Colombo Port City stands as a monumental endeavour in Sri Lanka’s quest for national progress and integration into the global economy. At the heart of this ambitious project lies the imperative of reinforcing state ownership. This measure is crucial not only for ensuring robust governance but also for attracting significant foreign investments and positioning Colombo as a premier international financial and business hub. In this article, we explore the rationale behind strengthening state ownership, the efforts to bolster governance, and the anticipated positive impacts on the broader economy.
Initiated by the Sri Lankan government in collaboration with China Harbour Engineering Company (CHEC), a Public Private Partnership (PPP) project to develop a modern city, Colombo Port City represents a colossal undertaking in land reclamation and urban development. Spanning 269 hectares (660 acres) adjacent to Colombo’s central business district, and gazetted as an extension of the Colombo District, this project aims to expand the cityscape to accommodate a diverse array of commercial, residential, and recreational facilities, including an International Financial Centre, which came in as an investment on the equity on the Sri Lankan government-owned land, with a current investment outlay of $1.4 billion. The vision is clear: to elevate Colombo’s status as a major global financial and business centre.
Governance of Colombo Port City is by a comprehensive legal framework, the Colombo Port City Economic Commission Act No. 11 of 2021 (CPCEC Act). This legislation establishes the Colombo Port City Economic Commission (CPCEC/Commission), as a dedicated regulatory body tasked with overseeing all activities within Colombo Port City. With a mandate to ensure compliance with both national and international standards, and as the Single Window Investment facilitator, the Commission plays a pivotal role in maintaining the project’s integrity and effectiveness.
M. Nayeemudeen, Secretary to the Ministry of Investment Promotion, highlights the Act’s emphasis on enhancing Sri Lanka’s ease of doing business. This objective serves as a guiding principle for the Commission, underscoring its commitment to fostering a business-friendly environment conducive to both local and foreign investors.
Ownership of the reclaimed land rests solely with the Sri Lankan government, solidifying its control over this strategic asset. With the establishment of the Colombo Port City Economic Commission, the government conferred a freehold grant under the State Land Ordinance.
As shared by the Chief Operating Officer of the CPCEC, Revan Wickramasuriya, the Commission was entrusted with the administration, regulation and control of all matters connected with business and other operations within the Colombo Port City, including the management of 74 marketable land parcels earmarked for commercial endeavours. Notwithstanding the powers vested with the Commission, the powers, duties and functions vested by any written law with any regulatory authority in Sri Lanka will continue to apply within the Colombo Port City unless it is specifically exempted under the CPCEC Act. Therefore all businesses operating within the Colombo Port City are required to abide by all laws and regulations applicable in Sri Lanka subject to the exemptions or incentives they may be granted under the CPCEC Act.
Crucially, the Commission has laid out clear regulatory guidelines delineating the development plans for each plot within Colombo Port City. Whether it involves constructing buildings or preserving public spaces, these guidelines provide clarity on width, height, and other parameters. Streamlining bureaucratic processes, investors engaging with Colombo Port City need not navigate multiple government entities. Instead, the Commission serves as a single point of contact, simplifying procedures and expediting approvals, as the Single Window Investment facilitator for investors’ end-to-end requirements.
Transformational Shift
Sri Lanka’s successful history with special economic zones (SEZs) has played a pivotal role in driving the country’s economic growth. Managed primarily by the Board of Investment of Sri Lanka (BOI), these zones have been operational for over four decades, with notable examples including the Katunayake Export Processing Zone, Biyagama Export Processing Zone, and Koggala Export Processing Zone.
These SEZs have been instrumental in attracting foreign direct investment (FDI), bolstering exports, and generating employment opportunities. For instance, the Katunayake Export Processing Zone, established in 1978, has seen significant success, with over 100 enterprises, predominantly in the manufacturing sector, contributing to its growth.
According to data from the Board of Investment of Sri Lanka, the cumulative investment in the Katunayake Export Processing Zone exceeds $500 million, with annual exports totalling approximately $2 billion. Moreover, these zones collectively employ over 100,000 people, playing a crucial role in reducing unemployment and enhancing local skills.
The manufacturing focus of these SEZs has led to the establishment of diverse industries, spanning apparel and textiles, electronics, and rubber products. This industrial diversification has not only strengthened Sri Lanka’s export portfolio but also heightened its competitiveness in the global market.
Colombo Port City represents the Government’s Commitment to further enhancing Sri Lanka’s SEZ strategy, by marking a shift from manufacturing to the services sector. As the country’s first SEZ specifically designed to attract investments in the services sector, Colombo Port City holds immense potential as a driver of economic growth, as a hub to attract financial and service sector businesses looking to expand their reach into India and its neighbouring states, east Asia, the middle east and other parts of the globe.
The regulatory framework for this new SEZ is outlined in the Colombo Port City Economic Commission Act No. 11 of 2021, which ensures a conducive environment for service-oriented businesses and investor protection provisions. Notably, the special economic zone will facilitate a multi-currency economic area, mitigating challenges typically faced by traditional financial hubs and fostering a stable economic environment.
