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Wednesday February 28th, 2024

Sri Lanka’s Port City Economic Commission to by-pass key laws, give own tax breaks

ECONOMYNEXT – Sri Lanka’s Colombo Port City Economic Commission will give its own tax breaks running up to 40 years and exempt businesses from a number of laws including an exchange control law in its area of authority, a draft bill to be presented in parliament shows.

For an enterprises defined as a ‘Business of Strategic Importance’ up to 40 years in tax incentives could be given by the Commission.

The Port City Chairperson and members would be appointed by the President of Sri Lanka.

The Commission could give exemptions to businesses from income tax, value added tax, excise tax, debit tax, customs duties, ports and airport levy, Sri Lanka Export Development Act levies, Betting and Gaming casino laws and labour laws.

Incentives already given under the Strategic Development Act will automatically be deemed to have been given by the Economic Commission.

Board of Investment of Sri Lanka, the UDA and Municipal council laws would not apply to the Port City Special Economic Zone.

In countries with very high level of foreign direct investment such as Vietnam, multiple authorities approve investments. The Southern Ho Chi Minh City ares (formerly Saigon) outperforms all other regions.

It is not clear whether sales of goods and services within the Port City Economic Zone would also be exempt from value added tax and import duties.

However the Commission would be authorised to set an exit tax on goods purchased from within the special zone.

“A citizen of Sri Lanka or a resident may utilize any retail facilities or services within the Area of Authority of the Colombo Port City at restaurants, cinemas, entertainment facilities, shopping facilities, or parking facilities, upon making related payments, in Sri Lanka Rupees,” according to the draft law.

“Any levy as may be required to be paid by a citizen of Sri Lanka or a resident on goods purchased at retail facilities…when leaving the Area of Authority of Colombo Port City, shall be as prescribed.”

Sri Lanka has high import duties to give excessive protectionist profits to so-called ‘cronies’ running import substitution tax arbitrage business, who channel the difference between world price and import tax (arbitrage) to their own pockets.

Under the earlier Strategic Development Act and Board of Investment capital import for construction or big businesses was freed from import duty and value added tax, which ordinary house builders have to pay.

In the first five years after the law is enacted the Port City Commission could also permit people to “engage in business from a designated location in Sri Lanka, outside the Area of Authority of the Colombo Port City, as may be approved by the President” or the minister in charge.

“Such business shall, for such period of five years be entitled to all the privileges accorded to, and be deemed for all purposes to be, a business situated within and engaged in business, in and from, the Area of Authority of the Colombo Port City.”

Salaries of workers within the zone would be dollarized, protecting them from currency depreciated by the Monetary Board of the central bank through the operation a regime without a credible anchor.

Sri Lanka had earlier allowed deposit dollarization (resident and non-resident forex accounts), liability dollarization (borrowing in dollars) but not denomination of salaries.

People in most countries are usually forced to use a unsound money through a ‘legal tender’ provision for a money monopoly contained in a central bank law or through a separate law through which the population in progressively impoverished and their saving expropriated through depreciation.

The Economic Commission is expected to cut red tape and make it easier to business and compete with other hubs such as Dubai.

Related

Sri Lanka Port City Special Economic Zone to be dollarized

Sri Lanka’s Colombo Port City Special Economic Zone to have gaming

Sri Lanka Port City Economic Zone workers to earn tax free, dollar salaries

Economic hubs such as Singapore, Hong Kong have have currency boards and Dubai also runs a currency board-like-system and do not print money to generate monetary instability in a failed attempt to boost growth.

The Colombo Port City Commission will be empowered to give exemptions from the following law.

1. The Urban Development Authority Act, No. 41 of 1978

2. The Municipal Council Ordinance (Chapter 252)

3. The Commercial Mediation Centre of Sri Lanka
Act, No. 44 of 2000

4. The Town and Country Planning Ordinance (Chapter 269)

5. The Strategic Development Projects Act, No. 14 of 2008

6. Public Contracts Act, No. 3 of 1987

7. The Board of Investment of Sri Lanka Law, No. 4 of 1978

The following laws will not apply within the Colombo Port City Special Economic Zone.

