By: Staff Writer

May 06, Colombo (LNW): Sri Lanka and Vietnam ushered in a new era of diplomatic and economic cooperation with the signing of five pivotal agreements during President Anura Kumara Dissanayake’s official visit to Hanoi. The high-profile signing ceremony, held at the Presidential Palace, was witnessed by President Dissanayake and Vietnamese President Luong Cuong, signaling a strengthened partnership between the two nations.

The visit culminated in the signing of four Memoranda of Understanding (MoUs) and one key bilateral agreement, highlighting both countries’ commitment to deepening cooperation across a spectrum of vital sectors. At the forefront was a bilateral agreement aimed at enhancing cooperation and mutual assistance in customs affairs—an essential step towards improving trade facilitation and border management.

Other significant MoUs focused on industrial collaboration, agricultural innovation, and trade promotion. One MoU, inked between the Ministry of Industry and Trade of Vietnam and Sri Lanka’s Ministry of Industry and Entrepreneurship Development, seeks to boost cooperation in machinery and equipment manufacturing—a sector with strong potential for technology transfer and industrial growth. Another, signed between the Vietnam Academy of Agricultural Sciences and Sri Lanka’s Department of Agriculture, targets joint research and capacity building in agriculture.

 Diplomatic and academic ties were also elevated with a new MoU between Sri Lanka’s Bandaranaike International Diplomatic Training Institute (BIDTI) and Vietnam’s Diplomatic Academy, aiming to facilitate the exchange of scholars, diplomats, and training programs. Meanwhile, a trade-focused MoU between the Vietnam Trade Promotion Agency and the Sri Lanka Export Development Board (EDB) promises to pave the way for increased market access and joint participation in trade fairs, exhibitions, and business networking events.

In a strategic move to attract foreign investment, President Dissanayake personally invited Vietnam’s private sector giant, Vingroup, to explore investment opportunities in Sri Lanka. This gesture aligns with Colombo’s broader push to revitalize the national economy through foreign direct investment and cross-border partnerships.

The agreements are expected to unlock new commercial prospects in high-growth sectors such as value-added agriculture, fisheries, apparel, and processed foods. Both governments anticipate that the collaboration will not only enhance bilateral trade but also strengthen people-to-people ties through academic exchanges and mutual learning. President Dissanayake’s visit marks a proactive shift in Sri Lanka’s foreign policy direction, leveraging strategic regional partnerships to bolster economic development.

By: Isuru Parakrama

May 06, Colombo (LNW): A recent announcement by the Government of the Maldives, in partnership with MBS Global Investments, to create an $8.8 billion international financial free zone has sent ripples across South Asia’s economic and geopolitical landscape.

Dubbed the Maldives International Financial Centre (MIFC), the ambitious project is being touted as a major disruptor in the region’s quest to attract foreign investment, particularly as it mirrors—and in some areas surpasses—the objectives of Sri Lanka’s much-hyped Colombo Port City.

With the Maldives now firmly entering the race to become the Indian Ocean’s premier financial and business hub, Colombo may find its aspirations under serious threat.

Set to be completed by 2030, the MIFC promises a slate of lucrative incentives: zero corporate tax, tax-free inheritance, full foreign ownership, and stringent privacy protections. Furthermore, there are no residency requirements for those looking to invest or operate within the free zone.

These policies are specifically tailored to attract high-net-worth individuals, digital nomads, global investors, and fintech pioneers. Significantly, this vision is underpinned by support from MBS Global Investments, chaired by a Qatari royal family member, signalling strong Middle Eastern backing and geopolitical weight.

Colombo Port City, developed with Chinese investment and first proposed as Sri Lanka’s answer to Dubai or Singapore, was similarly envisaged as a magnet for international capital. Yet the project has faced delays, legal battles, environmental opposition, and most recently, policy uncertainty.

Despite years of groundwork, regulatory hiccups and Sri Lanka’s ongoing economic fragility have hampered its momentum. In contrast, the Maldivian proposal appears more cohesive, politically stable, and financially secured—precisely what many investors look for.

There is a stark contrast in timing and market perception. The Maldives’ plan projects a revenue of over $1 billion by the fifth year, with completion expected by the end of this decade. Meanwhile, Colombo Port City is still grappling with local integration issues and an uneasy public narrative about sovereignty and foreign influence.

