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Colombo Port City project: Addressing issues  

18 Apr 2021

The “Colombo Port City Economic Zones Special Commission Bill” that was recently proposed by the Government continues to be a hot button issue, as many parties have voiced their opposition to it. Opposition parties, civil society groups, and labour unions all petitioned against the Bill at the Supreme Court (SC) last week and raised various concerns they had.  The 76-page document provided a legal framework for the setting up of a special economic zone (SEZ) within the Colombo Port City, and proposes the establishment of a commission empowered to grant registrations, licenses, authorisations, and other approvals to carry on businesses and other activities in the SEZ.   To help ease these concerns, the Government’s Media Centre for National Development spoke to The Sunday Morning and addressed each of the issues brought up by the Opposition and its leaders.  Following are excerpts:      “The Government is using their two-thirds power to pass the Economic Commission Bill for Port City”  A Government does not require a two-thirds majority to present a Bill to the Parliament. Except for legislation that involves a decision by the SC or other such unique legislation, bills can be passed in Parliament with a simple majority.    “Port City takes up 1,115 acres within the city of Colombo, 80% of which is owned by China Harbour Company” The Colombo Port City is around 446 hectares or 1,102 acres in size; however, the land space only amounts to 269 hectares or 664 acres, with the rest being allocated to the breakwater and moat. This entire land is freehold land owned by the Government of Sri Lanka, as declared by a parliamentary resolution.   When we look at the ground space, out of the 269 hectares, buildings can only be constructed in 178 hectares or 439 acres. The remaining 91 hectares or 224 acres has been allocated to the roads, beaches, and for public infrastructure such as lanes, parks, sidewalks, canals.  Out of the 178 hectares, only 116 hectares or 286 acres will be given on a 99-lease to the Chinese Harbour Company; while the remaining 62 hectares or 153 acres will be available for government use, or will be leased to other parties. The 116 hectares owned by the project company can also be leased to a third party.  The total cost for the Port City project is $ 1.4 billion, and only 286 acres are temporarily being transferred to the company. Therefore, the real percentage of ownership is only around 25%.    “This company has been funding the Rajapaksas and their elections in the recent past and has been pushing to have their area exempt from Sri Lankan law; that is why this new Bill has passed”  In 2018, a media outlet in New York City, US, published an article with fabricated information condemning China. This is where these accusations really stem from. However, the accused Chinese engineering company higher-ups and the Chinese Ambassador at the time held a press conference discrediting these accusations.   Following this press conference, the US stated that they would be filing a case against the media company, however, no such case has yet been filed.   The accusation that the project company exerted pressure on the Government to pass this Bill is untrue. The drafting of the Bill in question began during the last administration in 2016, and was rejected twice by the Attorney General's Department, as it was so powerful that it even transcended the Sri Lankan Constitution. Therefore, this new Bill has less power than its two predecessors.     “Our country already has a Board of Investment (BOI) Act and a Strategic Development Act, which give huge tax reliefs to international organisations. The Rajapaksas used this to give the Shangri-La hotel on a 25-year lease and Ranil Wickremesinghe used it to give away the Hambantota Port. In spite of these two bills, this new Bill was introduced giving the Chinese company more benefits, treating Port City as a separate State.”  The BOI Act, or the Greater Colombo Economic Commission, was first introduced 43 years ago to encourage investments towards readymade garments, rubber products and assemblies, etc. The Strategic Development Act was introduced in 2008 by the BOI to help cover areas that the first act did not. We have built the Port City aiming at the financial and service sector, and need a new framework built accordingly.     “The Port City does not belong to any Local Government, it is a special zone.”  This is a time when the incompetence of provincial institutions is being widely discussed, partisanship notwithstanding. There’s much discussion about suitable solutions to the problems of these institutions. The Port City provides an excellent environment to experiment with these possibilities. If the Port City model proves to be a competent and people- and service-centric enterprise, this system could be recommended to be implemented in other areas of the country.    “The Local Government is governed by people who live in the respective areas, and an elected people’s representative. But Port City is going to be governed by a Commission appointed by the President.”  The President himself has been elected by the popular vote of the people.    “Members of the Commission are exempt from being brought before court. It is not entirely dissimilar to that of the powers of the President.”  That immunity is only effective for activities relevant to the Bill. The immunity is not applicable in cases of criminal offences, intentional omission of provisions of the bill, or any other violation of the laws of the country.     “This Commission has special financial powers, and has a separate fund for itself. All of the Government’s revenue is added to the Consolidated Fund, and the money is maintained by Parliament and obtained only through their approval. But the Port City fund will be maintained by the Commission with no parliamentary approval needed.”  Any government agency or commission has their own funds. So it is normal for the Port City Commission to have their own funds. These other state institutions are funded by the public or by parliamentary approval, but the Port City Commission Fund is mainly made up by foreign funds. The Commission comes under the President and a minister nominated by him. Therefore, in the end, it is accountable to the people of the country.    “The Port City Economic Commission has the power to grant various tax concessions, which is a power generally only granted to Parliament.”  While the Commission can recommend and prepare tax concessions, for the tax relief to take effect, it still has to be submitted and approved by Parliament.     “The money the State receives is subject to the supervision of the Auditor General. However, the Port City money is to be privately audited by an institution. Therefore, it will be removed from the state audit.”  According to the Constitution, Requirement of International Audit Supervision of Audit Activities under Section 154, the final audit report must be presented to the Parliament, and people's representatives have the ability to study the final audit.     “Government agencies can be brought forward for investigation by the Committee on Public Accounts (COPA) and Committee on Public Enterprises (COPE). This Chinese territory cannot be managed or called on the same way by Parliament.”  There is nothing stated that it does not fall under parliamentary purview. It is only mentioned that since it is constructed with the intention of being an agency that does not rely on public/taxpayer money, direct responsibility lies more with either the President or a named minister, rather than with Parliament.    “Only foreigners can invest in the Port City, Sri Lankan businesses are being indirectly prevented from investing their funds. Only those abroad can invest in the city, making it, in a nutshell, a separate State.”  If businessmen were allowed to accumulate wealth locally or internationally, then local businessmen as well as foreign businessmen who operate locally could convert the wealth reserves they have into foreign currency, or they could use the wealth that they accumulate in local banks; if this was facilitated, the wealth reserves in local banks could easily and rapidly be transmitted into the Port City. But this regulation states that the local or foreign investors need to ensure that foreign reserves should be brought to the country from the outside.  Because of this regulation, it is guaranteed that foreign investment will come to Sri Lanka. Even now, some local companies do not transmit their foreign earnings into Sri Lanka, and instead bank it in countries like Singapore, Hong Kong, or Dubai. Due to the Port City Commission, the primary beneficiaries would be local businessmen and local investors who keep their wealth reserves outside the country.     “It has been stated that the salaries being paid to those working in the Port City will be made up of foreign currency, which could be the Chinese Yuan.”  Any currency in the world can be used to pay salaries within the Port City. Not only that, but goods and services can also be purchased with any currency. It can be the Sri Lankan or Indian rupee, Euro, Pound, Dollar, Yuan, Dinar, or even Ruble.    “The income of the employees within the city is exempt from income tax, and will be deposited in foreign currency accounts within the country.”  Instead of depending on foreign currency that comes from outside the country, those with higher positions can bring in foreign currency to the country from within itself.    “While the citizens of Sri Lanka can pay for goods within the Port City, once they leave the city, they will be subjected to a tax for the goods they bought. This is further proof that the Port City is a separate country.”  While both tourists and expats will be entitled to a tax relief, the general public will have to pay a tax so that the services and goods in the other parts of the country would not crash. This will protect the overall service and sale of goods in the country, while providing more advanced and competitive products and services for tourists.     “The Port City should resolve disputes within the jurisdiction of the Economic Commission by international arbitration. For example, the Petroleum Corporation and the international dispute over the hedging agreement with Bank of Singapore settlement was referred to a board. This is a way to resolve disputes between States. Accordingly, disputes between the commission and institutions, and between institutions and employees, will be taken up by an international arbitration panel, which is to be set up there.”  The emergence of such arbitration centres indicates an advanced international level of dispute resolution, and is the first step towards making Colombo a Port City.    “There are several bills that have been passed in Parliament at present that will not be effective within the Port City. These include: Urban Development Superintendent No. 78 of the National State Council for granting approval Act, Municipal Councils Ordinance, Commercial Mediation Centres of Sri Lanka Act, Cities and Rural Development Ordinance, Strategic Grant of Tax Concessions for Various Projects Development Act, General Contract Agreement Act, Board of Investment Act, and other important acts such as the Securities and Exchange Commission Act, etc. This Port City is being turned into a Chinese province, and they have a similar plan to that of Hong Kong.”  Hong Kong is a historical site in the ancient Chinese Empire, it was captured by the British in 1842, and later in 1898, the peninsula was taken as a tax base from the Chinese emperor for 99 years. Then reluctantly, it was given back to China in 1999, when the 99-year lease ended. Britain had to give up the Hong Kong region because they were sheep in the eyes of the world, whose wealth and natural resources were exploited by wolves. The British had Hong Kong for 150 years, and Chinese authorities did not change the regime overnight.     “Nowhere does it say that the members of the Commission appointed by the President will solely be Sri Lankan. Therefore, the commission could consist of Chinese nationals. This Government came in as a patriotic Government that protects national resources."  In many countries around the world, we can see Sri Lankans working in various government and quasi-government institutions. It has become a frequently-asked question, as to why many intellectuals leave Sri Lanka, their motherland. But Port City can be seen as an opportunity to bring these intellectuals back into the country.


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