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Sri Lanka’s China backed project puts reclaimed land on the market for services FDI

ECONOMYNEXT – Sri Lanka’s Colombo Port City, a project financed by China-based business group has placed 13 blocks of prime land reclaimed from the sea and a marina in the market for investors in services exports to kick start post-Covid-19 investments, an official said.

CHEC Port City Colombo (Pvt) Ltd, a unit of China’s CCCC group has reclaimed 269 hectares of land which has been vested with the government of Sri Lanka. CHEC Port City will get 113 hectares to draw investors and recover its 1.4 billion US dollar reclamation cost.

“About 68 hectares are ready for investment,” Thulci Aluwihare, Head of Strategy & Business Development said.

“We have floated 13 requests for proposals for 20 hectares of land. We are obviously signaling to the investors community that that we are open for business.

The Port City area will have a Special Economic Zone law which will have tax benefits and more business friendly regulations which will increase the ease of doing business.

Sri Lanka has been overtaken in the World Bank’s ease of business index by competing countries that are de-regulating faster.

“There is competition for foreign capital, especially post-Covid,” Aluwihare said. “We need to really compete for that. We have to create the right environment for that foreign capital.

“The idea is this proposed law will address some of those ease of doing business issues so that we would be able to attract the foreign direct investment to jump start growth.”

“Seventy percent of investment into the project will be commercial. We have to promote trade and commerce.”

The first phase will focus on getting FDIs for services export, which Aluwihare says is in line with the government’s economic strategy. A majority of the phase two of the project will be residential.

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“The idea is we have to have a commercial success in attracting businesses here. Then obviously people will start buying apartment and residences,” Aluwihare said.

Aluwihare says there is strong interest in blocks bordering a yacht marina. The yacht marina area itself has drawn interest from investors in Singapore and India, he said.

A global fund investment fund which collaborates with developers is among other investors who are looking at the blocks.

Sri Lankan companies have also expressed interest in blocks of residential apartments. The entire Port City area is covered by planning regulations which broadly specifies the type of business and also the height of the buildings.

However potential investors are awaiting the enactment of the SEZ law, Aluwihare said.

The legal structure was drafted over several years and President Gotabaya Rajapaksa appointed a committee to review it.

Aluwihare says if the law is passed in parliament this year investments would begin in the first quarter of next year.

Potential investors also want to visit and see the land. At the moment there is a two-week quarantine and restrictions on arrivals with the government focusing on bringing back expatriate Sri Lankans.

Aluwihare says recent US sanctions on subsidiaries on China Communications Construction Company, the ultimate parent of China Harbhour will not affect investors.

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US sanctions on China firms will not affect investments in Sri Lanka’s reclaimed port city: official

The land reclaimed by the Port City belongs to the state and the investors will get a long term lease from the government.

“As an investor you will get a lease from the government,” Aluwihare said. “It is just that the plots that have been allocated to the projects company in return for the investments made.

“For giving up the leasehold right, the project company gets a consideration.”

(Colombo/Sept15/2020)