By Sumudu Chamara
The Colombo Port City controversy has reached a crossroads, and the coming few months will be more decisive than before – the Government is about to make a number of amendments to the Colombo Port City Economic Commission Bill, as per the special determination of the country’s apex Court.
The Supreme Court’s (SC) special determination revealed by the Speaker on 18 May held that 25 Clauses of the Bill were inconsistent with the Constitution, and that therefore, in order for the Bill to be passed, either a two-thirds majority in Parliament and a referendum were required, or that the Clauses in question needed to be amended.
Addressing one of the most discussed concerns regarding the Bill, the determination also concluded that a majority of the Members of the Commission should be Sri Lankan nationals.
This determination was delivered after taking into consideration around 20 petitions filed by various parties, including the Samagi Jana Balawegaya (SJB), the United National Party (UNP), the Janatha Vimukthi Peramuna (JVP), former Presidential candidate Dr. Ajantha Perera, the Bar Association of Sri Lanka (BASL), the Centre for Policy Alternatives (CPA), Transparency International Sri Lanka (TISL), Ven. Muruttettuwe Ananda Thera, Engineer Kapila Renuka Perera, and the Ceylon Mercantile, Industrial, and General Workers’ Union (CMU).
However, the Government later announced that it will not opt for a referendum, and that it will make the recommended amendments instead.
To look into the status quo of the Port City controversy after the SC announced its determination, and what economic prospects the project would bring to the country regardless of the legal matters, The Morning spoke to several key persons who have been active in this discussion.
Economic prospects
From the outset, it was obvious that there was a certain lack of awareness about the Port City project and also misconceptions regarding the same.
Port City project Assistant Managing Director Thulci Aluwihare emphasised that the Government of Sri Lanka will be part of any and all agreements concerning investments in the Port City, and that the Commission will play a big role in this process.
He explained: “The Sri Lankan Government is the owner of the Port City, which spreads over 269 hectares. In return for the investment by the Chinese-owned company, which has committed $ 1.4 billion, of which $ 1.1 billion has already been invested, the Sri Lankan Government has given a leasehold right of 43% of the 269 hectares of land, which is approximately 116 hectares. We need to monetise this, and for us to monetise it, we have to attract investors. When we do so, we will surrender our leasehold right.”
He noted that since the Sri Lankan Government will always be a party to any lease agreement within the Port City, Sri Lanka’s territorial integrity and sovereignty are protected.
“Even if you have a 99-year leasehold right over a plot of land, you still need to apply to the Commission, which would be set up by an Act of Parliament once the Bill is passed, in order to obtain a license to operate within the Port City. The Commission will issue that license, renewable with conditions.
“If you breach that, the Commission has the power to revoke it. By way of this mechanism, and the significant oversight by the Sri Lankan Government over the Port City, Sri Lanka would be able to ensure that it will be under Sri Lanka’s control,” he noted.
He further added that with the Sri Lankan Government and the Commission having a great deal of oversight, there will be no room for any harmful act to take place within the Port City, and that the Government will have a say in almost all aspects of its operations.
Speaking of the allegations that the Port City would play host to money laundering activities due to having a separate administrative system, Aluwihare said: “Any jurisdiction can be a haven for money laundering if there are loose laws. If the Port City is labelled as such, we are doomed to fail. All the existing laws including anti-money laundering laws, the prevention of terrorism financing laws, and financial transaction reporting laws, will apply to the Port City. The Central Bank's financial services investigation units will also have the jurisdiction to conduct investigations within the Port City.”
In response to the allegations pertaining to money laundering and tax-related issues within the Port City, State Minister of Money, Capital Markets, and State Enterprise Reforms Ajith Nivard Cabraal earlier told The Morning that since no changes have been made to the Prevention of Money Laundering Act, there will be no room for any act amounting to money laundering within the Port City.
“These are baseless allegations. We can assure that no such thing can take place, because no changes have been made to the service and financing aspects of the Prevention of Money Laundering Act. Provisions in the said Act will continue to be in effect without any change,” he said.
