Crisis is an opportunity for transforming investment landscape and escaping unsustainable path

The Port City Colombo project according to Colombo Port City Economic Commission Chairman Dinesh Weerakkody is a public-private partnership, where the company has invested in the required hard infrastructure. The GOSL has to make sure that the soft infrastructure that is essential for Port City Colombo to go to market is in place. The regulations, incentives, in house skills and the Ease of doing business are critical to market the project. Weerakkody is a former Chairman of HNB, Commercial Bank of Ceylon and International Chamber of Commerce Sri Lanka. Excerpts of the interview:

Q: What motivated you to take on this responsibility, given that this project has been riddled with controversy from its very inception?

Sri Lanka is facing an unprecedented economic crisis largely driven by a massive forex crisis and mismanagement of the economy. This was an opportunity to work to find solutions and offer my experience for free. The Sri Lankan people want solutions for our current crises fast. Port City Colombo certainly if led effectively has the potential to change Sri Lanka forever. We certainly need to do a better job socialising the project from now on.

Q: Through Port City Colombo what can Sri Lanka achieve?

 Port City Colombo (PCC) is Sri Lanka’s first multi-services Special Economic Zone (SEZ) to promote and facilitate international trade, shipping/logistics operations, banking and financial services, information technology, international corporate headquarters, regional distribution operations, tourism/hospitality industry and other corporate services.

The fundamental focus of the SEZ – any SEZ for that matter, is to promote diversification of the economy and linkages to global value chains via service sector exports, and through this, to attract large-scale foreign investment, generate employment, and develop technical, professional, and entrepreneurial expertise. The Colombo International Financial Centre of Port City Colombo aspires to transform Colombo’s financial services profile with new banking products and services and new global and regional players. Also, all documentation, from licences to visas, will be handled within the centre through a digital onboarding portal to make the process simple and streamlined.

Q: Given the competition to attract investment into the region, what are the potential benefits of investing in this project?

 Port City Colombo offers a multitude of tangible advantages to investors by virtue of being Sri Lanka’s first service-oriented, multi-services SEZ in the region. PCC is taking measures to liberalise and modernise the operating environment, promote ease of doing business, whilst minimising the costs of doing business and a strong legal framework for Commercial Dispute Resolution. The SEZ also leverages Sri Lanka’s existing cost competitiveness, which is much cheaper than more mature jurisdictions such as Dubai and Singapore. Port City Colombo’s SEZ is designed as an economically ring-fenced jurisdiction that will permit 100% foreign ownership, full repatriation of profits and capital, and liberal foreign exchange regulations, to facilitate transacting with the rest of the world. A key feature of this SEZ is the ability to freely employ local or foreign employees and the availability of long-term visas for employees/investors as well as their spouses/dependents.

Employees will also be exempt from taxes on employment income. The attractive residential environment with access to a top international school, a reputed healthcare provider, and modern lifestyle amenities will position Port City Colombo as a regional hub for high-quality talent. PCC could be an ideal destination for regional offices, due to the possibility of coupling with manufacturing/logistics operations across Sri Lanka’s industrial zones using an array of fiscal incentives and non-fiscal incentives, which intend to make real estate development and business set-up costs competitive (exception of border tariffs and VAT) as well as long-term income tax holidays (up to 40 years) for early entrants.

Q: Why have some international agencies raised concerns about money laundering?

 The use of the term “Offshore Banking” in the Colombo Port City Economic Commission (CPCEC) Act, resulted in creating the impression that banks were to be licensed by PCC without ensuring appropriate Anti Money Laundering (AML) and Counter the Financing of Terrorism (CFT) Regulations. The framework, the rules, and the regulations are being drafted following expert advice and guidance, and AML and CFT regulations, as we know it, will certainly be applicable.

Q: Can PCC rival other financial centres such as Dubai, Singapore, or Hong Kong?

 What will define its success will be the “soft infrastructure” such as quality of regulation, access to talent, policy consistency, and upholding investor confidence (law and order, rule of law, political stability, work ethics, labour unions, taxation, health, and safety, political, social, neutrality/non-aligned foreign policy, etc.). Sri Lanka when compared to these locations, one would say, is far better situated and connected from a geographical perspective. Therefore, the frameworks, the rules, and the regulations that govern the Port City Colombo’s Special Economic Zone are critical. To become the go-to location for innovators and financial service providers from South Asia and the Far East the journey must begin now. Forget the past, Sri Lanka can become the gateway to South Asia and beyond, and PCC can be the gate that opens through to it. So with sound governmental support/leadership and by improving our ease of doing business, better synergies with both corporates and SOEs, and good connectivity and access to regional markets, we can certainly get there over time.

Q: Given the tensions in a number of hot spots in the region, how do you plan to manage the geopolitics?

 Since the passing of the Colombo Port City Economic Commission (CPCEC) Act in May 2021, there is more clarity on the operating model and many of the concerns held in the past have been largely addressed. We will continue to build awareness among all our stakeholders, with engagements with specific governments and non-governmental bodies with the support of the FM to address their concerns.

Q: The project is already 10 years old, what is holding Port City Colombo back?

 The Colombo Port City Economic Commission Act, No. 11 of 2021 was passed in Parliament in May 2021 to enable the formation of the Port City Colombo as a multi-serviced SEZ. However, further regulations under this Act are urgently required. Unfortunately, the key regulations have not yet been gazetted, and or passed by Parliament currently, e.g., the recommended set of initial rules and regulations including the business regulations, is critical. Enacting these regulations is now a priority.

Q: Can Port City Colombo become an economic game changer for the country?

 A PwC study shows that Port City Colombo can significantly impact GDP, FDI inflows, and improve our BOP and create over half a million new jobs. A realised master plan for the Port City provides 5.7 million square metres of built-up area valued at $ 15 billion.

Q: Officials estimate that it will take about 40 years to complete the project. Is there any possibility to shrink the timeline like during the accelerated Mahaweli program?

 Port City Colombo is the first ever mega city development in Sri Lanka spanning 269 hectares and an extension to the Colombo Central Business District. The project is Sri Lanka’s largest public-private partnership with an investment of $ 1.4 billion, of which $ 1.2 billion has been invested to date. It is a long-term project. For instance, the 360 ha Marina Bay in Singapore commenced reclamation work in 1969 and was completed in 1992 and rolled out in various phases. For Port City Colombo the currently envisaged timeline is about 20 years. The possibility of shorter timelines depends on how fast Sri Lanka can develop a business-friendly environment within Port City Colombo. A five-year plan to fast-track the strategic plots estimated at 25% of the land base is in progress which requires incentives, and exemptions. The opportunities are certainly limitless given the new waves in technology and banking infrastructure. So yes, we are.

Q: What more needs to happen at a national level?

 Sri Lanka is faced with a multifaceted crisis; the reforms need to kick off and importantly we need to develop a debt sustainability strategy that can convince all our creditors and can unlock new fund inflows to the country. With that we need to establish a single-window approvals process, introduce flexible employment laws, and enable an efficient dispute resolution mechanism. Also look at incubator programs to attract business investments. For a start all agencies tasked with attracting long term investments must work together to transform the country’s investment climate by simplifying the business environment for investors. We need to get experts, specialising across different business/manufacturing/services lines, and sectors to provide guidance and develop strategy for attracting investment and accessing new markets and expanding existing markets for products and services. The Lankan missions need to up their game. Ostrich-like behaviour will take us nowhere.