• Says SL’s quick economic recovery is remarkable, a testament to the resilience of its people
• Calls for diversification of markets and exports in preparation for debt repayment challenges 

Sri Lanka and Australia have endured the trials of the Indian Ocean and beyond, and share a close relationship with people-to-people links as its core. The Indian Ocean neighbours have enjoyed almost 80 years of diplomatic relations as sovereign states and share many common challenges, which they work closely on managing and overcoming. 

Outgoing Australian High Commissioner to Sri Lanka Paul Stephens, who took over duties in Colombo during a turbulent period, has been a witness to the island’s resilience and joined The Sunday Morning for an exclusive interview about his tenure in Colombo and what is in store for both nations in the future.

Following are excerpts:

Having assumed duties nearly three years ago, in the thick of a turbulent period in Colombo, what are your views on how Sri Lanka has weathered the storm?

I think the economic recovery Sri Lanka underwent was quite remarkable and quick. It is easy for us to forget just how much turmoil there was in the country three years ago. I think it is a testament to the resilience of the Sri Lankan people that the recovery was quick and deep. I think it is also a testament to the good policies introduced by the previous Government, which the current Government has maintained.

The support of the International Monetary Fund (IMF) and bilateral creditors has been very important. Obviously India was generous with grants and lines of credit. Australia also provided a big uptick in humanitarian support and response to the crisis as well. 

I think the recovery has been strong, but the challenge now is to provide real economic growth that can help safeguard Sri Lanka from future shocks, especially when debt repayment begins in 2028. The challenge is to find new export markets, diversify exports, and provide conditions for quality foreign investment. The recovery, the turnaround, was remarkable, but I think challenges persist.

What are some of your most memorable moments in Sri Lanka and how do you view the country’s future?

I can share so many moments. As a tourist, I have visited most corners of the island and seen amazing features, forest, and wildlife. I have seen leopards in Yala and Wilpattu. Sigiriya rock is incredible. The country has amazing natural beauty and it is a unique place. It has provided much stimulation and enjoyment to me and my wife as tourists.

In my official capacity, as a cricket enthusiast, having the opportunity to host the Australian team here for two Test matches and two one-day matches was fantastic and was a real highlight. Also, being able to organise and see through the gift of maritime surveillance aircraft and hydrographic equipment, which took a huge amount of work from the Sri Lankan side and the Australian side here and in Canberra – it was great to be able to see that through. 

As for the future, conditions are in place for Sri Lankans to look forward to a better future, as a country that embraces inclusion and diversity, and transparency and accountability, but there is still much work to do.  

As a long-standing partner and neighbour, in what areas would Australia like to see policy clarity from Colombo? And are you concerned about a policy continuance in Colombo, due to its history or lack of it?

The number one issue we would like to see policy clarity on is the arrangement for foreign investment. We would like to see rules and procedures for foreign investment that are clear and transparent. We would like to see a methodical process which potential investors can understand at the outset and be confident about the rules. This would be helpful for foreign investors. Sri Lanka must create a more conducive environment to attract investors to lay the strong foundation for real growth, especially with the debt repayment about to begin.

On the policy clarity issue, all democracies can be subject to that; you have an election every three to four years, which is the case even in Australia. This obviously brings a possibility of political change. I think business and investors like policy clarity. There is always a risk of policy change in a functioning democracy. 

Just when Sri Lanka was gaining economic stability, the world of trade was upended due to a trade war. As a seasoned diplomat, how do you think Sri Lanka should navigate this challenging period? And has the trade relationship between both nations improved over the decade?

All countries are grappling with how to respond to the US tariffs; this includes Australia. We see the tariff as an act of economic self-harm; we don’t agree with it. 

I am not privy to the negotiation that Sri Lanka is having with the US about the risk of the tariff being increased. From what I observed, your official delegation is getting meetings with the right people, in Washington and online.

I think you’re getting the opportunity to understand what the US wants in order to reduce the tariff. Having that opportunity is important. I hope that Sri Lanka can negotiate the lowest tariff possible, because whatever the tariff ends up being, the consequence for some sectors in Sri Lanka is significant. Just when the recovery is solidifying, such a tariff hit brings the situation to question.

For the bilateral relationship, over the last five years we had Covid-19, which impacted everyone, and then Sri Lanka had the economic crisis, so what we could have achieved was somewhat constrained. But what we have seen since Sri Lanka’s economy stabilised and borders opened up is a huge amount of ongoing growth in terms of services, especially in tourism and education. 

The education market in Sri Lanka is important for Australia. I think it is a win-win equation for Sri Lankan students to have the opportunity to get high-quality Australian education either in Australia or in Sri Lanka through one of the 35 Australian universities in Sri Lanka through a partner institution. Three Australian universities have opened up in Sri Lanka, two while I have been here, and there is a possibility of a few more in the future. There has been a huge uptick in interest in Sri Lanka by the Australian education system while I have been here.

Australia extended support and assistance to Sri Lanka over the last three years to help with essential services and food and medicine purchases. Are you satisfied with how the assistance provided was utilised? Are there more assistance programmes in the pipeline?

Yes, we are satisfied with how the humanitarian support provided was utilised. I personally observed some of that support – food donation and medical equipment given through United Nations (UN) agencies. It was very gratifying to see some of the most vulnerable people, including women and girls, having access to such.