When queried about another allegation raised by those opposing the Bill – i.e. that the Bill would not make it possible for Sri Lanka to properly collect tax revenue – Cabraal denied it, adding that before focusing on tax revenue, attention should be paid to attracting investments. He added the Bill has been prepared in a manner that facilitates the attracting of investments.
“When businesses start operations in the Port City, tax revenue would be collected as it should. Also, initially, a tax of 1% would be imposed on investments, and when there is a huge turnover, even 1% is a big amount,” Cabraal added.
Aluwihare also said that the Port City can bring prosperity to the country in more than one way, and could also help resolve the economic hardships Sri Lanka is going through.
He added: “When it comes to the Port City Special Economic Zone (SEZ), a law is required to actually promote the ease of doing business. According to the World Bank (WB), out of 190 countries, Sri Lanka ranked 99 in the Doing Business Indicator. We have not improved in the last five years, and Sri Lanka’s rank shows the difficulties in doing business in the country.
“However, India, which was at the 132nd place five years ago, has reached the 62nd place. Similar improvements can be seen in the case of China. Our Doing Business indicators are quite low, and there is competition for us to attract investors. SEZ laws will provide that equal system that is required for the ease of doing business for businesses to come and set up in the Port City. What the Government is trying to do is to improve some of those indicators and address some of the bottlenecks we have in the rest of Sri Lanka. That is essentially the objective.”
He also noted that the Bill does not have to remain the same, and it can and should evolve with the changing times. He noted: “The Bill has to evolve; this is only a framework, and there should be regulations, and they should drive the market.”
He also added that many countries including India and Malaysia have taken steps to change certain legal provisions in order to encourage investments, especially foreign investments. Among some of the laws that need to be changed, according to Aluwihare, are Sri Lanka’s labour laws.
Speaking of the benefits of the Port City project, Minister of Energy and Co-Cabinet Spokesman Udaya Gammanpila said that Sri Lanka can expect a number of benefits.
Adding that the leasing of the lands of the Port City is one of the main ways of generating income, he explained: “First and foremost, the project has already added 269 hectares to Sri Lanka. Also, after taking into account commonly-used facilities such as roads, the buildable land area is 178 hectares, and out of that, 62 hectares will be under the Sri Lankan Government – and Sri Lanka can earn by leasing those lands. In addition, China has already invested $ 1.4 billion, boosting investor confidence and stabilising the Sri Lankan currency exchange rate.
“Moreover, when foreign companies invest in the Port City, there will be a massive inflow of foreign direct investments (FDIs), further stabilising the exchange rate. Also, Sri Lanka can earn by providing goods and services such as water, electricity, fuel, food, janitorial services, and repair and maintenance services, and it will help generate a huge income.”
Speaking of other potential benefits, he added: “The Port City will create 60,000 job opportunities, mainly for professionals, who will earn in foreign currency. Also, Sri Lankans who are currently working in different countries because of the lack of job opportunities that match their qualifications can come back to the country. This is a landmark project in Sri Lanka’s history.”
However, speaking to The Morning earlier, certain trade union members said that one of the enactments that may not be applicable within the Port City according to the Bill is the Termination of the Employment of Workmen (Special Provisions) Act, and that it may have a direct impact on those who will be working within the Port City.
Minister Gammanpila further admitted that there were a lot of drafting errors in the Bill published by the Government, and that those have been rectified by the SC.
Speaking of the flaws of the Bill, Desha Hithaishi Jathika Viyaparaya (National Patriotic Movement) Secretary Wasantha Bandara, who has been vocal about the matter recently, also expressed similar sentiments, noting that the Bill shows serious shortcomings on the part of those who drafted it.
“Had the Bill been discussed with all the relevant parties, we would not have to make this many amendments. Also, had they done in-depth research about it, this would not have happened. It requires 25 amendments, and most of them are very minor ones. But it shows the incompetency of the groups that drafted the Bill,” he explained.
He stressed that the Bill is necessary, and that the country should be able to reap the benefits of the Port City, although this should happen in accordance with the Constitution. Bandara added that there is no obstacle to proceed with the project after making the necessary amendments.
