By Sarath Obeysekera

Sri Lanka today stands at a decisive moment in its economic journey. While recent engagements with India have strengthened infrastructure and energy cooperation, the next phase of growth must come from industrialisation and export-led development. In this context, the recent agreements with Indian Prime Minister Narendra Modi and the anticipated visit of the Vietnamese leadership present two distinct—but complementary—opportunities.

During the 2025 visit of Narendra Modi, Sri Lanka entered into several important agreements with India.

These included the development of the Trincomalee energy hub, renewable energy projects such as Sampur solar, and the proposed interconnection of electricity grids between the two countries.

 In addition, cooperation in digital identity systems and capacity-building programmes for Sri Lankan professionals were also agreed upon.

These initiatives are significant. They strengthen Sri Lanka’s energy security, improve infrastructure, and deepen regional integration. However, they are largely focused on support systems—energy, connectivity, and training—rather than directly creating large-scale manufacturing or export industries.

This is where Vietnam offers a powerful lesson.

Over the past three decades, Vietnam has transformed itself into one of Asia’s most dynamic industrial economies. From a largely agrarian base, it has become a global manufacturing hub, exporting electronics, garments, machinery, and processed food to the world. This success was not accidental. It was built on disciplined policies—export processing zones, foreign direct investment facilitation, skilled workforce development, and deep integration into global supply chains.

Sri Lanka must now ask: how can we replicate elements of this success?

The upcoming engagement with the Vietnamese President should focus on concrete industrial partnerships rather than general cooperation. 

One key proposal is the establishment of joint Sri Lanka–Vietnam industrial zones in strategic locations such as Trincomalee, Hambantota, and Bingiriya or any other ordered location 

These zones can attract Vietnamese manufacturers seeking to expand beyond their increasingly saturated domestic base.

Vietnam itself is now facing rising labour costs and capacity constraints. This creates an opportunity for Sri Lanka to position itself as a Vietnam Plus One” destination—offering competitive labour, strategic location, and port access.

Another important area is manufacturing relocation. Sri Lanka can invite Vietnamese firms to set up operations in sectors such as footwear, light engineering, motor car assembly ,electronics assembly, and agro-processing. This would generate employment, enhance exports, and bring in much-needed foreign exchange.

Port-led industrialisation is another promising avenue. By linking our ports—particularly Trincomalee and Hambantota—with Vietnamese logistics and industrial expertise, Sri Lanka can develop marine industries, ship repair facilities, and fisheries processing hubs. Given our geographic position, this is a natural advantage we have yet to fully utilise.

Equally important is skills development. Sri Lanka should propose the establishment of joint technical training institutes with Vietnam, focusing on modern industrial skills such as CNC machining, automation, and electronics. Moving beyond low-skilled labour is essential if we are to compete globally.

Agriculture too can benefit.

Vietnam has successfully built export-oriented fisheries and agricultural industries. Collaboration in aquaculture, food processing, and value-added exports could transform coastal economies in areas like Negombo and Trincomalee.

Strategically, Sri Lanka must recognise the difference between its partnerships. India provides strength in infrastructure, energy, and regional stability. Vietnam offers a model—and potential partnership—for industrial growth and export expansion. Both are essential, but they serve different purposes.

Sri Lanka has long depended on loans, aid, and infrastructure projects. While necessary, these alone do not create sustainable economic growth. What the country needs now is a shift towards production, manufacturing, and exports.

India is helping us build the foundation. Vietnam can help us build the industries.

If we act with clarity and purpose, Sri Lanka can transform itself into a competitive industrial hub in the Indian Ocean—leveraging its location, talent, and partnerships. The opportunity is real. The time to act is now.

Regards

Dr Sarath Obeysekera