By Yoshitha Perera
Parliament last Thursday (20) passed the Colombo Port City (CPC) Economic Commission Bill, which made headlines over the past few weeks. Following the Supreme Court’s determination on the Bill, the Government accepted its amendments and passed the Bill.
Meanwhile, it was also announced in Parliament last week that the Government had spent Rs. 138 billion so far in its efforts towards combating the Covid-19 pandemic.
In an interview with The Sunday Morning, State Minister of Money and Capital Market and State Enterprise Reforms Ajith Nivard Cabraal spoke about the future of the CPC and its Economic Commission as well as the Government’s plans to combat the Covid-19 pandemic.
Following are excerpts of the interview:
[caption id="" align="alignright" width="467"]
State Minister of Money and Capital Market and State Enterprise Reforms Ajith Nivard Cabraal[/caption]
Can you share with us the background of the CPC and how it is important to the country?
We have just built this new city. It is a fresh canvas. How we make use of it is actually very important because it has tremendous land value. It’s a part of the Colombo District and Colombo city itself. So, whatever we do there must provide value to the country. That is why we thought that it is best to highlight, market, or position it as an international financial city which would enable it to yield value for the country.
But how do we bring out that value? How do we ensure that value is actually received by the people as well as by the country? We should have a legal and administrative framework that will make it efficient and effective so people seek out this place and use it as their chosen destination.
All over the world, there are cities of this nature. In fact, there about 5,000, but very few – around 100 – are really successful. The top amongst them is Singapore, Dubai, and Shenzhen, which are what come to mind right now. So, we are competing with those cities. If we are going to compete with that kind of firm competition, we have to have very effective administration here, as only then can we yield the results.
Accordingly, we have developed a special law where there is a single window through which all investors can get tax benefits, services, or whatever they require to be done within the city. These will be provided through this single window so they don’t waste time being sent from pillar to post, which is the usual situation in Sri Lanka. Providing a single window is the main purpose of this law and once that law is effectively put in place by the commission we are going to appoint, then the investors will flow in.
How viable and sustainable is the creation of new urban land by reclaiming the sea in Colombo?
It is always best that all those environmental concerns and other factors are dealt with. That is why before 2014, around 2012 I believe, the initial work on assessing the impact of the new city was very carefully done. The environmental, traffic, and business implications were looked at.
A lot of things were done in order to ensure it doesn’t have a negative impact on any of our normal living conditions as well as administrative procedures. I believe these assessments are important in any city, even when putting up a building; so, the same has been done here too.
Is there any threat to Sri Lanka’s sovereignty by continuing the CPC project?
As I said, this project is to provide a single window. Those 5,000 such cities I spoke about are functioning without any problem. I think this was a canard put in place by a few Opposition members who actually know that this will be a turning point in Sri Lanka's economy. They know that they'll have to kiss goodbye their own ambitions of coming to power, perhaps in the next decade or so, once this city really takes shape and is successful.
So, I think a threat to Sri Lanka’s sovereignty is the only point they're looking at. By bringing up the story that there's absolutely nothing in this law (to protect our sovereignty), they are suggesting that there can be practical opportunities for any threat to Sri Lanka’s territory, territorial integrity, or security – but there’s nothing of that nature. Even by any stretch of the imagination, you can't think of it like that. I think it's sad that the Opposition is resorting to that.
China’s investment in Sri Lanka is often portrayed as “debt trap diplomacy”. In that sense, what’s your opinion on how the CPC project will help in handling Sri Lanka’s debt?
Once our Government came into office, we took a very clear policy decision that we will try to reduce our debt-making projects as much as possible, so that we will be curtailing our debt. Because, during the last Government, the country borrowed about $ 10 billion in international sovereign bonds at very high rates of interest. So, they put pressure on our economy. As such, what we are searching for is non-debt inflows into the country.
With this particular project, the investment of $ 1.4 billion is a non-debt-creating inflow as far as Sri Lanka is concerned. This project has been done by the CHEC Port City, not by Sri Lanka, and we have not spent a cent on this project. And as a result of the project, we will now have an asset that is going to generate income, which is going to contribute to GDP (gross domestic product), which is going to generate taxes as a result.
