Overview of Japan's Economic Cooperation to Sri Lanka

          Japan’s cordial relationship with Sri Lanka dates back to 1952, when Japan established diplomatic relations with Sri Lanka (then Ceylon). Since then, Japan has been a long- time partner in Sri Lanka’s socio-economic development as well as in the process of peace enhancement and reconciliation. Japan has also promptly provided relief and reconstruction assistance for conflict affected communities and those affected by natural disasters such as floods, droughts and tsunami.

         As of the end of December 2010, the Government of Japan has provided around 1,100 billion Japanese Yen (JY) (approximately Rs. 1,400 billion) as assistance to Sri Lanka under its various funding schemes that have benefitted people in all parts of the country including those in conflict affected areas. This assistance is provided through several funding schemes such as Grant Assistance, Technical Cooperation, and Yen Loan scheme and mainly executed by the Japan International Cooperation Agency (JICA) in close cooperation with the Government of Sri Lanka. In addition, Japan provides support through UN Agencies, World Bank, Asian Development Bank and local, Japanese, and international NGOs.     

         Japan’s assistance to Sri Lanka mainly focuses on two areas which are inter-related, and the assistance is expected to produce synergetic effects;

1. Consolidation of Peace and Reconstruction, and
2. Medium and Long-term Vision for Development

       In this context, Japan has engaged in the agendas of  i) post conflict reconstruction, ii) socio-economic infrastructure, iii) poverty alleviation, iv) human resources development and v) climate change adaptation and mitigation.

Recent Major Projects

  • The Construction of the Bandaranayake International Airport - Rs. 20.7 billion
  • Baseline Road - Rs. 12.5 billion
  • Expansion of the Colombo Port - Rs. 130.6 billion
  • Southern Transport Development Project - Rs. 60.7 billion
  • Provincial/Rural Roads Development Project - Rs.17.8 billion
  • New Mannar Bridge and improvement of the Causeway - Rs. 3.1 billion
  • Upper Kotmale Hydro Power Project - Rs. 63.3 billion
  • Vavuniya- Killinochchi Transmission Line - Rs. 4.5 billion
  • Solar Electric Power Generation - Rs. 1.4 billion
  • Kandy City Wastewater Management Project - Rs. 23.6 billion
  • Eastern Province Water Supply Development Project - Rs.8.2 billion
  • Pro-Poor Economic Advancement and Community Enhancement Project - Rs.6.4 billion
  • Improvements of Anuradhapura Teaching Hospital - Rs. 3 billion
  • Improvement of central functions of Jaffna Teaching Hospital - Rs. 3.8 billion
  • Digital Topographic Mapping of the Northern Province - Rs. 836 million
  • Development Planning for the Rapid Promotion of Reconstruction and Development in Jaffna District – Rs. 836 million.
  • Development Planning for the Urgent Rehabilitation of Resettlement Community in Mannar District – Rs. 836 million

Anuradhapura Teaching Hospital

Upper Kotmale Hydro Power Project

Manual de-mining

Sigiriya Museum

Bridge in Badulla constructed through GGP

Mannar Bridge

The recent major assistance projects for  socio-economic infrastructure include: i)  improvement of Anuradhapura Teaching hospital  by providing new facilities with medical equipment; ii) construction of  Vavuniya- Kilinochchi Transmission Line, iii) improvement of central functions  of Jaffna Teaching Hospital; iv) construction of the new Mannar Bridge and  improvement of the Causeway; v) improvement of Kandy City Wastewater Management;  vi) Eastern Province Water Supply Development; vii) Provincial/Rural Roads  Development; viii) construction of Upper Kotmale Hydro Power; ix) development  of Solar Electric Power Generation in Hambantota, x) construction  of Southern Highway from Kottawa to Kurundugahahetekma, and xi) construction of  the first section of the Outer Circular Highway in the outskirts of Colombo. These  projects are expected to contribute not only to the development and  welfare of all people of Sri Lanka, but also serve as a symbol of friendship  between the people of Japan and the people of Sri Lanka. Especially, the  projects in the Northern and the Eastern Provinces are expected to promote sustaining  peace and reconciliation among all communities.

