Balancing Economic Partnership for Growth in the Post-conflict Sri Lanka

Abstract

Sri Lanka sits at the centre of the Indian Ocean straddling major shipping routes. Its geostrategic position has led to courting by players in the region including China and India. For decades, India was Sri Lanka’s principal economic partner, in terms of trade and investment, development cooperation or defence. Over the past decade, there has been a significant change, with warming of ties between Colombo and Beijing, especially during the height of Sri Lanka’s war years (2006–2009) and thereafter. Even with the change of government in 2015, Sri Lanka has shown no hesitation in making an adjustment to pro-China policy, despite early claims to ‘rebalance’ the country’s strategic relations. In the post-conflict period therefore, Sri Lanka is on a precarious course: seeking economic assistance from China while maintaining relations with India. In examining Sri Lanka’s political and economic relationship with India and China in the post-conflict period, and how Sri Lanka is attempting to balance the interests of these rising two economic powers in Asia, the chapter argues for a more strategic approach by Sri Lanka to take advantage of the opportunities to meet its own development agenda and vision to become an economic hub in the Indian Ocean.