{"id":114610,"date":"2021-05-26T16:34:23","date_gmt":"2021-05-26T23:34:23","guid":{"rendered":"http:\/\/www.lankaweb.com\/news\/items\/?p=114610"},"modified":"2021-05-26T16:34:23","modified_gmt":"2021-05-26T23:34:23","slug":"port-city-project-will-it-generate-confidence-amongst-investors","status":"publish","type":"post","link":"https:\/\/www.lankaweb.com\/news\/items\/2021\/05\/26\/port-city-project-will-it-generate-confidence-amongst-investors\/","title":{"rendered":"Port City Project \u2013 Will it generate confidence amongst investors?"},"content":{"rendered":"

By Raj Gonsalkorale<\/em><\/span><\/h2>\n\n\n

Foreign direct investment (FDI) is an\nintegral part of an open and effective international economic system and a\nmajor catalyst to development. Yet, the benefits of FDI do not accrue\nautomatically and evenly across countries, sectors and local communities.\nNational policies and the international investment architecture matter for\nattracting FDI to a larger number of developing countries and for reaping the\nfull benefits of FDI for development. The challenges primarily address host\ncountries, which need to establish a transparent, broad and effective enabling\npolicy environment for investment and to build the human and institutional\ncapacities to implement them<\/strong><\/em> \u2013 OECD, Foreign Direct Investment for Development\nMAXIMISING BENEFITS, MINIMISING COSTS<\/p>\n\n\n\n

Sri Lankan politics has not witnessed bi-partisan\nagreement amongst the major political parties on key issues that impact on the\npeople of the country, the present generations and many more to come.<\/p>\n\n\n\n

There has never been bi partisan agreement on foreign\npolicy, on education, on health at least at the highest policy levels.\nPersonality politics has dominated the political landscape and it has always\nbeen about the plaudits or damage a policy decision might make on a personality\nand as a consequence on the party or parties that person represents, and\neventually whether or not that individual or the party would win the next\nelection, and ones after that.<\/p>\n\n\n\n

This absence of bi partisan agreement has now extended to\none of Sri Lanka\u2019s most daring, controversial to many and an out of the box\nventure, the Port City project. The absence of such agreement, and the\nstatements made by the current Opposition that they will amend the Port\nCommission bill is bound to unsettle many would be investors. They will be\nwondering what would happen to their investments if the current regime is\ndefeated at the next election and the terms and conditions in which they\ninvested should change after 4 years or so. The investment period horizon would\nthen be 4 years. It does not need an Einstein to conclude that investors would\nbe very hesitant to invest in any long term project in such a climate.<\/p>\n\n\n\n

The statement of the Opposition is not being questioned\nhere as they have rightly said that although the constitutionality of the bill\nhas been adjudicated by the Supreme Court, amendments made, but the policy\ncontentions had not been addressed and amendments they had brought in had been\nrejected by the government. It is also not clear whether the amended bill,\nincorporated with the supreme court determined amendments, had been presented\nto the Parliament. The public certainly has not seen the amended bill. <\/p>\n\n\n\n

The bona fides of the current Opposition of course is\nquestionable, as they were the government in 2016 when they signed a tripartite\nagreement with the China Harbour Engineering Company and the UDA to develop the\nPort City into what they termed the Colombo International Financial City,\nwhich will be in the centre of the maritime city, will be one of the key\nphenomenon which will decide the future development of Sri Lanka\u201d according to the\nthen Megapolis Minister Champika Ranawaka at the signing of the tri partite\nagreement. He added that the project would also fuel the planned Maritime city,\nAero city, Tech city, Industrial cities and Tourist cities. That agreement has\nnot been made public to the best of the writer\u2019s knowledge.<\/p>\n\n\n\n

The Port City project and the Port City Commission are\nmajor undertakings that will bind many future generations to its positives, but\nmore importantly to any possible negatives as well. It would not be out of\nplace to say that the politics associated with this futuristic project could\nhave been handled better in a more transparent and consultative manner.<\/p>\n\n\n\n

In the first place, the origin of this project, the\nagreement signed with China, signed by the Presidents of China and Sri Lanka in\n2014, to reclaim an area of the sea and to create a Port City, was not tabled\nin Parliament for discussion as far as can be ascertained. <\/p>\n\n\n\n

