Japanese Ambassador’s remarks on corruption A defining moment for SL to improve business climate

• The Sri Lankan economy has suffered immensely due to corrupt practices involving politicians and bureaucrats alike. Corruption denies major investments into the country
• Sri Lanka can no longer afford to remain passive in the face of global trade realignments. The country must actively position itself in emerging regional architectures and secure long-term access to markets
• In the face of mounting global uncertainties, Sri Lanka’s window to reform and diversify its export economy has never been clearer. The pause in U.S. tariff threats must not lull policymakers into complacency

After U.S. President Donald Trump announced reciprocal tariffs on imports from different countries, including Sri Lanka, policymakers across the world contemplated ways and means to diversify their export markets and products. For Sri Lanka, such an approach is all the more realistic because it depends on the U.S and the European Union for a bulk of its exports. The U.S. alone accounts for 23 per cent of Sri Lanka’s total exports.
Currently, there is a pause in the implementation of reciprocal tariffs, and the countries, including Sri Lanka, are in touch with the U.S. government authorities to seek redress. Sri Lanka is also ready to make some compromises to narrow the trade gap with the United States. The reduction of para tariffs and the increase in imports from the United States are among them. The government will make every possible effort to retain the market access for its products, mainly apparel, in the U.S.
For years, if not decades, the need for a broader export base has been discussed, but tangible actions have not yet been taken on the ground. Even minimal steps taken in this direction have yet to yield sufficiently. Action is needed to help cushion the impact of exogenous shocks without any further delay. In case of global recessions or disruptions, diversified economies are resilient. Diversification ensures that if demand falls in one region or for one product category, other areas may still provide stable revenue. Recently, India struck a trade deal with the UK, which sees it as a major achievement to stave off the impact from Brexit.
Sri Lanka has signed Free Trade Agreements (FTAs) with countries such as India, Pakistan, Singapore and Thailand. It mulls agreements with other countries at the moment.
Sri Lanka has initiated talks with India for signing the Economic and Technology Cooperation  Agreement (ETCA) with India, which is interpreted as a broad-based version of the FTA which is currently in place. Twelve rounds of talks have been conducted by the two Asian neighbours. A sense of urgency now prevails for Sri Lanka to make fresh initiatives to resume talks to gain access to the vast Indian market. The government, in the immediate aftermath of the U.S. reciprocal tariffs, requested India to increase the quota for apparel imports from Sri Lanka to 50 million pieces. It is actually a matter proposed by Sri Lanka during ETA negotiations in the past. What happened now is only a renewal of the request. Yet, India will consider it in a broader context during ETCA talks in the future. However, it is now high time for Sri Lanka to take action.
Likewise, Sri Lanka should take steps to explore avenues for early entry into Regional Comprehensive Economic Partnership (RCEP). During the time of the previous government, a team of senior officials concluded a fact-finding mission to Jakarta in this regard. Sri Lanka’s strong interest to enter into RCEP was well received by the ASEAN Secretary General Dr. Kao Kim Hourn, ASEAN Deputy Secretary-General Satvinder Singh, Senior Officials of the ASEAN Secretariat, Indonesian Government officials and a number of Ambassadors of RCEP in Jakarta, during the Mission, according to a statement by the Foreign Affairs Ministry at that time.
It is also important to revive the stalled FTA negotiations with China. Talks were undertaken during the 2010-2015 regime of 
Mr. Mahinda Rajapaksa.
Such agreements alone will not suffice. The export economy should not remain heavily concentrated around industrial goods, particularly apparel. Diversification is needed. For that purpose, Foreign Direct Investments (FDIs) are required. Once FTAs are in place with major countries and regions, FDIs will flow in. For that to materialise, what is needed next is the improvement of the business climate in the country. The Sri Lankan economy has suffered immensely due to corrupt practices involving politicians and bureaucrats alike. Corruption denies major investments into the country.
Eradication of corruption was a much-touted campaign slogan of President Anura Kumara Dissanayake. He is now in office. It is not an easy task to be accomplished. Corruption involving bureaucrats is even difficult to root out.
Recently, Japanese Ambassador Akio Isomata said that Japan was a victim of corruption in Sri Lanka. He, at a roundtable meeting organised by Pathfinder Foundation, emphasised the need to deal with corruption involving bureaucrats.
Eradication of corruption, improvement of business environment, easing rules and regulations and enactment of Sri Lanka’s accessibility to regional markets through tariff-free regimes are steps to be looked into without any further delay.
The Japanese ambassador even shared his experience in dealing with the U.S. in the wake of reciprocal tariffs.
“To start with, this, you know, Japan’s response to U.S. reciprocal tariffs, our negotiation is still going on right now. Our delegation is still in Washington. Chronologically speaking, the so-called Liberation Day announcement was made by President Trump early in April. Immediately on April 7, our Prime Minister made a phone call to President Trump, and both leaders decided to appoint, designate a minister in charge for negotiation, bilateral negotiation between Japan and the United States on this issue. On April 16, there was the first ministerial meeting in Washington, D.C. between the two delegations,” he said.
Sri Lanka’s strategic geographic location offers potential as a transshipment and logistics hub for South Asia. Upgrading port facilities further, streamlining customs procedures and forging public-private partnerships to develop industrial parks can attract regional manufacturers and distributors.
In the face of mounting global uncertainties, Sri Lanka’s window to reform and diversify its export economy has never been clearer. The pause in U.S. tariff threats must not lull policymakers into complacency. Instead, it should catalyse a comprehensive national strategy: deeper regional integration, robust FDI attraction, sectoral upgrading, and unrelenting anti-corruption efforts. Only then can Sri Lanka build a truly resilient, competitive and diversified export economy.
Sri Lanka can no longer afford to remain passive in the face of global trade realignments. The country must actively position itself in emerging regional architectures and secure long-term access to markets. But to unlock these doors, the key lies in domestic reform—policy consistency, good governance, and a determined push to clean up the system from within. Without these, even the best trade deals will remain underutilised promises on paper.
Lack of policy consistency has also kept prospective investors away from Sri Lanka. That is another area to be looked into when creating a business-friendly environment.