COLOMBO – China is taking the lead to promote Sri Lankan capital Colombo as South Asia’s hub through the controversial Colombo Port City which has been re-branded as Colombo International Financial City.
The new financial city is expected to fill the vacuum that exits between Singapore and Dubai.
After China struck a new agreement with the Sri Lankan coalition government, reclamation work on the $1.4 billion offshore financial center is set to commence in October this year.
The subsidiary of the state-owned China Communications Constructions Company, China Harbour Engineering Company (CHEC) which oversees the project, expects to complete the reclamation work in three years.
Thow Ming Liang, chief sales and marketing officer at CHEC Port City Colombo (Pvt) Ltd, said: “We hope to commence work in October and we are in the process of positioning the product correctly to make it the hub of South Asia.”
CHEC has already commenced a series of promotional campaigns in an attempt to attract foreign investors to the project in the 269-hectares reclaimed land which is expected to generate some 83,000 job opportunities.
“We have started marketing the product through our marketing consultants and discussions are already underway with certain companies in India and Singapore who have expressed their interest to invest in the project,” Liang told Asia Times.
Marketing campaigns will be carried out in other parts of the world such as Middle East and Europe to attract more investors to the city, he said.
The offshore financial center aims to attract more than $ 13 billion in foreign direct investment from investors outside Sri Lanka such as reputed international banking and financial services companies as well as malls, hotels, and apartment complexes, among others.
The project was originally inaugurated in September 2014 in the presence of Chinese President Xi Jinping and former Sri Lankan President Mahinda Rajapaksa.
Projected as the largest foreign-funded investment on record in the South Asian Island, the project, however, suffered a setback with the defeat of Mahinda Rajapaksa in the January 2015 presidential election.
His successor and incumbent president, Maithripala Sirisena, and prime minister, Ranil Wickremesinghe, suspended the project in 2015 citing procedural irregularities, issues related to the country’s sovereignty and environment.
However, pressure from China and the failure of Sirisena and Wickremesinghe to secure significant foreign funding from other countries to kick-start various other development projects led to the lifting of suspension of the project. It was given the green light this year.
In mid-August, a tripartite agreement was signed between CHEC and Sri Lanka’s Megapolis and Western Development Ministry and the Urban Development Authority re-branding the Colombo Port City as the Colombo International Financial City.
Under the new agreement, CHEC will not be granted any freehold land. Instead, 110 hectares of reclaimed land will be given on a 99-year lease and the Sri Lankan government will be the owner of the balance 159 hectares of reclaimed land.
CHEC had initially demanded $143 million as compensation from the Sri Lankan government for delaying the project by almost a year. However, following intense negotiations, CHEC finally agreed to accept extra land instead of financial compensation.
Sharing his views on the re-branding of the project, Anushka Wijesinha, chief economist of the Ceylon Chamber of Commerce, said the re-branding made sense, and was a good strategic move and will help with the global marketing of the project to attract foreign investors.
“I believe this is a bit of re-packaging for strategic purposes. The government was facing legacy issues of the ‘Port City’ – it vehemently opposed while in the opposition during President Rajapaksa’s regime and vowed to cancel the project. They made this a key campaign pledge.
“However, after coming in to power, reality set in and the new government realized it has to proceed with it. So the repackaging is useful to give it a fresh face in the eyes of the public,” he told Asia Times.
Wijesinha said even though the project was called ‘Port City’, it was never going to have exclusively port-related activities.
“In fact, it was being positioned as a new commercial center, just close to the Port in Colombo. So in a way, this new positioning makes sense,” he said.
However, he noted that what matters now is to bring in the right regulatory framework and investment climate to make the project truly successful.
“First, there needs to be policy consistency and a clearly articulated strategic plan for the foreign investment in general. This general foundation is important to give investors the confidence that Sri Lanka is ready to play at an international level. For the project in particular, the government needs to look at the fundamental features of what it takes to become a regionally competitive financial city,” he said.
The Sri Lankan government is already in consultation with international subject experts in an effort to make headway in this area and to ensure that the necessary climate is created to ensure the objectives of the project is met with and investors will have the necessary confidence to invest in the city.
According to Wijesinha, Sri Lanka can learn from countries such as Singapore, Dubai and Qatar on how they did it as well as what has worked and what has not.
“We are not new to this game, so we need to see how we strategically stand out, what pitfalls to look out for, and what lessons to be learnt from places like Dubai and Qatar,” he said.
Munza Mushtaq is a journalist based in Colombo, Sri Lanka. She is the former news editor of two leading Sri Lankan newspapers; The Nation and the Sunday Leader. She writes extensively on Sri Lankan current affairs with special focus on politics, human rights and business issues. She is currently the Colombo-based correspondent for International News Services, the Los Angeles Times and the Nikkei Asian Review.