Reports indicate that the project concept goes back to\n2011 and construction was set to begin in March 2011 but due to several\ncircumstances the project had been stopped. In mid-2012, the Sri Lankan Port\nAuthority (SLPA) announced that the construction of the then Colombo Port City\nproject would commence on 17 September 2014. The budget was estimated to be $15\nbillion.<\/p>\n\n\n\n

The reclamation was to be carried out by China Harbor\nEngineering Corporation, who has been engaged by the investor. 125 ha (310\nacres) was the land was given to government as well as 88 ha (220 acres)\nwhile owned by the government was planned to be leased for 99 years to the\nChinese company. 20 ha (49 acres) was planned to be given freehold to the\nChinese company.<\/p>\n\n\n\n

Construction of the Colombo Port City project was launched\non 17 September 2014 by Sri Lankan President Mahinda Rajapaksa<\/a> and Chinese\nPresident Xi Jinping<\/a>.<\/p>\n\n\n\n

The Sirisena\/Wickramasinghe government that was elected in\n2015 suspended the project on environmental grounds, but it is understood that\nthis was granted approval again in 2016 having agreed to pay a penalty of USD 100\nmillion to the Chinese company for the delay encountered in proceeding with\nconstruction as per a country to country agreement. It is learnt that in\nexchange for not paying this penalty, the Hambantota Harbour was sold or given\non a long term 99-year lease virtually on a platter.<\/p>\n\n\n\n

On 12th<\/sup> August 2016 the tripartite pact signed to\nconstruct a mega port city signed between Sri Lanka’s Urban Development\nAuthority, the Ministry of Megapolis and Western Development and the China\nHarbour Engineering Company, and as far as known, this agreement too has not\nbeen tabled before the Parliament.<\/p>\n\n\n\n

With\nthe signing of the agreement, the Colombo Port City Development Project was\nnewly renamed as the Colombo International Financial City with the government\nstating that the project would transform Sri Lanka into an international\nfinancial hub in the Indian Ocean region. <\/p>\n\n\n\n

It is\nstill not very clear as to the extent of land involved in this project as\ndifferent extents have been mentioned in different agreements. It is also not\nclear whether whatever land extent has been registered with the land registry.\nClarity on these will be useful.<\/p>\n\n\n\n

While there is no indication\nthat any of these two agreements had been tabled and ratified by Parliament,\nthese two occasions are not the first time Parliament had not ratified binding\nagreements, if indeed they had been tabled in Parliament. The Ceasefire\nAgreement that Prime Minister Wickramasinghe signed with LTTE Leader Prabakaran\nin 2002 was not tabled in Parliament, and in fact not even known to the Executive\nPresident of the country at that time Chandrika Kumaratunga who saw the\nagreement after it had been signed by Wickramasinghe and Prabakaran. The\nconsequences of that agreement are well known today.<\/p>\n\n\n\n

In this backdrop comes the\nPort City Commission bill. While it is true that there was an opportunity for\nlitigants to go before the Supreme Court to ascertain the validity of the bill\nwith the Constitution, the people\u2019s representatives, however low they are in\ntheir credibility in the eyes of the people, and neither the business\ncommunity, and civil society leaders, were given an opportunity to consider the\npolicy aspects of the bill in some depth and to work together to make it a\nnational project of great importance to the country. <\/p>\n\n\n\n

The SJB, and the residue of\nthe UNP, as well as those who supported the Yahapalanaya government in 2016,\ncannot afford to oppose this bill in principle while they have the right to\noppose sections of it if they differ with what they agreed to in 2016. As\nstated earlier, the writer stands corrected if the government and the\nOpposition could clarify to the public whether these important agreements were\nin fact discussed in Parliament and whether any attempt was made to have bi\npartisan agreement on them. Besides being an important consideration for the\npublic in Sri Lanka, it would be vital to generate confidence amongst would be\ninvestors in the Port City project for long term projects. Unless there can be\nsuch a bi partisan agreement, it is unlikely that the objective of large and long\nterm investments will be made in this project. <\/p>\n\n\n\n

While some may entertain philosophical arguments against\nthe concept of the Port City, and suspicions and fears about China getting an\nextended foothold in Sri Lanka, it is also true that Sri Lanka needs to raise\nits economic platform if the future generations are to enjoy the opportunities\nthey need and deserve in years to come. The current economic platform, based on\nTea, Rubber, Coconut and other agricultural exports, Apparel and IT products\nand services exports, foreign remittances, and tourism, is very volatile and\ninadequate to meet future challenges associated with investments required for infrastructure\ndevelopment, service improvements and social upliftment. <\/p>\n\n\n\n

