The Sunday Leader

Colombo Port City Suspension Creates Uncertainty For Foreign Investors

When Sri Lanka successfully defeated the Tamil Tiger rebels in May 2009, putting an end to Asia’s longest civil war, there was hope to transform the island nation into a ‘Miracle of Asia’.

Successive government’s had dreamt of transforming the capital Colombo into a major economic and tourism hub but the 30-year conflict had left no room for development.

Foreign Investments were an alienated thought with investors preferring to select neighbouring countries than investing in the island nation which was heavily scarred by the battles.

However, May 2009 changed all that. With the end of the conflict, Sri Lanka’s urgent attention was drawn towards post war development. The country’s investment environment had changed making room for large scale investors to invest in the island nation.

Sri Lanka’s immediate goal was to strengthen its economy. The time had emerged for the country to start competing with other regional markets and attract foreign investments.

“Currently there is a mounting competition among the developing countries to attract Foreign Direct Investments. The end of the war offers new and more development opportunities to Sri Lanka. Improvement of economic growth in Sri Lanka has been given top priority in post war scenario,” a leading economist in the country said.

“Furthermore, the end of the internal strife has increased the capacity of utilization of entire lands, natural resources and labour force in Sri Lanka in the context of post war economic revival. After the internal strife Sri Lanka’s economic outlooks have become positive,” the economist said.

In 2013, Sri Lanka was successful in finalizing a multibillion dollar deal with a Chinese company which would completely change the face of Colombo.

Costing a staggering US$1.43 billion, China Communications Construction Company Ltd (CCCC) agreed with Sri Lanka to build a port city on 233 hectares of reclaimed land on the sea adjacent to the Colombo South Harbour and Colombo’s historic Galle Face Green seafront.

The investments from the project are expected to be over US$13 billion in the coming decade. The project is set to transform the landscape of the city of Colombo and is considered to be South Asia’s most modern metropolis and the logistics and commercial hub.

The Port City will have major real estate opportunities, as well as provide international investors with attractive benefits to locate in the island nation as it emerges as a mega regional port city hub.

“The port city is an exceptional project. It will completely change Colombo. The foreign investments it will attract will be massive and the country’s tourism industry will also completely revive. The hotel industry in Sri Lanka will benefit tremendously with the Port City. It is a valuable project which we must not lose,” a leading hotelier in Sri Lanka, on a request to refrain his name being mentioned said.

Locals have also been eager to see the completion of the project stating that the Port City will introduce an ‘international touch’ to the city.

“When compared to Singapore, Mumbai and other major cities in the region, Colombo is lagging far behind. It is only now that we have finally got shopping arcades and parks but the port city is beyond imagination. While attracting tourists, it will also be beneficial for us locals who are desperate for an international project to be launched in the island,” Neil Peiris, an 18-year-old marketing student said.

The project with its immense benefits to the capital city, launched construction in September last year with workers racing against time, day and night to achieve its target of completing the project in 39 months.

Already 13% of the work into the project had been completed when suddenly in March 2015, almost six months after the project commenced construction, the Sri Lankan government, after a regime change, suspended the project causing massive daily losses to the company.

According to the CCCC, the sole financier of the project that aimed to place Sri Lanka on the international map and transform Colombo into a major commercial hub is now burdened with losses of over USD 380,000 per day as a result of the sudden suspension.

“You cannot invite a foreign investor, finalize the project and then suddenly suspend it once construction has started. That sends out dangerous signals to other foreign investors who are eyeing Sri Lanka. It is the investor who has to then bear the entire loss and the sudden suspension sends out clear signals that Sri Lanka’s investment environment is unfriendly,” a leading economist said.

“Sri Lanka needs foreign investments. It cannot survive on local investments alone. Any developing economy strives on the foreign investments it attracts. Losing such opportunities will be unhealthy for the country’s economy and the future,” the economist said.

The Port City Project has also created jobs for 5,000 locals who say their future is now uncertain with the suspension of the project.

With the April New Year just two weeks away, workers at the project said they were unable to go home due to the uncertainty of whether their jobs will remain.

“So much of work remains to be completed. You can never stop a marine project half way. This is not like constructing a building or a hotel. If we stop, the sea destroys our work. There is not much we can do to protect our work,” workers at the project site said.

“We have been submitting reports every month to the relevant authorities which include checks on the air quality, the noise and vibration, the water quality and the environment impact assessment. Everything of ours is in place and legal. Therefore we are sure that the government will give us a green light to start the project once again,” officials of the project said.

After almost a 15-day suspension, Sri Lanka’s cabinet recently approved the protection work of the breakwater on the request of the CCCC, in order to safeguard the completed work before the monsoon period.

Cabinet spokesperson and Health Minister Rajitha Senaratne told the media that the decision was taken following a request made by Prime Minister Ranil Wickremasinghe, when the cabinet convened for its weekly meeting.

“The request to construct the breakwater had been put forward to the cabinet by Prime Minister Wickremesinghe. Therefore cabinet approval was granted,” the minister said.

He further said that the prime minister had asked for the necessary reports and documents over the Port City to be submitted to the subcommittee soon in order to decide the future of the project. “Only once the necessary documents are submitted will the prime minister decide on the future of the project,” the minister said.

While many in the country remain in hope that the government will soon give its nod for the re-commencement of the project, analysts and economists are now of the view that the suspension of such international multi-billion projects will leave a black mark on a country which is being viewed as a ‘Miracle of Asia’ after its successful revival from a long civil war.

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