Port City Colombo bets on India for $3-billion push

Port City Colombo (PCC) is attracting over $3 billion in Indian investments by 2030 across technology, logistics, tourism, and healthcare, positioning itself as Sri Lanka's premier multi-services Special Economic Zone.

The India-plus-one pitch is aimed at Indian technology companies and global capability centres (GCCs) looking to diversify their operations and establish business-continuity centres, while positioning Colombo as an alternative regional hub for their businesses.

"We have already secured $1.2 billion so far in terms of the investment. We have a further plan up to 2030 of over $3 billion in terms of the investment magnitude," Harsha Amarasekara PC, chairman of the Colombo Port City Economic Commission, said at a media event here on Wednesday. "We have identified certain investments that we hope India will have a larger share."

Port City Colombo is a public-private partnership between the Sri Lankan government and CHEC Port City Colombo Pvt Ltd, a subsidiary of China Communications Construction Company Limited.

Its efforts to attract Indian investors come against the backdrop of shifting geopolitical and investment dynamics in Sri Lanka. Last month, China's state-owned China Merchants Port Holdings withdrew from a $392-million joint venture to develop a major logistics hub at Colombo Port. The project had been described as the first major foreign investment since Sri Lanka's 2022 economic crisis.

Seeking to address concerns over Chinese involvement, Amarasekara said the entire land bank at PCC is owned by the Sri Lankan government and all prospective investors deal directly with the Port City Colombo Economic Commission.

"If an Indian investor were to come and invest in a piece of land, the lease is given by the Port City Economic Commission for and on behalf of the government of Sri Lanka," Amarasekara said.

He further said every assurance is given under an Act of Parliament and signed by the Port City Economic Commission. "To that extent, there is a significant guardrail against the involvement of the Chinese party. Everybody deals with the government of Sri Lanka through the port city economic commission," he noted.

Spread across 6.4 million square metres, the SEZ already has around 250 companies operating across sectors such as IT, hospitality and business process outsourcing (BPO).

Thulci Aluwihare, deputy managing director of CHEC Port City Colombo, the master developer of the project, said the availability of the Indian rupee as legal tender within the SEZ, alongside 18 other currencies, offers a natural hedge to Indian investors.

"Indian employees and staff can be deployed. You get up to 5-year visas and directors will get about 10 years. You can pay the staff in INR as well," he said.

PCC will offer exemptions from border taxes on imports during the project implementation period for investors committing at least $100 million. "That could translate into construction cost savings of 25-30%," Aluwihare said.

Once commercial operations begin, eligible investors could receive tax holidays ranging from 10 to 15 years, depending on the scale of investment. Businesses qualifying as being of strategic importance and designated as primary developers would also be exempt from certain provisions of the Foreign Exchange Act, easing restrictions on capital movement.

Besides India, PCC is also looking to attract investments from the Middle East. At full scale, Port City Colombo (PCC) is expected to generate annual revenue of $13 billion by 2042, equivalent to around 13% of Sri Lanka's current GDP.