In addition to that, Sri Lanka will receive as much as 62 hectares of land. Even at the rate of about $ 2,500 per square metre of land, we hope we should be able to receive at least $ 1.5 billion or more, which means that these are the additional benefits that Sri Lanka is going to get.
That’s why I think it sits very well in our overall plan of non-debt inflows as well as foreign exchange inflows coming into the country, and also in terms of economic activity and employment being generated – all those factors are met by this project.
As far as Sri Lanka is concerned, we were never in a debt trap, because our debt-to-GDP ratios were in very good shape. I think this reasoning was only pushed in order to sell the Hambantota Port at that time. The previous Government did that. We had absolutely no problem paying off the loans that were taken in order to build the Hambantota Port. This was all a facade that was built.
The majority of the members of the CPC Economic Commission are to be Sri Lankans as per the Supreme Court determination. How will this be implemented?
Actually, there wasn’t a Supreme Court decision. It was our Government's reaction to some of the concerns that people expressed. The Supreme Court did not give any direction on that.
We also know that the people of this country were concerned because of what happened in the past; when the last Government appointed a foreigner as the Governor of the Central Bank, we all know what happened.
As a result of that, people are now weary when they see it could happen again. They are also concerned about whether these top positions being manned by people who are not Sri Lankans could in any way affect Sri Lanka’s forward march.
The President said that a majority of the commission members would be Sri Lankans and that the Chairman would be a Sri Lankan.
Sri Lanka is considered vital to China’s Belt and Road Initiative (BRI) because of its strategic geographical location. Will the CPC serve as a template for the BRI?
Well, it is in that route, but it's not part of the BRI plan. It is a city that is being developed in Sri Lanka that is a part of Sri Lanka and part of the Colombo District. So, whether it can fit into that particular initiative, whether it can be a geographical location where the East and the West can both do business at the same time through Sri Lanka, or whether it is a city that is chosen by many people because of its geographical location as well as time zone, is up to the person who is making the investment.
I think in that sense, we are lucky that various people can find various reasons to come and be a part of this commercial city. If we can reap the benefits of those investments coming into Sri Lanka, then we will certainly welcome it.
The Supreme Court also determined that the power granted to the CPC Economic Commission to make rules, give tax exemptions, control public funds, etc., is inconsistent with Articles 76, 3, and 4 of the Constitution, and that these need to be handled by Parliament. What is your opinion?
We are in agreement with that. We always took the view that if there are any clauses which the Supreme Court finds need amendment, we'll be happy to do that. That was our stance from the beginning. We, of course, had a certificate of confirmation from the Attorney General (AG) that it was in line with the Constitution. But, as in the case of any legislation, there will always be certain areas where even though the AG may have said it is in order, the Supreme Court may determine otherwise.
As far as the Government is concerned, from the beginning we said that if there are any changes proposed by the Supreme Court, we will go ahead with it.
We also had the option of enacting certain clauses with a two-thirds majority, and we did have a two-thirds majority. But we didn’t offer that. We were very clear that we would like to only have those clauses that are consistent with the Constitution without even having a two-thirds majority.
Why was there no discussion with the Opposition MPs during the preparation of the CPC Economic Commission Bill earlier?
Nowhere in the world has anything been discussed with the Opposition before bringing in a law. I think the Opposition must have got it all wrong, because legislation is introduced by the government. Once the government introduces the legislation, everyone else can look at it, comment on it, and go to court and file action against it. That is the freedom that is enshrined in our Constitution for people to comment on a law, to oppose a law, and to challenge a law.
All that was followed. Absolutely nothing was done outside the law. On the other hand, we have seen instances where it has not been followed by the previous Government. But I don't want to comment on that. Nevertheless, in this instance, I can dare anyone to show where we did not follow the rules.
I think the Government wanted to do everything the right way, in order to get this law right, because we think it's a very important law. It is going to be a turning point in our history, in our economic history, so we didn't want to get it wrong.
According to the Bill, there are many exceptions from certain laws such as the Urban Development Authority Law, Municipal Councils Ordinance, Commercial Mediation Centre of Sri Lanka Act, Town and Country Planning Ordinance, etc. Can these exemptions pose any harm to the country?