He described the need for separate administrative mechanisms for the Port City. “It was in 1978 that Sri Lanka first brought a Bill to encourage investments within a special investment zone. A Commission with specific powers was appointed for an identified geographical area, and it was intended to address issues faced by investors and to encourage them. The regular system takes around two to three years, and there are around 15 institutions from which permission should be obtained. The functioning of the Commission would facilitate the process of co-ordinating with those institutions, obtaining the necessary permissions, and giving applicable incentives in accordance with the country’s law, in order to encourage new investments. Such a Commission is essential for those purposes.
“If we file a case regarding a commercial dispute, it takes two to three years for the case to be resolved. To take approval from certain institutions, it takes years. With these types of practices in place, it would be impossible to encourage investments. Malaysia for example receives around $ 20 billion worth of FDI per year, whereas in our country, even Rs. 1 billion is a huge amount.
“The reason is the inadequacies, inefficiencies, and corruption in the existing administrative system. In order to conduct this process transparently, a special entity that operates in accordance with the country’s law and the Constitution is essential, and it will help encourage foreign investments.
“In order for Sri Lanka’s Covid-hit economy to revive following the pandemic by encouraging investments to create employment opportunities and bring in foreign exchange, the Commission should be established under a special law. Without such a Commission, it would be impossible to promote a mega project like the Port City among foreign investors.”
Bandara added: “Any part that is not consistent with the Constitution should be changed. The Government has agreed to make the necessary changes, and once these changes are made, the Bill will be consistent with the Constitution. These changes should certainly be made, and they should eventually be in line with the Constitution. Had the Government attempted to pass the Bill forcibly, like how the 19th Amendment to the Constitution was passed, that could then be considered wrong.”
Way forward post the Court's decision
SJB Parliamentarian Eran Wickramaratne, speaking of the Court's determination, said that merely amending the Bill is not adequate and that the process of making its amendments should also take place transparently. He also said that the Government presenting a Bill that was against the Constitution is unacceptable.
He told The Morning: “The Court looked at the constitutionality of the Bill and ruled that it was totally unconstitutional. The Court said that there are nine Clauses that need a referendum, and apart from them, there were also 17 Clauses which needed a two-thirds majority in Parliament.
“If the Government agrees to all of that, the Bill becomes constitutional, and I think that the Government will do that. However, the role of Parliament is not to look at the constitutionality of the Bill. The role of the Parliament is to really look at whether this Bill is acceptable politically, socially, and economically to the country.
“So the Court is one, the Parliament is the other. The real question we have to ask is: Why did the Government even think about presenting a Bill which is blatantly unconstitutional? There are various fundamental issues, one of which is who actually owns this Commission. That legal corporate entity should definitely be majority Sri Lankan-owned, and we will move an amendment suggesting that Parliament approves the funding that the Government puts to the Commission. If that is done, that issue will be resolved.”
Speaking of the Commission, which was a centre of controversy in the discussions on the Port City, Wickramaratne said that at least six Members of the Commission should be ex-officio.
He said: “The other issue is the composition of the Commission, i.e. who the Commissioners are. The Bill says that the President will be appointing five to seven persons. So one person will be appointing all the members. There are no checks and balances, because earlier we had the Constitutional Council, which basically took the President’s nominations to check; but this has been removed with the 20th Amendment to the Constitution.
“Now we have a Parliamentary Council that can only express its opinions to the President. It has no other powers. The President appointing all Members of the Commission is not satisfactory, because in order to get the benefits from the Port City project, it will take 30-40 years. Presidents come and go and Governments will change, so we have to look at this matter from the country’s perspective.
“Therefore, we are proposing another amendment concerning the composition of the Commission, and that there be at least six ex-officio Members in the Commission, of which the political authority can appoint three. But when it comes to the ex-officio Members, the Secretary to the Finance Ministry, the Governor of the Central Bank, the Head of the Urban Development Authority, the Head of the Central Environmental Authority, and the Head of the Securities and Exchange Commission become some of the ex-officio Members.”
When queried as to whether the SJB would support the Bill if all the amendments recommended by the SC are implemented by the Government, Wickramaratne said that the SJB has proposed eight amendments, and that if the Government agrees to them, there is no reason to not support the Bill. Some of these amendments, he said, are non-negotiable.
