Sri Lankan Megapolis and Western Province Development Ministry secretary Nihal Rupasinghe (2R) and China Harbour engineering company director Tang Qiaoliang (L) shake hands as Megapolis and Western Province Development Minister Patali Champika Ranawaka (C) looks on during an agreement signing ceremony in Colombo on August 12, 2016. / AFP PHOTO / ISHARA S.KODIKARA

With Sri Lanka enjoying new-found importance as a key element of China’s Belt and Road Initiative (BRI), the ambitious Chinese-funded Colombo Port City may be set to become an important trade nexus. The new city port will not only connect the East and West, but could also boost Sino-Indian relations, with promotional campaigns already under way to woo Indian investors to the offshore city.

Even though the $1.4 billion city project, which was rebranded as the Colombo International Financial City in 2015, is still at reclamation and land formation stage, it has already attracted worldwide interest.

According to global real estate services firm, Jones Lang LaSalle Lanka (JLL) (PVT.) Ltd, an international consultant to the offshore city project, the mega project has already received significant inquiries from investors and developers in India, as well as South East Asia and Europe.

“I can confirm significant interest from India, Singapore, Thailand, Japan, Malaysia, Indonesia, South Korea, and lately, European developers, as well as local Sri Lankan interest and, of course, from China for the project,” Steven Mayes, who heads the Sri Lanka operations of JLL Lanka (Pvt) Ltd told Asia Times.

According to Mayes, even though many letters of interest have been signed and understandings have been reached, they are so far unable to sell land to would-be investors as the necessary legal provisions for the offshore city are still being drafted by the Sri Lankan government.

JLL has been retained by China Harbour Engineering Company (CHEC) Port City Colombo (Pvt) Ltd, the local company that handles the project for China Communications Construction Company Limited (CCCC) to conduct various activities to promote the project internationally.

Colombo Port City to date is the largest ever foreign-funded project in Sri Lanka and will comprise of five different precincts: a financial district, central park living, island living, a marina and what is being called an “international island”.

While confirming that the offshore city has attracted interest from foreign investors, CHEC Port City Colombo (Pvt) Ltd told Asia Times, “The Port City marketing team has a plan to promote the project globally, including in India.”

Reclamation, land formation and the construction of marine protection structures for the port city is currently ongoing. This phase is expected to be completed by next year, while the port city development project is set to be implemented over a 25-year period. So far, 88% of the planned 269 hectares has been reclaimed from the ocean, which is next to the country’s premier seaport ‘Colombo Harbor’, one of the largest and busiest ports in the region.

Mayes is optimistic that the venture between CHEC and the Government of Sri Lanka will act as a landmark event that encourages legislative reform. This, he hopes, might open up the country to inward foreign investment from private sources, similar to the Dubai real estate model, and will benefit the economy as a whole.

Infrastructure development in the offshore city will kick off with a $1 billion investment from CHEC which will construct three, 60-floor office towers in the new city. An agreement to this end is expected to be signed between CHEC and the Sri Lankan government shortly. CHEC hopes to attract around $13 billion worth of investments to the city in infrastructure developments alone.

R. Hariharan, a retired military intelligence specialist who served as the head of intelligence for an Indian peace-keeping force in Sri Lanka from 1987 to 1990, believes that India has to participate in the Colombo Port City to make it profitable. “As the Indian economy is growing at over 7.5 percent, we can expect both China and Sri Lanka to woo Indian investment in Colombo Port City,” he told Asia Times.

Hariharan, who is also associated with the Chennai Centre for China Studies, said that “Already there are indications that both China and India are trying to strengthen their working relations, keeping their perennial geo-strategic disputes at manageable levels. Under such a dynamic environment, Colombo Port City can become an important “third party” (if you ignore the large Chinese ownership) link in progressing non-military relations between the two Asian giants,” he said.

However, with India continuously urging Sri Lanka to be watchful about the growing Chinese presence on the island, Hariharan noted that even though the possibility of China going on a security overdrive appears remote at present, China’s increasing power assertion in the so-called Indian Ocean littoral states, and particularly in Sri Lanka, is already having an impact on the strategic configuration in the Indo-Pacific. “In view of this, Sri Lanka will have to be on guard to ensure its security interests are not affected due to foreign activity in the Colombo Port City,” he said.

Hariharan maintained that it was important for Sri Lanka to ensure that the Colombo Port City does not result in any action detrimental to the sovereignty, environment and society of the host nation.

Maritime expert and ex-Secretary General of the Asian Shippers’ Council Rohan Masakorala believes, “The country’s location has an advantage and so it will be a good neutral location for business including Asian giants China and India.”

However Masakorala said, “Investors will want to know the total legal structure in terms of financial services and how dispute resolution and other matters will happen as the current legal system in Sri Lanka is weak in execution and slow in progress. The justice system itself will have to be clear for investors before we start marketing.”

Masakorala, also the CEO of the Shippers’ Academy Colombo, highlighted that it was important to understand the current regional competition and therefore create an attractive platform where those who wish to invest in the new city can easily do business.