Not at all. We are hoping to ensure that the functions that were done even by those acts are taken over by this new commission, and that it is handled by them.
The commission can discuss with anyone else about the need to have certain other frameworks in place or whatever other additional areas that need to be handled. The whole purpose of this law was to ensure that the investors investing in this area are not being sent from pillar to post, to ensure those inconveniences are eradicated.
If the commission wishes to consult those other agencies, it is free to do that, but it won’t be the investor who does. If there is any need to get some input from another government agency or a government regulatory authority, it is the commission's duty to go and get that.
The Supreme Court is of the view that the regulatory structure set out in the Bill lacks clarity and provides for the exercise of arbitrary powers by the commission and is thus inconsistent with Article 12 of the Constitution. How would the Government amend this and what is the solution?
We have amended it already. The Supreme Court was kind enough to propose how it could be amended and addressed, and we followed that.
The Supreme Court has, in its wisdom, proposed certain changes to the Bill and the Government; in its humility as well as its ability to work with other agencies of government, has accepted those amendments. We have now enacted the law in accordance with the Supreme Court's own suggestion and proposal, and we amended the law by the time it was approved.
Speaking at the Fourth Annual Asia Securities Sri Lanka Investment Conference last December, you pointed out that the CPC is expected to receive investments of up to $ 2.5 billion this year. What is the current situation of these investments?
There is a delay with the third wave as well as due to the law being passed only now. But the CPC certainly has the potential to draw those investments. The determining factors of the realisation of those investments would be how soon we can get it going, how effective our Commission is, and how well we are able to market it.
I think those numbers may not be realised this year, but we must work hard at realising those numbers, because I can very well say that the CPC has the potential of attracting that amount of investment.
On another note, how much has the Government spent on combating the Covid-19 pandemic?
Last year, the Government spent about Rs. 92 billion. Then this year, so far, we have spent Rs. 48 billion, and our total spend is Rs. 138 billion so far. That's a lot of money, and it has covered the vaccines, medicines, the changes made to the way in which we operate our hospitals, and the concessions and handouts that were given to the people.
In addition to that, the Government also arranged for moratoriums on loans. About one-third of the people that borrowed from the banks as well as the finance companies in our country were given this moratorium.
Then, we reduced the interest rates. That happened before Covid, but we maintained that even through this difficult period.
Additionally, we provided loans at 4% interest. I don't think any other government would even dare to do that. The loans themselves were given to more than 52,000 accountholders, and the amount that was dispersed was about Rs. 165 billion.
This was the reason that, even in the context of these massive challenges, last year, Sri Lanka's economy was still able to register a reduction in the growth rate of only -3.6%. But in other countries, it had been in the range of about -10%.
I think we have done reasonably well. But this year, we’ve got to make sure that we have reasonably positive growth. That’s why overcoming this third wave as fast as possible is vital.
How about the loans or donations given to the country by international agencies to combat the pandemic?
We received some loans from the World Bank (WB) to buy the vaccines. It gave about $ 80 million, which was helpful. Small loans came from other agencies as well, but nothing of any substantial value. But everything else had to be done with the Government's own funds, which is quite a challenging task, but we have been doing that.
What is the current situation on export and foreign remittance with the arrival of the third wave?
Exports have held and we have found that in certain months, in the recent past, it actually did better. So, we are quite pleased with that. Also, we have been able to keep our exports going.
Where we have done very well is in foreign remittances. I think certain policy actions we took also helped remittances grow. A growth of around 20% year-on-year is very substantial, and we are very pleased about that as well.
Unfortunately, oil prices are rising again. And with the very high reduction in tourism earnings, we are confronting a challenge at this moment of time. That’s something that we are hoping we can put behind us as fast as possible, and that's why vaccinations are very important.
Hopefully, if we get the vaccinations in, we will then be able to open our doors to tourists as well without any risk. However, I will say that the next few months are also crucial and we need to be very much on top of the situation in order to steer through this difficult period.
The Ministry had appointed a special committee on procuring vaccines last year. Any update on how the procuring of vaccines is coming along?