In terms of our current and future programmes, we are a long-standing development partner of Sri Lanka. We have a bilateral development programme worth about $ 25 million a year. Under that programme, during my time here we launched a new gender programme with Prime Minister Harini Amarasuriya, which will focus on the economic empowerment of women. 

We are also looking at a new skills programme; we already have a history of providing skills development programmes. We have developed a curriculum for skills development, which has now been handed over to the vocation training authorities, and which local authorities can continue.

Sri Lanka embarked on a reforms programme and has attempted to improve transparency and accountability to help improve its economic situation. How do you gauge the outcomes from such efforts?

We are pleased to see the Government’s focus on improving transparency, accountability, and good governance. We feel that the Government’s efforts are sincere and serious, so we will support and encourage those efforts. We are aware that effecting such cultural changes doesn’t happen quickly and is not an easy task. 

It is not realistic to expect the environment around transparency and good governance to improve overnight; it requires a sustained and dedicated effort.

Australia and Sri Lanka boast of over 75 years of diplomatic relations and a longer colonial history. As you prepare to take up new duties, what are your views about bilateral relations at present? And what are the key topics for the relationship between Colombo and Canberra to grow? What’s in store for the Indian Ocean neighbours?

I am satisfied with the depth and breadth of the relationship. I think the people-to-people links are the bedrock of our relationship. In education, there are over 20,000 studying in Australia and nearly 90,000 Australians visited Sri Lanka as tourists. That number demonstrates the strength of our links. 

Of course, the strong and diverse Sri Lankan diaspora in Australia is part of it too; there are about 180,000 now living in Australia, so they provide a solid link too. Following the Parliamentary Elections, now there are two Australians of Sri Lankan descent in the House of Representatives. I think that number will only continue to increase. 

In the last few months we have seen an increase in high-level visits to Sri Lanka by senior Australian officials. Our Governor-General is expected to visit in August as well. Such high-level visits also demonstrate Australia’s strong interest in Sri Lanka.

We are Indian Ocean neighbours; we both benefit from a secure, prosperous, and resilient Indian Ocean Region. We are strong partners in working together in preventing transnational crime. That has focused a lot on preventing people smuggling, but is also increasingly spreading to other areas such as counter-narcotics and illegal fishing – both of which are important for Sri Lanka. 

For the future, I’d like to see a strengthening of our strategic partnership further, in terms of shared interest in a stable and prosperous Indian Ocean. I think there are big opportunities in investment, especially in mining and energy. 

Sri Lanka has a lot of untapped resources. If Sri Lanka can put in place the right type of regulatory processes to use some of that sustainably, there is a lot of potential. Australia also has a lot of experience and expertise in renewable energy. 

The current Government is also focused on digitalisation and we are offering our support and experience from our digitalisation journey, which happened much earlier.

Small and medium-sized states rely on multilateralism and rules-based order to ensure stability and growth. What are the areas Sri Lanka can look at in terms of multilateralism and regional networks to improve its preparedness for issues like climate change, sustainable development, resource use, and ocean governance?

I will mention two particular arrangements that are important to Australia, which I think Sri Lanka can work with us in terms of taking forward. 

One is the Indian Ocean Rim Association (IORA). In our view, IORA is the most representative and mature regional organisation for Indian Ocean countries. It hasn’t always been as effective as it ought to be, but I think we can work together to improve it. It provides a platform and dialogue to promote stability and growth. I think IORA is one of the most prospective regional platforms. A more effective IORA can definitely lead in areas like ocean governance and sustainable use of ocean resources.

Another is the Regional Comprehensive Economic Partnership (RCEP), a 15-country arrangement. The previous Sri Lankan Government started the process to join the RCEP and the current Government has maintained the interest of the previous Government. If this continues, we will see definite value in Sri Lanka joining the RCEP. It would increase market access. 

Free Trade Agreements (FTAs) also require countries to stick to their standards, which would require Sri Lanka to evolve some domestic mechanisms and regulations. We are supportive of Sri Lanka’s RCEP bid and will offer our help once it starts to gain momentum.

The bilateral security, border control, and defence relationship has grown significantly over the last decade. Sri Lanka has become a participant in the Indo-Pacific Endeavour (IPE) and other defence initiatives which Australia spearheads in the Indo-Pacific region. How important is the bilateral security partnership and what is in store for the future?

It is certainly a critical part of the overall bilateral relationship between our nations. It’s not just about gifting assets like patrol aircraft, vessels, drones, and hydrographic equipment. It is very much about institutional exchange, training, and capability improvements. Stronger connections are important; they underpin relationships. 

We have been effective in some parts of preventing transnational crime and we will broaden our joint efforts. We have done a lot of work on improving maritime domain awareness capacity building. I think we are all aware of the importance of India in the current geo-strategic context.

The first-ever defence policy talks between Sri Lanka and Australia took place last year. This is a good platform for our deeper discussion on our strategic and defence policy challenges. The second iteration of those talks will happen in Canberra. That engagement is off to a strong start. 

I think we would also like to engage with Sri Lanka on defence reforms initiatives. A number of Sri Lankan governments have considered defence reforms and ‘right-sizing’ of the defence establishment has been considered. Australia is willing to share its experience in defence reforms and on how to get the balance right.

In Sri Lanka’s case of maritime importance, being a small island State, you need to have the right resources in your Navy and in your Coast Guard and improve other capabilities. Australia is ready to share its expertise and experience.

PHOTO KRISHAN KARIYAWASAM