• Proposal by PM approved, ex-AG to work with in’tl law firm Baker and McKenzie 
• Financial Centre likely to be established at WTC before moving to Port City 
• New agreement with Chinese company to include financial zone 

By Uditha Jayasinghe   

Sri Lanka’s ambitious plans to build an International Financial Centre are growing apace, with Cabinet approving the drafting of new laws to establish and operate a Financial City, likely to be opened at the World Trade Centre before being moved to the Port City. 

The International Financial Centre (IFC) or Financial City, as it is termed in the Cabinet paper submitted by Prime Minister Ranil Wickremesinghe, aims to create 15,000 jobs and build investment of 10% of GDP in the next five years.  

“The Financial City objectives include creating a world class alternative financial services centre within the South Asian region to support growth of local and regional business, capture international funds available due to Brexit and native interest rates of European banks and establish best financial regulations and controls to ensure zero business failure,” the Cabinet paper said. 

The Government will now obtain the services of with well-known law firm Baker & McKenzie to set up the IFC in Colombo. Headquartered in Chicago, Baker and McKenzie has been ranked the largest international law firm in the world, with 11,500 employees. It is ranked as one of the top three law firm in the world in terms of revenue with $2.43 billion in annual revenue in FY2014-2015.

In addition, former Attorney General Y. Wijayatilake will work with Baker & McKenzie to establish a legal framework and operations of the IFC and related legal aspects. These will include a Financial City Act, special development zone laws and separate laws covering banking, finance, and company law. Attention will also be paid to insolvency law, employment law and arbitrary mechanisms, according to the Cabinet paper seen by Daily FT. 

To lead financial and investment operations, the Government has recruited Dr. Ranjan Sara as an Advisor to the Finance Ministry. He is to ensure financial coordination with international partners and lead investment and operational duties, the Cabinet paper noted.

This special legal framework will initially apply to an office space, likely to be rented at the World Trade Centre or nearby with relocation planned once the Port City is completed. Cabinet approval has been given to allocate Rs. 78 million to the National Policies and Economic Affairs Ministry under Wickremesinghe to cover initial costs for 2016. Such expenses include local legal, marketing and financial advisory costs as well as providing infrastructure for the IFC. 

“We have already reached an agreement with the Chinese Government to establish the financial centre in a part of the Port City,” Cabinet Spokesman Dr. Rajitha Senaratne told reporters. A fresh agreement to be signed with the China Harbour Engineering Company (CHEC), likely later this month, will include an international financial zone the Government hopes will become home to global financial institutions in banking, finance, wealth management, equity funds and capital markets.

A financial centre is a location that is home to a cluster of nationally or internationally significant financial services providers such as banks, investment managers or stock exchanges. A prominent financial centre can be described as an international financial centre or a global financial centre and is often also a global city. An offshore financial centre is typically a smaller, low-tax jurisdiction that primarily serves non-residents.

International Financial Centres (IFCs)—such as London, New York, and Tokyo—are large international full-service centres with advanced settlement and payments systems, supporting large domestic economies, with deep and liquid markets where both the sources and uses of funds are diverse, and where legal and regulatory frameworks are adequate to safeguard the integrity of principal-agent relationships and supervisory functions.

In Asia, Singapore and Hong Kong have long been in competition to round off the top five financial centres in the world.

$ 300,000 deposit gets 10-year residency visa

Investors willing to fork out over $300,000 through a special deposit account will be granted a 10-year residency, in a fresh effort by the Finance Ministry to attract much-needed foreign exchange to Sri Lanka. 

The Special Deposit Account Act is expected to find its way to Parliament over the next few weeks to enable the Government to establish Special Deposit Accounts that could be used by foreigners or the diaspora community. If parents of a family remit $ 600,000 to the account, any children below 18 years of age will also be granted visa to accompany their parents.

Depositors must maintain a minimum balance of $ 300,000 in the special accounts for the entire duration of the 10 years, the Cabinet paper said.  

However, the new measure, which has already received Cabinet approval, stops short of allowing depositors to work in Sri Lanka. Work permits have to be obtained separately from the Immigration or Emigration Department. Nonetheless the Government plans to encourage them to start a business in Sri Lanka with their private capital to generate employment and create partnership opportunities with local companies.  

Cabinet approval was also given this week for two other proposals of Finance Minister Ravi Karunanayake. The Finance Ministry seeks to establish an agency for restructuring financial assets of failing finance companies. The agency includes preparing a legal framework on recapitalizing and restructuring troubled finance companies. 

Under the second Cabinet paper the Finance Ministry will set up a performance and efficiency management unit to review efficiency and productivity of funds released by the Treasury to ministers, departments and public enterprises. (UJ)