I think the general procurement of the vaccines have been very encouraging and we have been assured supplies from both China and Russia, where we hope to procure at least 10 million doses from Russia (Sputnik V) and about another 3.5 million doses from China (Sinopharm). We have also requested more. There is a massive demand for vaccines from all over the world and those suppliers are also having very critical challenges in supplying as much as other countries.
State Minister of Money and Capital Market and State Enterprise Reforms Ajith Nivard Cabraal[/caption]
Can you share with us the background of the CPC and how it is important to the country?
We have just built this new city. It is a fresh canvas. How we make use of it is actually very important because it has tremendous land value. It’s a part of the Colombo District and Colombo city itself. So, whatever we do there must provide value to the country. That is why we thought that it is best to highlight, market, or position it as an international financial city which would enable it to yield value for the country.
But how do we bring out that value? How do we ensure that value is actually received by the people as well as by the country? We should have a legal and administrative framework that will make it efficient and effective so people seek out this place and use it as their chosen destination.
All over the world, there are cities of this nature. In fact, there about 5,000, but very few – around 100 – are really successful. The top amongst them is Singapore, Dubai, and Shenzhen, which are what come to mind right now. So, we are competing with those cities. If we are going to compete with that kind of firm competition, we have to have very effective administration here, as only then can we yield the results.
Accordingly, we have developed a special law where there is a single window through which all investors can get tax benefits, services, or whatever they require to be done within the city. These will be provided through this single window so they don’t waste time being sent from pillar to post, which is the usual situation in Sri Lanka. Providing a single window is the main purpose of this law and once that law is effectively put in place by the commission we are going to appoint, then the investors will flow in.
How viable and sustainable is the creation of new urban land by reclaiming the sea in Colombo?
It is always best that all those environmental concerns and other factors are dealt with. That is why before 2014, around 2012 I believe, the initial work on assessing the impact of the new city was very carefully done. The environmental, traffic, and business implications were looked at.
A lot of things were done in order to ensure it doesn’t have a negative impact on any of our normal living conditions as well as administrative procedures. I believe these assessments are important in any city, even when putting up a building; so, the same has been done here too.
Is there any threat to Sri Lanka’s sovereignty by continuing the CPC project?
As I said, this project is to provide a single window. Those 5,000 such cities I spoke about are functioning without any problem. I think this was a canard put in place by a few Opposition members who actually know that this will be a turning point in Sri Lanka's economy. They know that they'll have to kiss goodbye their own ambitions of coming to power, perhaps in the next decade or so, once this city really takes shape and is successful.
So, I think a threat to Sri Lanka’s sovereignty is the only point they're looking at. By bringing up the story that there's absolutely nothing in this law (to protect our sovereignty), they are suggesting that there can be practical opportunities for any threat to Sri Lanka’s territory, territorial integrity, or security – but there’s nothing of that nature. Even by any stretch of the imagination, you can't think of it like that. I think it's sad that the Opposition is resorting to that.
China’s investment in Sri Lanka is often portrayed as “debt trap diplomacy”. In that sense, what’s your opinion on how the CPC project will help in handling Sri Lanka’s debt?
Once our Government came into office, we took a very clear policy decision that we will try to reduce our debt-making projects as much as possible, so that we will be curtailing our debt. Because, during the last Government, the country borrowed about $ 10 billion in international sovereign bonds at very high rates of interest. So, they put pressure on our economy. As such, what we are searching for is non-debt inflows into the country.
With this particular project, the investment of $ 1.4 billion is a non-debt-creating inflow as far as Sri Lanka is concerned. This project has been done by the CHEC Port City, not by Sri Lanka, and we have not spent a cent on this project. And as a result of the project, we will now have an asset that is going to generate income, which is going to contribute to GDP (gross domestic product), which is going to generate taxes as a result.
In addition to that, Sri Lanka will receive as much as 62 hectares of land. Even at the rate of about $ 2,500 per square metre of land, we hope we should be able to receive at least $ 1.5 billion or more, which means that these are the additional benefits that Sri Lanka is going to get.