However, JVP Politburo Member Wasantha Samarasinghe, who was also a petitioner against the Bill, said that the country should be vigilant about the implementation of the recommendations issued by the Court's determination, and that most importantly, there is a need to have a collective discourse about the matter. He further said that the Government should not try to hastily pass the Bill, especially due to the ongoing Covid-19 pandemic.
He opined: “Even though the Court has fulfilled its duty, the rulers, however, are the kind of people who do not respect the Court. Had the Bill been passed in Parliament, Sri Lanka would have passed a Bill that consists of a number of Clauses that go against the Constitution. It is a sign that the Government does not protect the country or the country’s law.”
Now that the SC has delivered its determination, the controversy surrounding the Bill's inconsistency with the Constitution will soon be over. However, the biggest challenge, i.e. making the Port City a beneficial project economically, geopolitically, socially, and culturally, is still far from over.
As those who spoke with The Morning stressed, when forming laws and policies for a project that is capable of changing the history of Sri Lanka, perhaps, a much broader discussion should have taken place.
The amendments recommended by the SC and a national level discussion could therefore help Sri Lanka yield the maximum benefits of this project.
From the outset, it was obvious that there was a certain lack of awareness about the Port City project and also misconceptions regarding the same.
Port City project Assistant Managing Director Thulci Aluwihare emphasised that the Government of Sri Lanka will be part of any and all agreements concerning investments in the Port City, and that the Commission will play a big role in this process.
He explained: “The Sri Lankan Government is the owner of the Port City, which spreads over 269 hectares. In return for the investment by the Chinese-owned company, which has committed $ 1.4 billion, of which $ 1.1 billion has already been invested, the Sri Lankan Government has given a leasehold right of 43% of the 269 hectares of land, which is approximately 116 hectares. We need to monetise this, and for us to monetise it, we have to attract investors. When we do so, we will surrender our leasehold right.”
He noted that since the Sri Lankan Government will always be a party to any lease agreement within the Port City, Sri Lanka’s territorial integrity and sovereignty are protected.
“Even if you have a 99-year leasehold right over a plot of land, you still need to apply to the Commission, which would be set up by an Act of Parliament once the Bill is passed, in order to obtain a license to operate within the Port City. The Commission will issue that license, renewable with conditions.
“If you breach that, the Commission has the power to revoke it. By way of this mechanism, and the significant oversight by the Sri Lankan Government over the Port City, Sri Lanka would be able to ensure that it will be under Sri Lanka’s control,” he noted.
He further added that with the Sri Lankan Government and the Commission having a great deal of oversight, there will be no room for any harmful act to take place within the Port City, and that the Government will have a say in almost all aspects of its operations.
Speaking of the allegations that the Port City would play host to money laundering activities due to having a separate administrative system, Aluwihare said: “Any jurisdiction can be a haven for money laundering if there are loose laws. If the Port City is labelled as such, we are doomed to fail. All the existing laws including anti-money laundering laws, the prevention of terrorism financing laws, and financial transaction reporting laws, will apply to the Port City. The Central Bank's financial services investigation units will also have the jurisdiction to conduct investigations within the Port City.”
In response to the allegations pertaining to money laundering and tax-related issues within the Port City, State Minister of Money, Capital Markets, and State Enterprise Reforms Ajith Nivard Cabraal earlier told The Morning that since no changes have been made to the Prevention of Money Laundering Act, there will be no room for any act amounting to money laundering within the Port City.
“These are baseless allegations. We can assure that no such thing can take place, because no changes have been made to the service and financing aspects of the Prevention of Money Laundering Act. Provisions in the said Act will continue to be in effect without any change,” he said.
When queried about another allegation raised by those opposing the Bill – i.e. that the Bill would not make it possible for Sri Lanka to properly collect tax revenue – Cabraal denied it, adding that before focusing on tax revenue, attention should be paid to attracting investments. He added the Bill has been prepared in a manner that facilitates the attracting of investments.
“When businesses start operations in the Port City, tax revenue would be collected as it should. Also, initially, a tax of 1% would be imposed on investments, and when there is a huge turnover, even 1% is a big amount,” Cabraal added.
