Japan Builds Sri Lanka Ties With Aso Visit as China Clout Grows

Japan and Sri Lanka will hold their second high-level talks in less than two months as the East Asian nation seeks to safeguard ties and counter China’s growing influence on an island lying on key maritime routes.

Finance Minister Taro Aso is due to discuss bilateral ties with the island’s President Mahinda Rajapaksa today, according to an Embassy of Japan statement. He will also visit Sri Lanka’s main port in Colombo, which has been expanded with $800 million of Japanese assistance.

Rajapaksa has lured investment from China, Japan and India as he capitalizes on the end of Sri Lanka’s 26-year civil war to build a trade gateway to emerging markets. China has tightened its embrace by committing at least $3.7 billion since 2005 for projects from ports to a power plant, on an island that has attracted the world’s dominant nations since the 16th century for its access to pivotal sea links.

“Japan may be trying to counter China’s influence on Asia, while also diversifying its investments,” said Bimanee Meepagala, an analyst at NDB Aviva Wealth Management Ltd. in Colombo, the island’s largest private fund. “For Sri Lanka, it’s new sources for tapping funds, and who it can align itself with.”

Rajapaksa met Prime Minister Shinzo Abe in March in Japan. Sri Lanka has the potential to be a regional maritime hub and would play a “crucial” international role, the leaders said in their joint statement then.

Abe also thanked the president for welcoming port calls by Japan’s maritime self-defense force vessels engaged in anti- piracy operations, according to the statement.

Rajapaksa, whose armed forces defeated separatist rebels in May 2009, is seeking to take advantage of Sri Lanka’s position 31 kilometers (19 miles) off India’s southern coast. There lie the main shipping lanes connecting the Far East, West Asia, Africa and Europe.

The tropical nation’s strategic location led to colonization by the Portuguese, Dutch and British until independence in 1948.

To contact the reporter on this story: Anusha Ondaatjie in Colombo at anushao@bloomberg.net

To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

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