practised in Sri Lanka. The northern parts of both countries, particularly in southern India and Sri Lanka, share Tamil ethnic and cultural ties.
  •  Economic Cooperation: Interest in economic cooperation has been expressed by all three nations. Among Sri Lanka’s key trading partners and sources of foreign investment are Japan and India. Infrastructure development initiatives, trade agreements, and help during economic downturns are all part of the relationship.
  • Infrastructure Projects: A key component of this partnership has been cooperation on infrastructure projects. Projects including ports, container terminals, roadways, railroads, and renewable energy programs have all benefited from joint ventures or backing between Japan and India. These initiatives seek to improve regional economic growth, commerce, and connectivity.
  • Strategic Interests: Both India and Japan have promoted the idea of a “Free Open and Inclusive Indo-Pacific” (FOIIP). This is in line with their strategic objectives of preserving the Indo-Pacific’s peace and stability. Additionally, Sri Lanka’s interests in marine security and economic development are aligned with this objective.
  • Economic Assistance: India and Japan have both given Sri Lanka economic support, notably during difficult financial times. This help has come in the form of grants, loans, and development initiatives.
  • Regional and Multilateral Cooperation: To address shared concerns and advance regional stability, these nations frequently collaborate on regional and multilateral platforms like the South Asian Association for Regional Cooperation (SAARC) and the Indian Ocean Rim Association (IORA).

What is East Container Terminal?

  • East Container Terminal, also known as the ECT, is a crucial port expansion project in Colombo, Sri Lanka.
  • The project’s objective was to build and run a container port at Colombo Port, a significant transhipment hub in the area.
  • A memorandum of understanding (MoU) for collaboration on economic projects, including the development of the ECT, was signed by India and Sri Lanka in 2019.
  • The MoU prioritized a joint venture for the terminal in recognition of the substantial transhipment-related trade that India conducts through Colombo.
  • The Sri Lanka Ports Authority (SLPA) was supposed to own the ECT as its whole.
  • Sri Lanka would own 51% of the Terminal Operations Company (TOC), which would be in charge of operations, and the other joint venture partners would possess 49%.
  • Japan’s involvement was seen as balancing geopolitical factors, and the project’s development was anticipated to be funded by a 40-year loan with a low-interest rate of 0.1%.
  • Historical sensitivities, labour opposition, and difficulties resulting from shifting political dynamics and regional influences were obstacles.
  • Public opinion, political shifts, and worries about sovereignty and national interests all had an impact on the project’s fate.
  • The ECT project exhibited a nuanced interaction between political agendas, historical factors, economic cooperation, and local geopolitical dynamics.

What are the benefits for India with the re-initiating of ECT?

  • Enhanced Trade Connectivity: The construction of the ECT would give India access to a contemporary, effective transhipment centre nearby. This would allow for more seamless trade movements and lower the cost of shipping goods from India to foreign markets.
  • Strategic Maritime Presence: India’s strategic presence and influence in the Indo-Pacific would be enhanced by the ECT’s position in the Indian Ocean region. It contributes to maintaining maritime security and stability and is consistent with India’s vision of a “Free, Open, and Inclusive Indo-Pacific.”
  • Regional Leadership: By collaborating on important projects in the region, India may increase its leadership and influence, which will enable it to work with its neighbours to promote shared economic growth and regional stability.
  • Economic Growth: Increased exports and economic growth for India may result from improved trade connections provided by the ECT. More international trade can be attracted to Indian ports by having effective transhipment facilities.
  • Counterbalance to Chinese Influence: India’s participation in initiatives like the ECT serves as a counterbalance to China’s growing influence in the Indian Ocean as a result of the Belt and Road Initiative. It supports the survival of a multipolar regional environment.
  • Maritime Security: Improved marine security can assist protect shipping lanes that are essential to India’s trade by giving countries more sway and presence at local ports.
  • Strategic Partnerships: Working together on the ECT project with Japan and Sri Lanka can strengthen strategic partnerships, which will promote peace and security in the Indo-Pacific region.

How is it going to help Sri Lanka with its crisis?

  • Foreign Direct Investment (FDI): The ECT project includes FDI from abroad, presumably from Japan and India. By generating jobs, fostering economic activity, and luring other types of investment, this FDI infusion has the potential to significantly strengthen Sri Lanka’s economy.
  • Infrastructure Development: Significant infrastructure development, including the construction of roads, railroads, and utilities, would be needed for the development and construction of the ECT. This might then promote associated industries, create jobs, and support overall economic growth.
  • Trade and Transshipment: Sri Lanka’s position as a transhipment hub in the area may be enhanced by the ECT’s strategic location and state-of-the-art facilities. Higher port earnings, handling fees, and related services can result from increased transhipment activity, which can increase government revenue.
  • Trade Diversification: An effective ECT can draw foreign shipping lines, increasing trade volumes and broadening the range of trading partners. By doing this, Sri Lanka can increase its links with other countries and lessen its reliance on a single market.
  • Regional Connectivity: By enhancing regional connectivity and logistics, a developed ECT can entice manufacturers and exporters to Sri Lanka. Higher exports and foreign exchange revenues may result from this.
  • Participation of the Private Sector: The ECT project may be stimulated by the participation of domestic and foreign private sector companies, fostering innovation, competition, and economic growth.