The Chinese footprint in Port City has often been criticised as lacking transparency, raising fears of debt-trap diplomacy and neocolonial control. In comparison, MIFC’s Qatari backing is seen as less politically fraught and more aligned with sustainable development values—a narrative that sits well with Western investors wary of authoritarian entanglements.

Geographically, the Maldives has the advantage of being a well-established luxury and tourism brand, which it now aims to leverage into finance. With plans for a futuristic conference centre, residential and commercial towers, regional HQs, and education institutions, MIFC offers an all-encompassing, mixed-use urban experience.

Malé’s reputation as a safe and politically neutral location further boosts its appeal, especially as Sri Lanka continues to wrestle with domestic unrest and institutional reform following its recent economic collapse.

Sri Lanka’s economic strategy, especially post-IMF bailout, relies heavily on foreign investment flows to stabilise its balance of payments and stimulate growth. Colombo Port City was positioned as a linchpin in this recovery. However, the arrival of MIFC threatens to dilute investor interest and regional capital flows.

If global businesses perceive the Maldives as a more viable and less risky option, Colombo may find itself sidelined in an already competitive Asian investment landscape.

Moreover, the environmental and governance model proposed by the Maldives may draw additional attention. By branding MIFC as “wholly sustainable” and aligned with green finance, the Maldives is speaking directly to a new generation of investors who prioritise ESG (Environmental, Social, and Governance) standards.

Sri Lanka has struggled to market its own development agenda along similar lines, often weighed down by opaque policies and bureaucratic inertia.

It is worth noting that both nations are strategically situated along vital maritime routes in the Indian Ocean, and their financial centres are as much geopolitical statements as they are economic ventures. The Maldivian move thus not only introduces competition but also shifts the balance of influence in a region already fraught with China-India rivalries, Western interests, and Gulf ambition.

In the wake of this announcement, Colombo will need to make swift and bold adjustments. That means tightening regulatory clarity, accelerating infrastructure delivery, improving investor protection, and most importantly, building trust both locally and internationally. Otherwise, the promise of the Port City may well remain just that—a promise.

By: Staff Writer

May 05, Colombo (LNW): Sri Lanka President Anura Kumara Dissanayake met with General Secretary of the Communist Party of Vietnam (CPV), Tô Lâm, in Hanoi on Sunday, in a significant diplomatic engagement underscoring shared interests in economic development, anti-corruption efforts, and multilateral cooperation. The meeting took place at the CPV Central Committee Headquarters, as confirmed by the President’s media office.

General Secretary Tô Lâm, currently Vietnam’s most powerful leader, has led a far-reaching anti-corruption campaign that resulted in the resignation or dismissal of high-ranking officials, including a Prime Minister, President, and Speaker of Parliament.

At one point in 2024, this effort left nearly one-third of Vietnam’s politburo seats vacant. Following a brief tenure as State President, Tô Lâm assumed leadership after the death of former General Secretary Nguyễn Phú Trọng in July 2024.

Under his leadership, Vietnam plans to reduce its public workforce by 20 percent—a strategy aimed at easing the fiscal burden on citizens through spending-based consolidation. This contrasts with Western-style fiscal stimulus approaches that rely on increased public spending.

Tô Lâm praised President Dissanayake and the JVP Party, the core of Sri Lanka’s National People’s Power coalition, for their electoral success, calling it a reflection of the people’s trust in their leadership. He expressed optimism that Sri Lanka, under Dissanayake’s leadership, would achieve significant national development.

President Dissanayake, in turn, congratulated Vietnam on the historic reunification of the country on April 30, 1975, and commended its remarkable progress in economic development since. He lauded Vietnam’s transformation into one of the fastest-growing economies globally, with a steadily rising international profile.

The Sri Lankan President expressed a strong interest in learning from Vietnam’s experience in institutional reform, anti-corruption, and governance. Both leaders agreed to deepen cooperation, particularly at multilateral platforms like the United Nations, and to enhance South-South collaboration.

Vietnam began liberalizing its economy in 1984, several years after Sri Lanka, and stabilized its monetary system by the late 1980s, creating favorable conditions for business and foreign investment. Today, it is a low-cost, food-secure nation with low malnutrition rates and strong trade openness.

