Govt. decides to grant 40-year tax holiday for Port City investments

The Cabinet of Ministers on Monday decided to grant tax holidays up to 40 years for investments in China-backed multibillion dollar Colombo Port City project as the foreign investor interest appear to be waning amid the on-going economic crisis.

The Prime Minister Ranil Wickremesinghe in his capacity as the Minister of Finance, Economic Stabilization and National Policies on Monday sought the approval of the Cabinet Ministers to grant 40-year tax holiday for the country’s single largest foreign direct investment (FDI) project to-date.

Although nearly one year has passed since the establishment of the Colombo Port City Economic Commission (CPCEC) through a special Act in parliament, the project is yet to attract any large foreign investments apart from the project company.

“The main reason why the Port City has failed in attracting investments is competition. Countries such as Oman, Ethiopia, Bangladesh and Kenya have given more attractive incentives to attract investments to their countries,” Cabinet Co-Spokesperson and Minister of Transport, Highways and Mass Media Bandula Gunawardena noted.
According to CPCEC, the project company, CHEC Port City Colombo (Pvt) Ltd., a unit of China Communications Construction Company Limited (CCCC), was expected to invest US$ 500-600 million increasing the initial investment of the project, which included land reclamation of 269 hectares and physical infrastructure to US$ 2 billion.

In the first quarter of 2022, CPCEC said it had concluded land lease agreements worth US$ 200 million with investors who had committed to make US$ 600 million worth investments.

The CPCEC was targeting to complete US$ 600-800 million worth land sales this year. 
However, the investor interest significantly waned after the country declared pre-emptive default on its external debt in April.

The Colombo Port City’s first project, International Financial Centre phase one is expected to break ground in the third quarter of this year. The 250,000 square metre mixed development project is a joint venture between CHEC Port City and Sri Lanka’s LOLC Group.

In addition, LOLC Group has also secured several land plots including the marina and the hotel development project.

169 hectares of reclaimed land which has been declared as a special service export processing zone is expected to generate 143,400 direct jobs and add US$ 13 billion to the GDP when fully operational.