Jan 16, 2019
Sri Lanka's CHEC Port City (Pvt) Ltd, which has reclaimed 369 hectares of sea to build a brand new city expanding the island's capital Colombo is awaiting tax incentives to begin marketing, officials said.
The reclaimed area will have 178 hectares of buildable space and 91 hectares of public areas including a park.
"We look forward to government policy support to attract more investors to the port city," CHEC Port City Managing Director Jiang Houliang said, after the company said the first stage of reclamation had been finished on January 16.
The firm now has to develop the land, build water and sewer lines and power connections. Utilities are expected to be managed by a separate public private partnership.
Sri Lanka has not yet announced the tax structure for investors after a so-called Strategic Development Law, which gave ad hoc tax breaks amid charges of corruption, was suspended partly as measure to boost revenues amid an expansion of debt.
CHEC will sell 113 hectares of land over two decades for development, while the government will get the balance. The areas have already been allocated by drawing lots.
The land is expected to draw 15 billion US dollars of investments.
The land is expected to be given on 99-year leases, but more clarity is required on title industry analysts say.
Sri Lanka's economic affairs ministry is expected to develop a separate legal framework for the area, which is expected to house a financial centre.
The legal framework is expected to create similar environment like the Dubai International Financial Centre and a draft was due to have been vetted by international legal experts. But it is not yet passed by parliament.
Thulci Aluwihare, head of strategy and business development at CHEC Port City said the firm hopes to start selling land in the second quarter of 2019.
He said the firm was targeting investors in East Asia, India and the Middle East.
There were expectations earlier that marketing would begin in October, shortly before President Maithripala Sirisena triggered a political crisis.
A budget to be presented in November was also delayed to March.
Meanwhile doubts have been raised about the ability of Sri Lanka to house a financial centre, with the central bank operating a soft or non-credible pegged exchange rate regime which is prone to balance of payments crises and IMF bailouts when credibility of the peg is lost.
Hong Kong, a top financial centre, has a currency board (hard peg) targeting a fixed exchange rate and Singapore has a modified currency board with a floating policy rate.
Dubai has a currency-board-like system which follows US policy rates, and does not attempt independent monetary policy.
In 2018 Sri Lanka slapped trade and exchange controls to maintain its soft peg and has lost about 1.2 billion US dollars over four months ending December 2019.