The visit marked a reaffirmation of Sri Lanka’s commitment to regional partnerships and a desire to model successful reform strategies from Asia’s emerging economies.

By: Staff Writer

May 05, Colombo (LNW): Despite a significant rebound in private sector credit, Sri Lanka’s fiscal pressures remain a concern as the country’s banking and finance sectors closed 2024 on a high note. The Central Bank of Sri Lanka’s Annual Economic Review 2024 reveals that private lending across licensed financial institutions surged by over Rs.1 trillion, driven by falling interest rates and a cautiously recovering economy.

According to the report, licensed commercial banks led the way with a Rs.789.6 billion increase in private sector credit—marking a 10.7% year-on-year growth. Licensed finance companies posted a striking 21.0% rise, adding Rs.277.1 billion to the credit flow, largely fueled by consumer demand for gold-backed loans, personal financing, and vehicle leasing. Licensed specialized banks, while growing at a slower pace, still registered a Rs.27.9 billion or 2.5% increase in loans.

This reversal from the credit stagnation seen in 2023 reflects improved liquidity and a reduction in market interest rates. However, analysts caution that the credit surge, while indicative of short-term economic recovery, does not fully address deeper fiscal vulnerabilities—including high public debt, revenue shortfalls, and the structural reforms demanded by international creditors.

The growth in credit was broadly distributed across key economic sectors. Lending to industry, which represents nearly 40% of private sector credit from commercial banks, rose by 8.4%, driven by increased financing to construction, textiles, chemicals, and transport equipment. The construction sector alone saw a 5.5% credit rise, signaling a tentative rebound after years of decline.

The services sector, accounting for 27.4% of credit, expanded by 12.3%. Retail and wholesale trade, IT and communication, logistics, and business services were among the primary beneficiaries. Agriculture, though a smaller credit recipient at 7.3%, recorded a healthy 8.2% loan increase, supported by favorable weather and improved rural market integration. Notably, credit flowed into food crops, fisheries, and paddy cultivation, aligning with national efforts to strengthen food security and reduce import dependence.

Despite this growth, concerns persist about the long-term sustainability of credit-fueled expansion in the absence of robust fiscal consolidation. The Central Bank noted that short- to medium-term loans outpaced long-term borrowing—raising questions about investment in infrastructure and capital formation necessary for sustained development.

While the lending uptick paints a picture of resilience, policymakers are reminded that without parallel progress in tax reforms, debt restructuring, and governance improvements, Sri Lanka’s fiscal outlook will remain fragile—even amid signs of credit and consumption revival.

By: Staff Writer

May 05, Colombo (LNW): The Sri Lankan government plans to impose surcharges on those found guilty. This move follows a recommendation made by the International Monetary Fund (IMF) in its 2023 governance diagnostic assessment report, which called for amendments to the National Audit Act by March 2024.

The revised policy aims to empower the Auditor General to levy surcharges on public officials — including Chief Accounting Officers — who fail in their duties of financial oversight and accountability. These surcharges may be imposed in cases of negligence, misconduct, financial losses, or failure to account for public funds as required by law.

Although no action had been taken since the IMF’s initial recommendation, the current government has now announced an expedited implementation plan. Within two months, a new procedure will be introduced, involving the appointment of an independent five-member committee by the Constitutional Council. This committee will review the Auditor General’s findings and take necessary action against culpable officials.

Previously, the Auditor General’s Department had the authority to disallow expenditures and recommend surcharges for issues such as legal violations in accounts or unreported transactions. However, these powers were limited to a select group of institutions, including local governments and universities. Under the new policy, the scope will expand to include ministries, departments, state-owned enterprises, corporations, and boards.

The independent committee will be led by a retired Supreme Court judge and will also include a retired public finance officer and a representative from the Institute of Chartered Accountants. This panel is expected to bring impartiality and credibility to the process.

The Auditor General’s Department routinely investigates state bodies for financial discrepancies and submits reports to Parliament, recommending necessary corrective actions. These can include disciplinary actions, policy reforms, and strengthened internal controls. However, due to inadequate follow-up and systemic coordination, such measures have often failed to materialize.

This renewed effort reflects the government’s commitment to improve accountability and transparency in public finance, as well as align with international standards on good governance.