The longer term future of Tea and Rubber is uncertain, and\nforeign remittances may not be long lasting even once the COVID pandemic\nsubsides. Sri Lanka needs a different approach and lateral thinking on economic\npolicies if it is to free itself from debt and generate enough revenue to\nservice its infrastructure development and service improvements. Besides the\nPort City project, there is no other innovative project that has been presented\nfor discussion that would address the future economic needs of the country.\nWhile the management of its politics has left much room for improvement and\nsome policy aspects may need adjustment, the fact remains that there is nothing\nelse on the table to compare it with.<\/p>\n\n\n\n

While it is not a critique of the bill itself, as the\nwriter feels that should be left to the politicians as well as experts who are\nmore competent to do so, there are a few questions pertaining to the clauses 64\nand 65 in the agreement that needs some clarification as there appears to be a\nlegal provision in the bill to extend the authority of the Port Commission to\nland associated with projects approved by the Commission, beyond the reclaimed\nland area that constitutes the Port City. In addition, these clauses appear to\nmake the Board of Investments (BOI) irrelevant and an unnecessary entity as all\nits activities, past, present and future could easily be managed by the Port\nCommission.<\/p>\n\n\n\n

  1. Firstly,\nwhat does section 65. (1) mean? It says, from and after the date of\ncommencement of this Act, all land comprising the Area of Authority of the\nColombo Port City, shall be vested with the Commission in the manner set out in\nsubsection (3)\u201d. Sub Section (3) reads as follows.  For the avoidance of\ndoubt, it is hereby stated that on the coming into operation of this Act, the\nPresident may, issue a Land Grant under the Crown Lands Ordinance (Chapter 454)\nin the name of the Commission, in respect of all land comprising the Area of\nAuthority of the Colombo Port City as set out in Schedule I to this Act\u201d<\/li><\/ol>\n\n\n\n

    It is understood that\nPresident Sirisena by way of a gazette notification granted a land deed\nfor the reclaimed land in favour of the UDA as mentioned by Presidents counsel Jayantha\nWeerasinghe at a recent press conference. The land given to the UDA on this\ngrant apparently was given on a lease to the Chinese company by the UDA in\n2016.<\/p>\n\n\n\n

    Is it to be understood that\nas per section 65, the present President is giving another grant of the same land\nto the Port Commission under section 65 when the land is owned by the UDA and\nleased to the Chinese company? This convoluted situation may not be accurate,\nand it would be good if the government could clarify this. <\/p>\n\n\n\n

    None of these land deeds\nhave been registered as far as known and therefore no one has been able peruse\nthem and ascertain the status of the grants and deeds. No wonder the Public is confused.\nIt is also understood that the gazette which contains the deed signed by\nPresident Sirisena has the new plan as per the tripartite agreement under\nCadastral system. It would be helpful if these documents are made available to\nthe public. If the above confusion could be cleared, this sub section and what\nis referred to in Section 65 of the gazette notification looks harmless and\ninnocuous if it is read as it is without any reference to any other Section. <\/p>\n\n\n\n

    • However,\na question does arise as to what this Section (65) and Sub Section (3) mean in\neffect? <\/li><\/ul>\n\n\n\n

      Is it that only the\nreclaimed land area referred to as the Port City, will be vested with the\nCommission? If not, what other land?<\/strong><\/p>\n\n\n\n

      Some confusion and doubt\ndoes occur when it is read in conjunction with Section 64 which reads as\nfollows. Clause 64 <\/p>\n\n\n\n

      (1) The Commission may,\nwhere it considers necessary to do so, as an interim measure,<\/strong> permit an authorised\nperson to engage in business from a designated location in Sri Lanka, outside\nthe Area of Authority of the Colombo Port City<\/strong>, as may be approved by the President\nor in the event that the subject of the Colombo Port City is assigned to a\nMinister, such Minister, for a period not exceeding five years from the date of\ncommencement of this Act. Such business shall, for such period of five\nyears be entitled to all the privileges accorded to, and be deemed for all\npurposes to be, a business situated within and engaged in business, in and\nfrom, the Area of Authority of the Colombo Port City.<\/strong><\/p>\n\n\n\n

      (2) Where an authorised\nperson has been permitted to engage in business from a designated location in\nSri Lanka, outside the Area of Authority of the Colombo Port City in terms of\nsubsection (1), such business shall be subject to the provisions of this Act\nand any regulations made hereunder.<\/p>\n\n\n\n

