Colombo Port City - a boost for Sri Lankan economy | Sunday Observer

Colombo Port City - a boost for Sri Lankan economy

25 April, 2021

The Colombo Port City Economic Commission Bill is a hot issue that surfaced in Sri Lankan politics in recent times. This city will undoubtedly meet the need to restructure the worst-affected Sri Lankan economy, despite being politically entrenched and hotly debated. This article discusses some of the facts regarding the Port City and its benefits to the nation and draws the attention on the criticism on the above bill. Sri Lankan Government initiated its efforts to establish a Colombo Port City in 1998.

The project was a large-scale land reclamation project funded by China Communication Construction Company. This is the flagship project of the Mahinda Chinthana and China’s Maritime Silk Road. Through this project, both countries seek to enhance the economic development and infrastructure of the western metropolitan areas of Sri Lanka by constructing the Colombo Port City.

In November 2013, the China Communication Construction Company and Sri Lanka Investment Authority signed the Colombo Port City Plan Agreement. As per the agreement, China Harbor Engineering Co. Ltd., solely owned by China Communication Construction Company, was responsible for the first phase of the port city project. The first phase was subjected to three-years. It involves an investment of 1.4 billion. The second phase aims to attract more than $ 13 billion in investment. The project will reclaim 276 hectares of coastal land and create more than 5 million square meters of building space. A high-quality urban development plan will be executed to integrate business, finance, tourism and residential activities through this project.

Abandonment of project

The Government that came to power in 2015 suspended the Colombo Port City project on 4th of March 2015 in the name of reconsidering the environmental impact. The China Communication Construction Company suffered a direct economic loss of $ 380,000 every day as the Sri Lankan Government suspended the project.

The Government faced a severe financial crisis and had to rejoin China. On March 8, 2016, the report of the Central Environmental Authority was approved by the Cabinet for the Port City project and the contract was extended for a further period of six months. The Government of Sri Lanka announced that the conditions for the resumption of Port City construction had been met and that the Chinese Companies could begin construction immediately. Subsequently, the project was renamed the Colombo International Financial City and was incorporated into the Western metropolitan plan of the Government of Sri Lanka.

Chinese companies are currently in the process of expediting the completion of the Colombo Port City project. This project will play a significant role in the future economic development of Sri Lanka. With the completion of this project, there are opportunities for direct foreign investment in Sri Lanka, increased employment opportunities for locals, knowledge transfer and more.

Transforming Colombo

President Gotabaya Rajapaksa’s election manifesto had included the proposal to transform Colombo into a business and financial hub through the Colombo Port City. We all know that the importance of business and financial inflow is crucial for the development of a country. With the realisation of the above fact, the current Government already initiated the Colombo Port City project, one of the most important projects for Sri Lanka to attract international investment. In such circumstances, a special regulatory system which is conclusive for business to operate faster productive is essential to run such a city in international standards as the current economic regulation for business and investment is cumbersome.

That is exactly what the Government is trying to do by introducing a bill namely Colombo Port City Economic Commission Bill. Sri Lankan citizens also mandated executing such a port city development plan in the 2019 Presidential Election.

Structure and economy

The Port City includes five grounds - the financial district, central park living, island living, the marina and the international island - offering office, health care, education, retail and entertainment facilities, as well as hotels and restaurants. When this plan comes into effect, there will be better employment opportunities for Sri Lankans across the country. This city will serve as a hub for access to finance and service with the most successful modern facilities. The city will also be a hub for absorbing future generations of Sri Lankans into the modern world. It can also be seen as the largest project to connect Sri Lanka with the Middle East, East Africa and the Asia Pacific region.

The most important crisis facing Sri Lanka in recent times is how to manage the economy. The country’s economy has been hit hard by the impact of the political instability and Covid-19, resulting in a slump in GDP and currency.

The current economic crisis has affected more than twenty million people of this country. The Government has a responsibility to expedite the recovery of the country. In this context, establishing a financial city will be a factual instrument to revitalise the Sri Lankan economy.

The city can create employment for millions of Sri Lankans, and it will undoubtedly serve as a hub for creating an international market for domestic products.

The establishment of such a city is necessary to improve the tourism sector of the country. Many of the world’s most economically developed countries have succeeded in adopting such approaches. The establishment of such a city must be seen as essential for Sri Lanka to lead today’s internationally competitive economy.

The Government has embarked on an effort to implement such an important project. Building and operating a world-class business and financial city is a daunting task. Attracting foreign investors to carry out the project within the strict legal framework currently in place in the country is not an easy task. The Government has embarked on an effort to create a separate legal framework for governing the city.

We can see that the financial cities like Singapore and Dubai have been thriving economically in implementing such mechanisms. When a special economic zone is established, the maximum benefit can only be achieved by creating separate legal administrative arrangements for it.

In today’s world of complexity, special laws become inevitable to govern areas that are crucial for developing a country. Otherwise, there will be failures in managing such a unique financial city. Those who make significant investments do not want to operate within a tight framework. In this context, where Sri Lanka’s traditional legal system calls for substantial reforms, it is impossible to stand within the legal framework and manage a progressive financial city aimed at the purely economic benefit.

Port City Economic Commission

There has been a lot of controversy over the Colombo Port City Economic Commission, which is the body that the Government wants to set up to govern the city and thereby the Government has recently proposed a Parliamentary Bill. We must first understand that these counter-arguments are political and not in the national interest.

The above Bill attempts to create a special economic zone and not to create a separate State. The Sri Lankan Parliament will pass the bill and if it warrants amendments, it could be done. Thus, the city will be governed by an Act of Parliament of Sri Lanka. Unlike other cities in Sri Lanka, this city needs to have a different legal framework only because of the international standard and a city to attract increased foreign investment.

As it is a unique city, it can be governed separately. Sri Lankans can also learn lessons concerning development experience through it. The city can be used as a model to identify shortcomings in Sri Lanka’s administrative practices. The commission will be set up by the President elected by the people of Sri Lanka and thus the commission members are not appointed by anyone else. In this way, we can understand that the sovereignty of the people of Sri Lanka will not be challenged.

The port city is a special financial city and has been given special financial powers. That is the purpose for which the city is to be created. Otherwise, the financial city will become useless. If a power structure similar to other ordinary cities is created there, the purpose for which the city will be established will not be achieved. By granting special financial powers to the particular city, Sri Lanka can manage the city properly and reap the appropriate economic benefits.

When looking at matters related to tax concessions, it is essential to note that the country’s economy can be boosted by providing adequate tax concession for investors and importers. It is in this context that the bill has proposed to provide tax concession in the city. Expected investments will be unattainable without tax concession. In such cases, we will face huge losses through the Port City.

The legal sources related to the port city need to be discussed within the political and social realities mentioned above. Any Government in power in Sri Lanka would have tried to come up with and implemented such a law.

This is how the project has been framed and the draft plan has been designed to give the city with a special status. Modern financial cities are governed by special arrangements in many countries that have implemented such schemes.

There is no doubt that the Port City plan will be beneficial for the country’s rapid development and economic prosperity. Everyone has a responsibility to lift the Sri Lankan economy, plagued by war and other casualties.

The Government has attempted to execute a noble task to boost the country’s economy. Therefore, it is unwise to compare this plan with a separate State and lead the country’s economy to fall back into disrepair. It is also incumbent upon us to extend our fullest support to the present Government to implement the port city project to boost our economy.

(The writer is a Professor in Sociology at South Eastern University of Sri Lanka)