Crisis-hit Sri Lanka has decided to give special 40-year tax relief for Chinese-built Colombo Port city to attract potential investors as the island nation’s largest foreign direct investment failed to attract investments after the much-touted project opened for nearly one year, a senior minister said on Tuesday.
Also with the Sri Lankan government desperately trying to secure long-term IMF funding to recover from the complete bankruptcy, the future of the much-touted Chinese funded Colombo Port City project to build an artificial 665-acre island to set up an international financial hub also hangs in balance.
The USD 1.4-billion Colombo Port City project, expected to play a key role in China’s ambitious “Maritime Silk Road” project in India’s backyard, is said to be the single-largest private sector development in Sri Lanka.
Investors at the Colombo Port City will get 40-year tax concessions, Minister Bandula Gunawardana saidon Tuesday .
The Cabinet Spokesman said that the Cabinet had decided to offer the concessions to draw more investments to the Port City.He noted that in a competitive world other countries are offering attractive concessions to draw investors.
The Minister said that drawing investments has become difficult owing to the current global crisis. Gunawardana disclosed that Sri Lanka needs to offer more attractive packages for investors.
As a result, the Cabinet approved a proposal to offer 40-year tax concessions for investments at the Colombo Port City. Gunawardana said that if such concessions draw more foreign investors it will help address the dollar crisis in Sri Lanka.
Sri Lanka is struggling to cope with a debilitating economic crisis with inflation soaring, food and fuel shortages, and fears of a sovereign default looming on the horizon.
The belief is that the project will transform Sri Lanka’s tourism-and-tea economy into a thriving, multi-services one. And it is an expensive dream, especially so for a country in the grip of unprecedented economic turmoil.
The project is estimated to cost $ 14 billion, largely funded by potential investors who will buy into the idea of the financial hub and set up shop there. For starters though, China has invested $ 1.4 billion to help PCC reclaim 269 hectares (ha) of land on the Indian Ocean. In exchange, China has got about 116 ha of the land there on a 99-year lease.
PCC is a public-private partnership project between the Sri Lankan Government and China Harbour Engineering Company (CHEC) Port City Colombo (Pvt.) Ltd, which is a subsidiary of China’s state-run infrastructure firm, China Communications Construction Company (CCCC), a company that is leading President Xi Jinping’s Belt and Road Initiative (BRI).
The move comes even as the economic crisis has pushed well-heeled Sri Lankans to take to some of the upmarket streets to protest against the Rajapaksa brothers — President Gotabaya Rajapaksa and Prime Minister Mahinda Rajapaksa — nearly daily.
That still doesn’t explain the extent of the Government’s belief in the project.Even as China’s shadow looms large over the project, the Sri Lankan Government is keen to see northern neighbour India investing in the city in a substantial way.
This is despite awareness within the Rajapaksa Government of the current border tensions between India and China.
On its part, India is apprehensive of the project. New Delhi believes the city is part of President Xi’s BRI, and has thus chosen not to make any public statement on the project expressing its “discontent and displeasure”, a top-level source said. .
PCC is expected to be fully operational in the next 25 years, though Phase 1 of the mega project will be completed by 2027, according to the Sri Lankan authorities.