Under Japan’s Technical Cooperation, a total of 11,057 Sri Lankan professionals and students have been trained in various fields in Japan and 1,724 Japanese Experts ad 788 Japan Overseas Cooperation Volunteers (JOCVs) have been dispatched to Sri Lanka up to the end of March 2009. At present, 56 Volunteers are actively working at the grassroots level and over 20 Japanese experts are working with counterparts in relevant Ministries and institutions. In order to strengthen the capacity of Northern and Eastern provincial authorities, Japan is currently involved in a project to build capacity of the local officials concerned. In addition, there are several scholarships offered by the Government of Japan to young Sri Lankan public officers in various fields of expertise. 15 officers selected for the Human Resource Development scholarship are presently pursuing their post-graduate studies in three universities in Japan.

The Government of Japan also provides  assistance to Sri Lanka through international agencies such as the World Bank, Asian  Development Bank and UN Agencies via Japan Special Fund, Japan Fund for Poverty  Reduction, Japan Social Development Fund, and Human Security Trust Fund etc. The  Eastern and North Central Provincial Road Project, Poverty Reduction through  Rural Infrastructure Maintenance, US$ 11 million (approximately Rs. 1,250  million) through IOM, UNHCR, UNICEF, and ICRC for providing shelter, food,  water and sanitation to Internally Displaced Persons (IDPs) living in camps. In  addition, US$ 7 million (approximately Rs.800 million) was provided through  seven Japanese NGOs operating in Sri Lanka under the Japan Platform Fund to  meet emergency humanitarian needs in conflict affected areas.

Japan’s Role in the Private Sector of Sri Lanka

Sri Lanka  and Japan  have enjoyed healthy bilateral relations in the area of trade and investments.  In this regard, the Japanese presence in the private sector of this country has  been maintained despite various challenges. Currently about sixty Japanese  companies are operating in the country. As good corporate citizens of Sri Lanka,  they have made a substantial contribution to Sri Lanka’s  economy through creating employment, generating exports and transfer of  technology to this country. In this regard, the Japanese Commerce and Industry  Association in Sri Lanka  are playing a coordinator role among the Japanese enterprises in Sri Lanka.  The Japan External Trade Organization (JETRO) is playing an important role in  further promoting bilateral trade between our two countries by disseminating  trade related information and responding to various queries made by the Sri Lanka  business sector.
Improving the business environment is very  crucial at this stage, especially in the context of new investment  opportunities that have emerged in the entire island including the Northern and  the Eastern parts of the country. We hope that the Government of Sri Lanka will  capture this opportunity by creating a stable macroeconomic environment and  reducing the cost of doing business where businesses and industries could  thrive. It is in this context that the Government-Private Joint Forum was  launched last year, which forms a framework for improving the business  environment for the Japanese companies operating in Sri Lanka. The regular  discussions between the Sri Lankan Government, Japanese companies and the Embassy  of Japan will not only benefit the Japanese companies, but will also contribute  to improving the business environment in Sri Lanka.
One significant event on promoting the Sri  Lanka and Japanese businesses is the Joint Meeting of the Sri Lanka-Japan and  Japan-Sri Lanka Business Co-operation Committees which is due to hold its 16th  gathering in Tokyo in 2011. This event will provide opportunity for business  partners to share experiences, meet new business partners, obtain guidance and  insight on investment opportunities and forge new heights in promoting and  enhancing Japanese investment, bilateral trade, and tourism between the two  countries.

Country Development Cooperation Policy for Democratic Socialist Republic of Sri Lanka January, 2018

1. Purpose of Development Cooperation
(1) Sri Lanka has traditionally been a good friend of Japan. Japan and Sri Lanka have maintained cordial relations, including cooperation in international arenas, since the establishment of diplomatic relations between the two countries in 1952. Sri Lanka is geopolitically important to Japan in securing its sea lanes and in developing economic ties not only with South Asian countries but also with countries in the Middle Eastand Africa.

(2) Since the end of the internal conflict in 2009, Sri Lanka has shown steady economic growth. However, Sri Lanka faces various challenges in furthering its continued economic growth such as, the delay in transition to high value-added industries , the mismatch in demand and supply in the labor market, underdeveloped infrastructure in various sectors including  transport and energy, insufficient social services in rural areas, and natural disaster risks given by its geographic location. In addition, there are areas in the North and the East where basic infrastructure was destroyed as a result of the 26 year long internal conflict.

