According to the global economic forecast at the outset of 2025, the Asia-Pacific and Indian Ocean Regions were poised to deliver the highest global growth. India was projected to lead the way with 6.5% growth, followed by China and the Association of South East Asian Nations (ASEAN) with 4.6% and 4.5% for the next two years. However, the year posed many challenges for the Asia-Pacific Region, including escalating international tensions there. This commentary will explore various regional challenges, including the conflicts between India and Pakistan, Cambodia and Thailand, as well as the tensions within Nepal, and between Iran and the US and its partner Israel. When faced with such tensions, what strategy did Sri Lanka take? How did Sri Lanka position itself in relation to regional peace agreements?
The year 2025 started with Sri Lanka’s president visiting China, which followed his December visit to India, his first trip abroad since his election victory in September 2024. Following the president’s visit to India, and despite continuing the cooperation agreement signed by the previous government of Sri Lanka, the new Sri Lankan government decided to review one of the major private sector renewable energy investments that had been announced by the Adani Group, an Indian conglomerate, which later forced it to pull out.
In hindsight, we can now see that this sent a negative signal to Indian investors as no investments of this size have been announced since. Similarly, a large Australian investor would later pull-out amid bureaucratic delays.
The President’s visit to China in early 2025, while having all the optics of a successful State visit, also failed to result in any new investment projects. Instead, a previous investment of $4.5 billion (‘Sri Lanka’s biggest investment since crisis will be a Chinese refinery’ (Firstpost)) by SINOPEC in an oil refinery project was reannounced at a $3.7 billion valuation.
These two visits were later followed by a visit to Vietnam; together, they showed that the new Government was looking to its Asian neighbourhood for its future, not too dissimilar from the previous Government. Additionally, while no significant investments were announced, this presented a positive outlook, given that this was where growth was projected in the coming years.
However, these ‘Asian future’ projections gave way to setbacks, as regional tensions in the Asia-Pacific and Indian Ocean Region began to appear more evident. The ongoing war between Hamas and Israel which started in October 2023 escalated into the wider region, with Houthi attacks on commercial vessels in the Red Sea area starting in 2023,
while Iran attacked Israel in 2024.
These all had wider implications for the Indian Ocean Region, as commercial activity had to bypass certain areas and the insurance of cargo became more costly. Sri Lanka’s navy started taking part in the Operation Prosperity Guardian in January 2024,
while Iranian President Raisi visited the island nation in April 2024.
In April 2025, a terrorist attack by a Pakistan-based group in Pehalgam, Jammu and Kashmir, India, led to increased tensions between India and Pakistan, and across the Region.
In the aftermath of this act of terror, Sri Lanka proceeded with its 5th iteration of its bilateral defence dialogue with Pakistan; senior Defence Ministry officials visited Pakistan from April 28th to May 2nd.
Questions remain on the timing of such a visit, as conflict broke out on May 7. For the four days while this hot conflict lasted, the Region was immediately pushed into uncertainty, as is expected when the Regional nuclear heavyweights have any conflict. Other great powers intervened to bring an end to the fighting, while Geopolitical Cartographer President Ranil Wickremesinghe called for greater regionalism in the Indian Ocean on May 10 in Bangalore, India.
On July 24, 2025, a conflict erupted between Cambodia and Thailand along contested territorial areas following the ASEAN Foreign Minister’s Meeting in Malaysia earlier in the month. On July 26, 2025, Sri Lanka’s Foreign Ministry issued a statement that “The Government of Sri Lanka is concerned over the recent incidents along the Cambodia–Thailand border, which has resulted in the loss of life, displacement of civilians and damage to culturally significant sites. As a nation guided by the timeless teachings of the Lord Buddha – centred on non-violence, compassion, and peaceful coexistence – Sri Lanka urges both countries to engage in early diplomatic dialogue aimed at resolving differences peacefully”.
Again, with the intervention of others, the fighting ceased on July 28, 2025 and at an event in Colombo on July 29, 2025, Geopolitical Cartographer International Advisory Council Member Mr. Kishore Mahbubani reaffirmed the power of ASEAN in meeting regularly.
By the end of August 2025, tensions among Nepal’s youth began to rise as mostly US-based social media companies refused to follow a directive of the Nepal Government to register with the communications authority of the country. This had followed a year of protests; the government seemed unwilling to listen to the voices of the youth.
By early September, the government announced that they would ban these social media companies, which led to mass protests among the youth, who were aggrieved by their lack of avenues for participation and saw this as an attempt to block them from seeing some of the extravagances of politicians and senior bureaucrats’ children’s lavish lifestyles.
This led to protests and the government turned to lethal measures to dispel the protestors. With the death of over 15 people, the protests erupted and became violent, leading to the storming of parliament and coordinated attack on state institutions. This forced the leaders of the incumbent government to resign.
Sushila Karki was announced as the interim prime minister on the night of Friday, September 12, 2025, and the Sri Lanka Government was quick to congratulate her, a stance which some say was too sudden.
The launch of the Geopolitical Cartographer Nepal Chapter, which was slated for the end of October 2025, was postponed.
In terms of economic statecraft, with the return of President Donald Trump in January 2025, many anticipated a trade-war with China; however, instead of this only taking place with China, the US seems to be re-evaluating the trade relationship which it has with every country. This forced countries and companies to relook at their trading relationships and derisk their supply chains. Additionally, it called the entire US-led trading architecture into question, where previous Most Favoured Nation (MFN) status at the World Trade Organisation (WTO) was replaced by a new framework were countries now had to unilaterally reduce their tariffs solely in relation to the US. The question remains: who stands to gain with rising uncertainty in Asia and the Indian Ocean Region?
The October edition of the World Economic Outlook projects a slight downturn in the Asian economies listed at the outset of this paper (Annex 2). Amidst such changes, what role will bodies like the Shanghai Cooperation Organisation play, given that the major leaders of this grouping all came together in September 2025? It is my opinion that Sri Lanka should accelerate its application for the Regional Comprehensive Economic Partnership (RCEP), and continue to work on regional Free Trade Agreements, while also trying to secure a stronger agreement with the US, and attract regional Foreign Direct Investment, without publicly reviewing existing investments. Additionally, it should position itself as a regional peace-broker or mediator, much like Malaysia did, and provide a neutral venue where others can come together to discuss their differences.
The Valdai Discussion Club was established in 2004. It is named after Lake Valdai, which is located close to Veliky Novgorod, where the Club’s first meeting took place.
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