Sri Lanka

Last updated in April 2013

Political relations

Political relations between Germany and Sri Lanka are good.

Germany is engaged in a variety of ways in Sri Lanka (a cultural institute, political foundations, the Alexander von Humboldt Foundation, the German Academic Exchange Service (DAAD), the South Asia Institute and friendship societies) and is respected and valued as a reliable partner.

Economic relations are also of importance. The European Union is Sri Lanka’s principal trading partner, taking 35 per cent of the country’s exports. Germany accounts for 5 per cent of total exports. For many years, Germans have also made up a large portion of the foreign tourists visiting Sri Lanka (in 2012 they numbered approximately 71,000).

Together with its EU partners and other Western countries, Germany is closely monitoring respect for human rights and the development of the humanitarian situation in Sri Lanka. In the wake of a civil war that lasted nearly thirty years, the focus is on achieving a lasting reconciliation between the country’s different ethnic groups, especially between the majority Sinhalese and the Tamils.

In the war-ravaged north and east of the country, Germany is providing emergency and transitional aid as well as helping with reconstruction. The assistance is being provided through international organizations, the implementing agencies of German development cooperation – the Gesellschaft für Internationale Zusammenarbeit (GIZ) and the KfW Development Bank – as well as German non-governmental organizations.

Economic relations

Sri Lanka has concluded the following agreements with Germany:

• trade agreements (1950, 1955 and 1958)
• framework agreement on Technical Cooperation (1973)
• air transport agreements (1973 and 1995)
• double taxation agreement (1979)
• investment promotion and protection agreement (2000)

The cooperation agreement between Sri Lanka and the EU that entered into force in 1975 has been superseded by a new agreement that came into effect on 1 April 1995.

In 2012, bilateral trade with Sri Lanka was worth EUR 722 million, approximately 4 per cent more than in 2011 (EUR 693 million). German imports from Sri Lanka grew by approximately 3 per cent and German exports to Sri Lanka by 7.5 per cent. Germany’s main imports from Sri Lanka are textiles, rubber and tea, and its chief exports are machinery, electrical goods, chemical products and motor vehicles. Since mid-2011, German companies have been showing increasing interest in Sri Lanka, particularly in the renewable energy, medical technology and IT sectors. For years, Germany has recorded a balance of trade deficit with Sri Lanka. In 2012, German exports to Sri Lanka amounted – in euro terms – to only 50 per cent of German imports from there.

Germany has traditionally been one of Sri Lanka’s most important partners in the tourist industry. However, there has been a continuing downturn in this sector, due initially to the tsunami, then to the civil war and the security situation, but also on account of global developments and international competition. While some 59,000 German tourists visited the country in 2004, in 2008 and 2009 they numbered only around 30,000. With some 46,000 German visitors in 2010 and around 56,000 in 2011, this downward trend has been halted. 2012 actually saw 71,000 German tourists visiting the country, well above the previous 2004 record.

Some 120 German companies have invested in Sri Lanka, creating around 20,000 jobs. Founded in 1999, the Sri Lanka-Germany Business Council, in which businesspeople from both countries are seeking to promote bilateral economic relations, has 82 members.

Development cooperation

Since the late 1950s, Germany has been one of Sri Lanka’s principal bilateral donors. Up to and including 2004, total development cooperation (DC) commitments amounted to EUR 381.5 million for Technical Cooperation (TC) and EUR 717.3 million for Financial Cooperation (FC). The last regular commitments, for 2003 and 2004, were worth EUR 21.5 million (TC) and EUR 17.3 million (FC).

In 2005, in the wake of the tsunami, the Sri Lankan government received from Germany, in addition to emergency relief worth EUR 10 million, a pledge of EUR 85 million in reconstruction assistance (EUR 49 million in FC and EUR 36 million in TC), an amount that was subsequently increased. This brings the total development cooperation funding provided by the Federal Government to Sri Lanka in tsunami aid to over EUR 100 million. The tsunami relief programme has since been fully implemented, giving thousands of people the chance to make a new start by rebuilding houses and infrastructure, granting micro-loans and promoting fishing and small businesses.

The conflict, which flared up again in 2006 and eventually developed into a fully fledged civil war, caused a marked deterioration in the conditions for long-term development cooperation. Consideration of the political and military situation eventually led, in late 2007, to a fundamental restructuring of development cooperation. Conflict transformation became the focus of bilateral cooperation, which encompasses five major projects (peace education in schools, promotion of civil-society peace initiatives, training measures for the administrations of the Eastern and Northern Provinces, promotion of the microfinance sector and assistance with the resettlement of internally displaced persons). In 2009, the Federal Government provided EUR 10.5 million in funding to alleviate the plight of those internally displaced by the civil war, to normalize living conditions for those temporarily accommodated in camps and to support their resettlement.

In addition to the EUR 5 million pledged for ongoing projects, in 2010 the Federal Government provided EUR 940,000 to fund humanitarian aid projects as well as humanitarian mine clearance and disaster prevention projects. Also implemented was a vocational training project worth EUR 2.9 million in Sri Lanka’s civil-war-ravaged Eastern Province.

In 2010 and 2011, emergency and transitional aid worth a total of EUR 7.4 million was made available (including humanitarian aid projects and food aid for flood victims).

In 2011, Germany also pledged a low-interest loan worth EUR 28 million to build a children’s hospital and a total of EUR 8 million to set up a vocational training centre in the former war zone in the north of the country.

In 2012, EUR 6 million was made available for ongoing programmes in the education sector and to promote small and medium-sized businesses, as well as nearly EUR 100,000 in humanitarian aid for cyclone and drought victims. The German Embassy also provided a total of EUR 79,000 to fund eight micro-projects.

So far, EUR 170,000 in humanitarian aid has been provided for flood victims in 2013.