(3) Therefore, Japan’s assistance to Sri Lanka aims to help Sri Lanka in addressing its challenges and promoting further economic growth, in addition to improving business environment for Japanese companies in Sri Lanka. In doing so, Japan hopes that the economic ties and the friendship between the  two countries will grow further.
Furthermore, it is hoped that Japan’s assistance will lend support to Sri Lanka’s national reconciliation efforts and economic and social developments, and thereby contribute to consolidation of democracy and stability in the entire South Asia as well as securing stability of the sea lanes.

2. Fundamental Principle of the ODA (Overarching Aim): Promoting high quality, inclusive growth
Aligning with Sri Lanka’s basic development principles, at the core of Japanese assistance is focus on developing infrastructure and institutions necessary for high quality growth in Sri Lanka, beyond the steady growth that the country has been achieving so far , and to impart stability to the country.
Considering Sri Lanka’s history of the internal conflict and current development environment, Japan provides impartial and fair assistance keeping in mind emerging areas, while paying attention to its vulnerability due to natural disasters, etc.
3. Priority Areas (Specific Aims)
(1) Promoting quality growth
For Sri Lanka to grow further economically, it needs to develop its transport infrastructure for domestic movement of goods and people mainly in the metropolitan area and for cross-border connectivity, to ensure distribution of affordable electricity and stable supply of water. Thus, Japan actively supports infrastructure development in sectors such as transportation, energy, water supply and sewerage, eyeing utilization of Japan’s advanced technology, both in hardware (physical) and software (institutional); such assistance could also contribute to improving business environment for Japanese companies in the country.
In anticipation of Sri Lanka’s entry into an upper middle-income country in the near future, Japan supports Sri Lanka’s efforts to promote investment and to develop private sector, and thereby improve economic and fiscal health of the country by enhancing public sector efficiency through such measures as improving system and introducing public-private partnership (PPP). In this context, Japan also supports efforts towards human resource development to strengthen administrative capabilities.
In addition, to ensure sustainable development of the economy, attention will be paid towards bilateral cooperation on developing information and communication technology, promoting cooperation on industries that form the basis for growth such as science and technology cooperation, developing local small and medium sized enterprises, and towards improving environmental and sanitary conditions.   

(2) Development cooperation for inclusive growth
Regional and individual disparities are widening with economic growth in Sri Lanka. In addition, regions in the North and the East of the country are lagging behind in development due to the effects of the internal conflict in the past. Therefore, Japan supports development of industries and human resources with focus on agriculture, improvement of basic infrastructure that contributes directly to people’s lives and their industrial activities, and women’s economic empowerment in order to improve livelihoods of the people in these areas. In addition, Japan also pays attention to coastal regions where people live primarily on fishing and the regions with potential tourism resources, and continues to assist in demining activities in the Northern areas.

(3) Mitigating vulnerability
 Sri Lanka, being an island nation, is strongly affected by monsoon and vulnerable to natural disasters such as heavy rain. It is also vulnerable in social service due to the delay in establishing its service delivery system. Therefor measures to mitigate its vulnerability are needed.
Japan provides physical and institutional assistances to develop and strengthen Sri Lankan government’s capacity for tackling climate change and natural disaster risk reduction, and also to improve social services such as health and medical services.

4. Points of consideration
(1) In providing its assistance, Japan pays attention to the regional and ethnic balances in the country in order to encourage Sri Lanka’s efforts for national reconciliation.

(2) The World Bank revised its assistance policy toward Sri Lanka in 2016. Emerging countries such as China and India are actively assisting Sri Lanka in recent years. In providing its assistance, Japan pays attention to activities of other development partners.

(3) In order to support sustainable economic development of Sri Lanka, Japan also pays attention to environmental and social impacts of development. Additionally, Japan considers assistance in human resource development and in science and technology through higher education to enable efficient operation of its economic and social management activities.

(4) Japan continues to place emphasis on public-private partnership and cooperation with NGOs and international organizations.