Singapore’s remarkable ability to consistently rank amongst the top destinations worldwide for attracting Foreign Direct Investments (FDI), despite being Asia’s third-smallest country, stems from its exceptional business friendly environment. According to World Bank data, Singapore holds the third position globally for FDI inflows, owing to several key advantages.
These include its welcoming and transparent business policies, a favourable tax regime, and a diverse, English-speaking skilled workforce, all of which significantly enhance its attractiveness to foreign investors.
On the other hand, Sri Lanka presents strategic geographical importance, placing it central to numerous shipping routes and logistics hubs. However, its developmental progress has been significantly hindered by persistent vulnerabilities and bottlenecks that successive governments have failed to address adequately.
Consequently, this has impeded the attraction of foreign investments and access to capital. Persistent structural weaknesses in the macroeconomic environment have been long standing challenges facing the country. Despite these hurdles, Sri Lanka on its own hands has a potential game-changer -‘Port City Colombo’ (PCC).
The Port City Colombo project is arguably Sri Lanka’s most ambitious development initiative since gaining independence
The aim behind is to make Port City Colombo a regional logistics and business hub as well as a financial centre in the heart of South Asia. This project is marked as the largest Public-Private Partnership in Sri Lanka’s history, being between the Government of Sri Lanka (GoSL) and CHEC Port City Colombo (Pvt) Ltd – the project developer.
Being scheduled to be fully operational by 2041, Port City Colombo is designed as a multi-service Special Economic Zone (SEZ) as a catalyst to Sri Lanka’s shift towards a service-led growth model and higher-income status.
Port City Colombo holds an immense potential to tackle numerous challenges confronting Sri Lanka’s modern services sector including IT and IT-enabled services, financial services, shipping logistics, professional services, corporate headquarters, regional distribution operations, and tourism.
The Colombo Port City Economic Commission Act No.11 of 2021 was approved by the Government of Sri Lanka, which places an emphasis on the ease of doing business in the Port City Colombo SEZ. Port City Colombo is governed by the Colombo Port City Economic Commission (CPCEC), the regulatory body that plays an important role in managing all activities within Port City Colombo.
The Commission acts as a Single Window Investment facilitator and has the authority to grant exemptions, incentives, streamline procedures, simplify processes and expedite approvals.
A study conducted in 2020 by the Lakshman Kadirgamar Institute of International Relations and Strategic Studies (LKI), tested the potential success of Port City Colombo benchmarking with some well-established SEZs
The study compared Port City Colombo to some of the well-established SEZs around the world, such as the Dubai International Financial Centre (DIFC) in the UAE, Gujarat International Financial Tech-City (GIFT) in India, Songdo International Business District (IBD) in Rep. of Korea, and Labuan International Business and Financial Centre (IBFC) located off the coast of Malaysia.
Based on the findings, Sri Lanka was found well ahead in terms of ‘accessibility’ and ‘sustainability’ dimensions compared to the competitors/SEZs listed above.
Nevertheless, Port City Colombo can draw some invaluable lessons from Singapore’s approach to creating a conducive business environment that attracts foreign investors
Singapore’s success is anchored in its modern legal system, widely recognized for its efficiency and integrity. Many regional cross-border contracts choose Singapore for dispute resolution, ensuring a neutral and secure arbitration hub upheld by institutions like the Singapore International Arbitration Center (SIAC).
Additionally, Singapore actively promotes innovation through government investment in startups, which reduces risks for private investors and stimulates local startup funding, which would eventually enhance the local innovation capacity.
Manufacturing, particularly electronics, plays a huge role in Singapore’s economy, contributing significantly to its GDP and employment. Another important aspect is its commitment to strengthen its position as an intellectual property (IP) hub, which is mainly driven through ‘Singapore IP Strategy (SIPS) 2030’. This forward-looking blueprint aims to capitalise on global intellectual asset values by enhancing Singapore’s capabilities in IP management and commercialization.
Additionally, the Singapore Government supports businesses in leveraging their R&D outputs, through targeted initiatives and industry-specific training programs.
The Sri Lankan Government has undertaken significant efforts to overcome existing challenges and unleash the potential for attracting FDIs to Sri Lanka, including Port City Colombo
Initiatives such as expansion of the National Highway Network and recent agreements to revive certain stalled infrastructure projects like the Colombo Light Rail System are poised to enhance connectivity and competitiveness of the country and thus Port City Colombo, as an attractive investment destination in the medium to long term.
Port City Colombo offers a regulatory environment similar to most other global financial hubs. The Colombo Port City Economic Commission (CPCEC) will facilitate a streamlined regulatory framework establishing an international commercial arbitration centre which is aimed at resolving commercial disputes.
Additionally, CPCEC has partnered with the Singapore International Arbitration Centre (SIAC) in providing expert professional services in resolving disputes and conflicts within the area of the authority of Port City Colombo.
Fiscal incentives also play a pivotal role in attracting investors, with businesses qualifying under the Business of Strategic Importance (BSI) will gain benefits such as a 25-year corporate income tax holiday, exemptions from indirect taxes and border tariffs, and personal income tax exemptions for employees as they earn in foreign currency.
Moreover, foreign investors are guaranteed 100% ownership of property and business assets under the CPCEC Act, which also includes strong investor protection measures to safeguard against policy changes.
The Port City Colombo project will play a pivotal hand in Sri Lanka’s transformation journey as a leading investment destination in the region, exerting a strong impact on the nation’s economy
According to a special economic impact assessment conducted by PricewaterhouseCoopers (PWC) Sri Lanka, Port City Colombo is projected to attract close to US$1 billion in Foreign Direct Investment (FDI) annually, once fully operational. These investments are expected to generate significant positive externalities, including regional employment opportunities, increased exports, additional government revenues, and enhanced foreign exchange earnings, which could be seen in the short-term.
The spillovers of this project are expected to stimulate significant benefits essential for the country’s long-term development path as well, including improvements in local skills, technological upgrades through technology transfer, enhanced local innovation capabilities, and economic diversification.
These outcomes in turn would help Sri Lankan firms to enhance their productivity, aligning closely with the country’s ambitions for sustainable long-term economic growth and stability.
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