Aluwihare also said that the Port City can bring prosperity to the country in more than one way, and could also help resolve the economic hardships Sri Lanka is going through.
He added: “When it comes to the Port City Special Economic Zone (SEZ), a law is required to actually promote the ease of doing business. According to the World Bank (WB), out of 190 countries, Sri Lanka ranked 99 in the Doing Business Indicator. We have not improved in the last five years, and Sri Lanka’s rank shows the difficulties in doing business in the country.
“However, India, which was at the 132nd place five years ago, has reached the 62nd place. Similar improvements can be seen in the case of China. Our Doing Business indicators are quite low, and there is competition for us to attract investors. SEZ laws will provide that equal system that is required for the ease of doing business for businesses to come and set up in the Port City. What the Government is trying to do is to improve some of those indicators and address some of the bottlenecks we have in the rest of Sri Lanka. That is essentially the objective.”
He also noted that the Bill does not have to remain the same, and it can and should evolve with the changing times. He noted: “The Bill has to evolve; this is only a framework, and there should be regulations, and they should drive the market.”
He also added that many countries including India and Malaysia have taken steps to change certain legal provisions in order to encourage investments, especially foreign investments. Among some of the laws that need to be changed, according to Aluwihare, are Sri Lanka’s labour laws.
Speaking of the benefits of the Port City project, Minister of Energy and Co-Cabinet Spokesman Udaya Gammanpila said that Sri Lanka can expect a number of benefits.
Adding that the leasing of the lands of the Port City is one of the main ways of generating income, he explained: “First and foremost, the project has already added 269 hectares to Sri Lanka. Also, after taking into account commonly-used facilities such as roads, the buildable land area is 178 hectares, and out of that, 62 hectares will be under the Sri Lankan Government – and Sri Lanka can earn by leasing those lands. In addition, China has already invested $ 1.4 billion, boosting investor confidence and stabilising the Sri Lankan currency exchange rate.
“Moreover, when foreign companies invest in the Port City, there will be a massive inflow of foreign direct investments (FDIs), further stabilising the exchange rate. Also, Sri Lanka can earn by providing goods and services such as water, electricity, fuel, food, janitorial services, and repair and maintenance services, and it will help generate a huge income.”
Speaking of other potential benefits, he added: “The Port City will create 60,000 job opportunities, mainly for professionals, who will earn in foreign currency. Also, Sri Lankans who are currently working in different countries because of the lack of job opportunities that match their qualifications can come back to the country. This is a landmark project in Sri Lanka’s history.”
However, speaking to The Morning earlier, certain trade union members said that one of the enactments that may not be applicable within the Port City according to the Bill is the Termination of the Employment of Workmen (Special Provisions) Act, and that it may have a direct impact on those who will be working within the Port City.
Minister Gammanpila further admitted that there were a lot of drafting errors in the Bill published by the Government, and that those have been rectified by the SC.
Speaking of the flaws of the Bill, Desha Hithaishi Jathika Viyaparaya (National Patriotic Movement) Secretary Wasantha Bandara, who has been vocal about the matter recently, also expressed similar sentiments, noting that the Bill shows serious shortcomings on the part of those who drafted it.
“Had the Bill been discussed with all the relevant parties, we would not have to make this many amendments. Also, had they done in-depth research about it, this would not have happened. It requires 25 amendments, and most of them are very minor ones. But it shows the incompetency of the groups that drafted the Bill,” he explained.
He stressed that the Bill is necessary, and that the country should be able to reap the benefits of the Port City, although this should happen in accordance with the Constitution. Bandara added that there is no obstacle to proceed with the project after making the necessary amendments.
He described the need for separate administrative mechanisms for the Port City. “It was in 1978 that Sri Lanka first brought a Bill to encourage investments within a special investment zone. A Commission with specific powers was appointed for an identified geographical area, and it was intended to address issues faced by investors and to encourage them. The regular system takes around two to three years, and there are around 15 institutions from which permission should be obtained. The functioning of the Commission would facilitate the process of co-ordinating with those institutions, obtaining the necessary permissions, and giving applicable incentives in accordance with the country’s law, in order to encourage new investments. Such a Commission is essential for those purposes.