That’s why I think it sits very well in our overall plan of non-debt inflows as well as foreign exchange inflows coming into the country, and also in terms of economic activity and employment being generated – all those factors are met by this project.
As far as Sri Lanka is concerned, we were never in a debt trap, because our debt-to-GDP ratios were in very good shape. I think this reasoning was only pushed in order to sell the Hambantota Port at that time. The previous Government did that. We had absolutely no problem paying off the loans that were taken in order to build the Hambantota Port. This was all a facade that was built.
The majority of the members of the CPC Economic Commission are to be Sri Lankans as per the Supreme Court determination. How will this be implemented?
Actually, there wasn’t a Supreme Court decision. It was our Government's reaction to some of the concerns that people expressed. The Supreme Court did not give any direction on that.
We also know that the people of this country were concerned because of what happened in the past; when the last Government appointed a foreigner as the Governor of the Central Bank, we all know what happened.
As a result of that, people are now weary when they see it could happen again. They are also concerned about whether these top positions being manned by people who are not Sri Lankans could in any way affect Sri Lanka’s forward march.
The President said that a majority of the commission members would be Sri Lankans and that the Chairman would be a Sri Lankan.
Sri Lanka is considered vital to China’s Belt and Road Initiative (BRI) because of its strategic geographical location. Will the CPC serve as a template for the BRI?
Well, it is in that route, but it's not part of the BRI plan. It is a city that is being developed in Sri Lanka that is a part of Sri Lanka and part of the Colombo District. So, whether it can fit into that particular initiative, whether it can be a geographical location where the East and the West can both do business at the same time through Sri Lanka, or whether it is a city that is chosen by many people because of its geographical location as well as time zone, is up to the person who is making the investment.
I think in that sense, we are lucky that various people can find various reasons to come and be a part of this commercial city. If we can reap the benefits of those investments coming into Sri Lanka, then we will certainly welcome it.
The Supreme Court also determined that the power granted to the CPC Economic Commission to make rules, give tax exemptions, control public funds, etc., is inconsistent with Articles 76, 3, and 4 of the Constitution, and that these need to be handled by Parliament. What is your opinion?
We are in agreement with that. We always took the view that if there are any clauses which the Supreme Court finds need amendment, we'll be happy to do that. That was our stance from the beginning. We, of course, had a certificate of confirmation from the Attorney General (AG) that it was in line with the Constitution. But, as in the case of any legislation, there will always be certain areas where even though the AG may have said it is in order, the Supreme Court may determine otherwise.
As far as the Government is concerned, from the beginning we said that if there are any changes proposed by the Supreme Court, we will go ahead with it.
We also had the option of enacting certain clauses with a two-thirds majority, and we did have a two-thirds majority. But we didn’t offer that. We were very clear that we would like to only have those clauses that are consistent with the Constitution without even having a two-thirds majority.
Why was there no discussion with the Opposition MPs during the preparation of the CPC Economic Commission Bill earlier?
Nowhere in the world has anything been discussed with the Opposition before bringing in a law. I think the Opposition must have got it all wrong, because legislation is introduced by the government. Once the government introduces the legislation, everyone else can look at it, comment on it, and go to court and file action against it. That is the freedom that is enshrined in our Constitution for people to comment on a law, to oppose a law, and to challenge a law.
All that was followed. Absolutely nothing was done outside the law. On the other hand, we have seen instances where it has not been followed by the previous Government. But I don't want to comment on that. Nevertheless, in this instance, I can dare anyone to show where we did not follow the rules.
I think the Government wanted to do everything the right way, in order to get this law right, because we think it's a very important law. It is going to be a turning point in our history, in our economic history, so we didn't want to get it wrong.
According to the Bill, there are many exceptions from certain laws such as the Urban Development Authority Law, Municipal Councils Ordinance, Commercial Mediation Centre of Sri Lanka Act, Town and Country Planning Ordinance, etc. Can these exemptions pose any harm to the country?
Not at all. We are hoping to ensure that the functions that were done even by those acts are taken over by this new commission, and that it is handled by them.
The commission can discuss with anyone else about the need to have certain other frameworks in place or whatever other additional areas that need to be handled. The whole purpose of this law was to ensure that the investors investing in this area are not being sent from pillar to post, to ensure those inconveniences are eradicated.