      This Section raises two\nquestions<\/strong><\/p>\n\n\n\n

      1. Would\nsuch a project have to be approved by the Authority, meaning, will it have to\nbe a new project and not an existing project? Does this not virtually open any\npart of the country for such a project to be located for 5 years? If so,\neffectively, the Authority has island wide authority for 5 years for approved\nprojects. In this event, what is the role of the BOI, and why should projects\nseek approval from the BOI?<\/li><\/ol>\n\n\n\n
        • When\nthis is read in conjunction with Section 65 and sub section (3) does it mean\nthat not only the reclaimed land but also any land allocated for an approved\nproject for 5 years under clause 64 couldalso be vested with the\nAuthority for 5 years with President issuing a Land Grant under theCrown\nLands Ordinance (Chapter 454) in the name of the Commission?<\/li><\/ul>\n\n\n\n
          • Section\n65, sub section (2) reads as follows \u2013 Where any deed of transfer,\nindenture of lease, agreement or other similar document has been executed in\nrespect of any land situated within the Area of Authority of the Colombo Port\nCity, prior to the date of commencement of this Act, by the Urban\nDevelopment Authority, established under the Urban Development Authority Law,\nNo. 41 of 1978<\/strong>, such deed of transfer, lease, agreement or other similar\ndocument shall, from and after the date of the commencement of this Act, be\ndeemed for all purposes to be a document executed by the Commission, in terms\nof the provisions of this Act and be valid and effectual as if executed\nhereunder\u201d<\/li><\/ul>\n\n\n\n

            The Port Commission Act has\njust been passed by the Parliament. In relation to this clause, besides the\nland that was leased to the Chinese company by the UDA in 2016, is it to be\nunderstood that there are projects approved by the UDA or any other body on\nland within the Area of the Authority? Is this clause to be understood as\nextending to projects already approved by the UDA, with some projects located\noutside the Port City precincts (as per Section 64) the benefits referred to in\nSection 65?  <\/strong><\/p>\n\n\n\n

            It would be useful if the\ngovernment tables a list of such projects so approved and their operational\nlocations as the country has a right to know which project, located where, is to\nbenefit from terms in Section 65.<\/p>\n\n\n\n

            These clauses, their meaning and effects need\nclarification as confusion does arise about the extent of authority the Port\nCommission has over land outside the Port city itself, even if it\u2019s for 5\nyears. The potential does exist for the Port Commission to approve investment\nprojects with say the headquarters office located in the Port City, but actual\nprojects located anywhere else in the country, and enjoying all privileges and\nbenefits accorded to the project irrespective of where its operations are\nlocated. Theoretically, farfetched it may be, the possibility exists for\nhundreds of foreign companies to have their projects approved by the Port\nCommission, with their operations located in any part of the country. The\nconsequences of this possibility needs to be considered especially from the\npoint of view of the impact on local farmers (if the projects are agriculture\nbased) or industrialists who will not enjoy the benefits enjoyed by projects\nregistered with the Port Commission. <\/p>\n\n\n\n

            Considering all of above, the extraordinary powers granted\nto the President of the country to make far reaching and binding decisions on\nwhat may turn out to be a sizeable component of the country\u2019s economy could\nhave the potential to be detrimental rather than beneficial to the long term\ninterests of the country should the Presidency be in the hands of a person not\nentirely suitable to hold that office. Avenues for greater accountability of\ndecisions made by the Port Commission and the President of the country have to\nbe considered from this point of view.<\/p>\n","protected":false},"excerpt":{"rendered":"

            By Raj Gonsalkorale Foreign direct investment (FDI) is an integral part of an open and effective international economic system and a major catalyst to development. Yet, the benefits of FDI do not accrue automatically and evenly across countries, sectors and local communities. National policies and the international investment architecture matter for attracting FDI to a […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":true,"template":"","format":"standard","meta":{"footnotes":""},"categories":[172],"tags":[],"class_list":["post-114610","post","type-post","status-publish","format-standard","hentry","category-raj-gonsalkorale"],"_links":{"self":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/114610","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/comments?post=114610"}],"version-history":[{"count":0,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/posts\/114610\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/media?parent=114610"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/categories?post=114610"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.lankaweb.com\/news\/items\/wp-json\/wp\/v2\/tags?post=114610"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}