Transparency is a cornerstone of the Colombo Port City’s governance framework, as emphasized by Wickramasuriya, Chief Operating Officer of the Colombo Port City Economic Commission. The Commission has prioritized transparency from the outset, implementing measures such as a comprehensive visa framework and an online application process to ensure consistency in all endeavours. In striving to ensure transparency, the requirements that need to be met by businesses that wish to obtain incentives and exemptions are laid out in the Business of Strategic Importance Regulations published on the Commission website and all licensed businesses and the incentives they receive, if any, are included in the Public Register also accessible via the Commission website.
Attractive Governance
The Sri Lankan government has implemented significant measures to fortify governance within Colombo Port City. A robust regulatory framework has been established, to uphold transparency, accountability, and the rule of law. The Colombo Port City Economic Commission (CPCEC/Commission), mandated by the Colombo Port City Economic Commission Act, assumes the responsibility of supervising the development and management of the Colombo Port City, ensuring adherence to stringent governance standards. Most regulations governing the special economic zone are already in effect, enabling several businesses to commence operations promptly.
Efforts to streamline bureaucratic processes and enhance the ease of doing business constitute pivotal components of attracting foreign investments. The government has introduced simplified procedures for business registration, along with offering tax incentives and efficient dispute-resolution mechanisms. These reforms have been meticulously crafted to cultivate a business-friendly environment that resonates with global investors.
For instance, various businesses, including software firms endorsed to operate from the Colombo Port City, are already operational at designated locations, awaiting the construction of permanent structures. Furthermore, Sri Lanka is actively pursuing the establishment of necessary regulations, including offshore banking regulations, underscoring the government’s unwavering commitment to providing a comprehensive regulatory framework conducive to diverse financial activities within the Colombo Port City.
By embracing international best practices in urban planning, financial regulation, and corporate governance, Colombo Port City aims to establish credibility and trust among global investors. Strategic collaborations with leading international firms and consultancies constitute integral components of this strategy, ensuring alignment with global standards in infrastructure and service delivery. Notably, the ongoing construction of a business centre and the development of the retail and duty-free shopping facilities, soon to be launched, exemplifies this commitment to excellence.
Situated along major shipping routes and near rapidly burgeoning economies in Asia and the Middle East, Colombo Port City emerges as a prime candidate for an international financial hub. Leveraging its strategic location, Colombo Port City stands poised to attract multinational corporations, financial institutions, and investors seeking a gateway to South Asia and beyond.
Central to Colombo Port City’s ambition to evolve into an international financial hub is the development of world-class infrastructure. State-of-the-art office spaces, luxury residential areas, world-class recreational facilities, and logistics hubs are being meticulously crafted to cultivate an environment that is both appealing and conducive to the needs of businesses and residents alike.
Creating a vibrant financial services ecosystem necessitates the development of a comprehensive range of financial products and services, spanning banking, insurance, asset management, and fintech. The government is actively fostering an environment conducive to innovation and technological advancement in financial services, to attract top talent and lead financial institutions to Colombo Port City
Positive Impact
The development of the Colombo Port City is poised to attract FDI worth $15 billion and catalyse significant employment opportunities across various sectors, including IT, construction, real estate, finance, healthcare, education, and other services. This infusion of capital is not only expected to alleviate unemployment but also foster skill development and capacity building among the local workforce, as highlighted by the Asian Development Bank.
The significance of this influx of capital lies in its ability to stimulate the economy and generate employment opportunities, mirroring the success of global economic zones in enhancing the economic landscape of host nations.
Presently, 60 companies have expressed interest in establishing themselves in the Colombo Port City, with 51 companies registered. These companies that are Authorized Persons have the flexibility to hire foreign or local employees, who need to be remunerated in foreign currency. The process of obtaining resident visas for up to 10 years for foreigners is streamlined, presenting no obstacles to talent acquisition for Colombo Port City businesses, investors and residents.
Sri Lanka envisages attracting two broad types of investors to develop the Colombo Port City. Unlike traditional economic zones that focus on vertical infrastructure like high-rise buildings, Colombo Port City, having completed land reclamation, seeks investors for constructing high-rise commercial, retail, and residential spaces. Consequently, businesses can establish themselves within these zones, engaging in a spectrum of activities, thereby attracting two distinct types of investors and businesses, as elucidated by Nayeemudeen.
The integration of leisure and hospitality facilities within Colombo Port City is poised to bolster tourism, thereby contributing to the broader economy. The inclusion of high-end hotels, entertainment venues, a marina, and cultural attractions is expected to draw visitors from around the world, elevating Sri Lanka’s profile as a premier tourist destination. Additionally, a state-of-the-art international hospital, international school, and convention centre will further elevate the city’s quality of life proposition, creating a vibrant and attractive environment for residents, businesses, and tourists alike.
The influx of foreign investments and the establishment of new businesses within the Colombo Port City are anticipated to have positive spillover effects on local enterprises. The increased demand for goods and services is expected to stimulate local industries, thereby fostering economic diversification and resilience.
Reinforcing state ownership of Colombo Port City is a strategic manoeuvre that underpins broader objectives of robust governance, investment attraction, and economic development. By ensuring Sri Lankan government control, enhancing regulatory frameworks, and cultivating a conducive business environment, Sri Lanka is poised to transform Colombo Port City into a thriving international financial hub. This transformation promises to bolster the national economy and position Sri Lanka as a significant player in the global economic landscape.