1. The Inland Revenue Act, No. 24 of 2017

2. The Value Added Tax Act, No. 14 of 2002

3. The Finance Act, No. 11 of 2002

4. The Finance Act, No. 5 of 2005

5. The Excise (Special Provisions) Act, No. 13 of 1989

6. The Debit Tax Act, No. 16 of 2002

7. The Customs Ordinance (Chapter 235)

8. The Ports and Airports Development Levy
Act, No. 18 of 2011

9. The Sri Lanka Export Development Act, No. 40 of 1979

10. The Betting and Gaming Levy Act, No. 40 of 1988

11. Termination of Employment of Workmen (Special Provisions)
Act, No. 45 of 1971

12. The Entertainment Tax Ordinance (Chapter 267)

13. The Foreign Exchange Act, No. 12 of 2017

14. Casino Business (Regulation) Act, No. 17 of 2010

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Sri Lanka’s religious leaders need to cultivate harmony: Prez

ECONOMYNEXT – The responsibility of cultivating harmony rests significantly on the shoulders of religious leaders, Sri Lanka’s President Ranil Wickremesinghe has said.

“While politicians often pursue power, religious leaders strive to maintain their positions, frequently resorting to the perilous avenues of racism and bigotry. This unfortunate trend has plagued our country since the 1930s, yielding disastrous outcomes,” Wickremesinghe was quoted by his media division as saying at the ‘Religions to Reconcile’ national inter-religious symposium, organized by the National Peace Council of Sri Lanka, held today (28) at the Bandaranaike International Conference Hall (BMICH).

“Our nation has endured the bitter consequences of racism and religious extremism, culminating in a devastating conflict.

“With the military conflict resolved, Sri Lanka’s political challenges are now receiving attention, necessitating a renewed focus on coexistence,” Wickremesinghe said, adding that steps are being taken to resolve land disputes, address the issue of missing persons, release certain individuals, and initiate a delimitation of powers.

The President’s speech:

Having acknowledged the intrinsic connection between religion and reconciliation, our nation has endured the bitter consequences of racism and religious extremism, culminating in a devastating conflict. Following the cessation of hostilities, our main objective has been to foster coexistence among all communities.

The responsibility of cultivating harmony rests significantly on the shoulders of religious leaders. It is imperative that we remain mindful of our intentions. While politicians often pursue power, religious leaders strive to maintain their positions, frequently resorting to the perilous avenues of racism and bigotry. This unfortunate trend has plagued our country since the 1930s, yielding disastrous outcomes that require no further explanation.

Take Singapore, for example, where the absence of racism and bigotry has contributed to its rapid development despite its diverse linguistic landscape. With the military conflict resolved, Sri Lanka’s political challenges are now receiving attention, necessitating a renewed focus on coexistence, a topic also being deliberated in Parliament.

Mr. Karu Jayasuriya, served as the Chairman of the Sectoral Oversight Committee on Religious Affairs and Co-Existence when he was serving as the Speaker. This committee was established in response to conflicts involving Muslims in March 2018, as well as incidents in Galle in 2017 and Beruwela in 2014. Various proposals were put forth by these committees to address these issues, and consensus was reached on their implementation. It’s crucial that we uphold this agreement and continue working collaboratively to resolve these challenges.

Towards the close of last year, numerous Buddhist monks and Tamil leaders presented the Himalaya Declaration, a document we are currently adhering to. As we move forward, the final phase entails fostering synergy, particularly through discussions with Tamil political parties and MPs, aimed at addressing lingering issues. Steps have been initiated to resolve the matter of missing persons, with further updates forthcoming in the near future. Additionally, arrangements have been made for the release of certain individuals held in connection with these matters.

The primary concern at present revolves around the fate of the missing persons. To address this issue, we’ve presented and successfully passed a bill in Parliament to establish the Truth and Reconciliation Commission (TRC). Numerous reports from Disappearance Commissions have been reviewed, and one report authored by Judge A.H.M.D.Nawaz was selected.

Following the approval of the draft for the Truth and Reconciliation Commission, South African President Cyril Ramaphosa pledged his support for these initiatives. Similar assistance is being extended by other nations as well, enabling us to advance these critical endeavours.