If the commission wishes to consult those other agencies, it is free to do that, but it won’t be the investor who does. If there is any need to get some input from another government agency or a government regulatory authority, it is the commission's duty to go and get that.
The Supreme Court is of the view that the regulatory structure set out in the Bill lacks clarity and provides for the exercise of arbitrary powers by the commission and is thus inconsistent with Article 12 of the Constitution. How would the Government amend this and what is the solution?
We have amended it already. The Supreme Court was kind enough to propose how it could be amended and addressed, and we followed that.
The Supreme Court has, in its wisdom, proposed certain changes to the Bill and the Government; in its humility as well as its ability to work with other agencies of government, has accepted those amendments. We have now enacted the law in accordance with the Supreme Court's own suggestion and proposal, and we amended the law by the time it was approved.
Speaking at the Fourth Annual Asia Securities Sri Lanka Investment Conference last December, you pointed out that the CPC is expected to receive investments of up to $ 2.5 billion this year. What is the current situation of these investments?
There is a delay with the third wave as well as due to the law being passed only now. But the CPC certainly has the potential to draw those investments. The determining factors of the realisation of those investments would be how soon we can get it going, how effective our Commission is, and how well we are able to market it.
I think those numbers may not be realised this year, but we must work hard at realising those numbers, because I can very well say that the CPC has the potential of attracting that amount of investment.
On another note, how much has the Government spent on combating the Covid-19 pandemic?
Last year, the Government spent about Rs. 92 billion. Then this year, so far, we have spent Rs. 48 billion, and our total spend is Rs. 138 billion so far. That's a lot of money, and it has covered the vaccines, medicines, the changes made to the way in which we operate our hospitals, and the concessions and handouts that were given to the people.
In addition to that, the Government also arranged for moratoriums on loans. About one-third of the people that borrowed from the banks as well as the finance companies in our country were given this moratorium.
Then, we reduced the interest rates. That happened before Covid, but we maintained that even through this difficult period.
Additionally, we provided loans at 4% interest. I don't think any other government would even dare to do that. The loans themselves were given to more than 52,000 accountholders, and the amount that was dispersed was about Rs. 165 billion.
This was the reason that, even in the context of these massive challenges, last year, Sri Lanka's economy was still able to register a reduction in the growth rate of only -3.6%. But in other countries, it had been in the range of about -10%.
I think we have done reasonably well. But this year, we’ve got to make sure that we have reasonably positive growth. That’s why overcoming this third wave as fast as possible is vital.
How about the loans or donations given to the country by international agencies to combat the pandemic?
We received some loans from the World Bank (WB) to buy the vaccines. It gave about $ 80 million, which was helpful. Small loans came from other agencies as well, but nothing of any substantial value. But everything else had to be done with the Government's own funds, which is quite a challenging task, but we have been doing that.
What is the current situation on export and foreign remittance with the arrival of the third wave?
Exports have held and we have found that in certain months, in the recent past, it actually did better. So, we are quite pleased with that. Also, we have been able to keep our exports going.
Where we have done very well is in foreign remittances. I think certain policy actions we took also helped remittances grow. A growth of around 20% year-on-year is very substantial, and we are very pleased about that as well.
Unfortunately, oil prices are rising again. And with the very high reduction in tourism earnings, we are confronting a challenge at this moment of time. That’s something that we are hoping we can put behind us as fast as possible, and that's why vaccinations are very important.
Hopefully, if we get the vaccinations in, we will then be able to open our doors to tourists as well without any risk. However, I will say that the next few months are also crucial and we need to be very much on top of the situation in order to steer through this difficult period.
The Ministry had appointed a special committee on procuring vaccines last year. Any update on how the procuring of vaccines is coming along?
I think the general procurement of the vaccines have been very encouraging and we have been assured supplies from both China and Russia, where we hope to procure at least 10 million doses from Russia (Sputnik V) and about another 3.5 million doses from China (Sinopharm). We have also requested more. There is a massive demand for vaccines from all over the world and those suppliers are also having very critical challenges in supplying as much as other countries.