Addressing the on-going political challenges, our attention is directed towards resolving land disputes, particularly in regions like Jaffna where tensions persist between villagers and the Wildlife Department. Similar conflicts also arise in areas such as Vavuniya, Trincomalee, Polonnaruwa, and Mahianganaya. We aim to address these issues through inclusive dialogue, involving all concerned parties. Furthermore, I have instructed to proceed in accordance with the 1985 map. Additionally, I anticipate meeting with Tamil MPs in Parliament next week to discuss these matters further. Following consultations with the security forces, agreements have been reached to release more land, providing a pathway forward in our efforts.

Another pressing issue is the delimitation of powers. A key demand is the empowerment of the 3rd list of devolution, with an emphasis on not interfering with police powers at present, leaving them open for future consideration. The Land Act is slated for presentation, and there are no objections to the delegation of other subjects in the 3rd list. However, securing the necessary consensus with other parties in Parliament to achieve a two-thirds majority remains crucial.

Simultaneously, discussions are underway regarding the implementation of the Provincial Board of Education. Proposals have been made to establish provincial professional training institutes in each province. Additionally, plans are underway to appoint provincial-level committees to lead the modernization of agriculture, establish a tourism board, and undertake related initiatives.

Additionally, the work of five provincial ministries is expected to be distributed among twenty ministries. This restructuring cannot simply resemble a general ministry, so officials are currently deliberating on adjusting their structure accordingly.

I eagerly anticipate addressing the final aspect of this matter, the decentralized budget, once all parties have convened. There’s also a call for a secondary board, akin to a Senate, which the government does not oppose. However, such an initiative would need to coincide with the framing of a constitution, potentially requiring a referendum. I also intend to engage in discussions on this topic with other party leaders.

These measures aim to lay the groundwork for a new era in our country. Religious leaders have been entrusted with significant responsibilities in this endeavour. I am confident that further discussions on these matters will yield fruitful outcomes.

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Sri Lanka rupee closes at 310.00/15 to the US dollar

ECONOMYNEXT – Sri Lanka’s rupee closed at 310.00/15 to the US dollar Wednesday, from 310.25/50 on Tuesday, dealers said.

Bond yields were broadly steady.

A bond maturing on 01.02.2026 closed at 10.60/80 percent from 10.60/75 percent.

A bond maturing on 15.09.2027 closed at 11.90/12.00 percent up from 11.80/95 percent.

A bond maturing on 15.03.2028 closed stable at 12.00/15 percent.

A bond maturing on 15.07.2029 closed at 12.20/50 percent from 12.25/50 percent.

A bond maturing on 15.05.2030 closed stable at 12.25/40 percent.

A bond maturing on 15.05.2031 closed at 12.55/75 percent down from 12.60/80 percent.

A bond maturing on 01.07.2032 closed at 12.50/90 percent down from 12.55/13.00 percent. (Colombo/Feb28/2024)

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Sri Lanka Treasuries yields edge up after steep fall

ECONOMYNEXT – Sri Lanka’s Treasury bill yields edged up across maturities at Wednesday’s auction with the 3-month yield up 09 basis points to 9.87 percent, data from state debt office showed.

The debt office sold 27.5 billion rupees of 3-month bills after offering 35 billion rupees.

The 6-month yield rose 09 basis points to 9.95 percent with 37.23 billion rupees of bills sold, after offering 47.5 billion rupees.

The 12-month yield went up 03 bis points to 10.05 percent, with 39.5 billion rupees of bills sold and 40 billion rupees offered.

Sri Lanka’s Treasuries yield have come down sharply in recent weeks.

The trend was partly helped by some banks which were earlier not buying into bills, starting to buy them.

Deposit in the central banks overnight window (private sector sterilization) has come down from around 200 billion to around 130 billion rupees in recent weeks.

Sri Lanka’s central bank in the past have triggered currency crises and eventual high corrective rates by not allowing Treasury bill yields to move when up private credit picks up and buying them into the balance sheet.

The resulting forex problems are then blamed on budget deficits (politicians) and current account deficits (mainly imports of the public usually petroleum, gold or cars).

The central bank can still buy Treasury bills outright from banks, term or overnight to inject money, alter rupee reserves of banks and encourage them to overtrade and trigger forex shortages, confidence shocks, capital flight and a second default, critics say.

The central bank recently lifted counterparty limits of standing facilities, which are given at the policy rate without a penalty unlike in countries with greater monetary stability.

In recent weeks the central bank has oversold bills outright and injected money long term and short term, though so far overall net injections have been deflationary. (Colombo/Feb28/2024)

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