“If we file a case regarding a commercial dispute, it takes two to three years for the case to be resolved. To take approval from certain institutions, it takes years. With these types of practices in place, it would be impossible to encourage investments. Malaysia for example receives around $ 20 billion worth of FDI per year, whereas in our country, even Rs. 1 billion is a huge amount.
“The reason is the inadequacies, inefficiencies, and corruption in the existing administrative system. In order to conduct this process transparently, a special entity that operates in accordance with the country’s law and the Constitution is essential, and it will help encourage foreign investments.
“In order for Sri Lanka’s Covid-hit economy to revive following the pandemic by encouraging investments to create employment opportunities and bring in foreign exchange, the Commission should be established under a special law. Without such a Commission, it would be impossible to promote a mega project like the Port City among foreign investors.”
Bandara added: “Any part that is not consistent with the Constitution should be changed. The Government has agreed to make the necessary changes, and once these changes are made, the Bill will be consistent with the Constitution. These changes should certainly be made, and they should eventually be in line with the Constitution. Had the Government attempted to pass the Bill forcibly, like how the 19th Amendment to the Constitution was passed, that could then be considered wrong.”
Way forward post the Court's decision
SJB Parliamentarian Eran Wickramaratne, speaking of the Court's determination, said that merely amending the Bill is not adequate and that the process of making its amendments should also take place transparently. He also said that the Government presenting a Bill that was against the Constitution is unacceptable.
He told The Morning: “The Court looked at the constitutionality of the Bill and ruled that it was totally unconstitutional. The Court said that there are nine Clauses that need a referendum, and apart from them, there were also 17 Clauses which needed a two-thirds majority in Parliament.
“If the Government agrees to all of that, the Bill becomes constitutional, and I think that the Government will do that. However, the role of Parliament is not to look at the constitutionality of the Bill. The role of the Parliament is to really look at whether this Bill is acceptable politically, socially, and economically to the country.
“So the Court is one, the Parliament is the other. The real question we have to ask is: Why did the Government even think about presenting a Bill which is blatantly unconstitutional? There are various fundamental issues, one of which is who actually owns this Commission. That legal corporate entity should definitely be majority Sri Lankan-owned, and we will move an amendment suggesting that Parliament approves the funding that the Government puts to the Commission. If that is done, that issue will be resolved.”
Speaking of the Commission, which was a centre of controversy in the discussions on the Port City, Wickramaratne said that at least six Members of the Commission should be ex-officio.
He said: “The other issue is the composition of the Commission, i.e. who the Commissioners are. The Bill says that the President will be appointing five to seven persons. So one person will be appointing all the members. There are no checks and balances, because earlier we had the Constitutional Council, which basically took the President’s nominations to check; but this has been removed with the 20th Amendment to the Constitution.
“Now we have a Parliamentary Council that can only express its opinions to the President. It has no other powers. The President appointing all Members of the Commission is not satisfactory, because in order to get the benefits from the Port City project, it will take 30-40 years. Presidents come and go and Governments will change, so we have to look at this matter from the country’s perspective.
“Therefore, we are proposing another amendment concerning the composition of the Commission, and that there be at least six ex-officio Members in the Commission, of which the political authority can appoint three. But when it comes to the ex-officio Members, the Secretary to the Finance Ministry, the Governor of the Central Bank, the Head of the Urban Development Authority, the Head of the Central Environmental Authority, and the Head of the Securities and Exchange Commission become some of the ex-officio Members.”
When queried as to whether the SJB would support the Bill if all the amendments recommended by the SC are implemented by the Government, Wickramaratne said that the SJB has proposed eight amendments, and that if the Government agrees to them, there is no reason to not support the Bill. Some of these amendments, he said, are non-negotiable.
However, JVP Politburo Member Wasantha Samarasinghe, who was also a petitioner against the Bill, said that the country should be vigilant about the implementation of the recommendations issued by the Court's determination, and that most importantly, there is a need to have a collective discourse about the matter. He further said that the Government should not try to hastily pass the Bill, especially due to the ongoing Covid-19 pandemic.
He opined: “Even though the Court has fulfilled its duty, the rulers, however, are the kind of people who do not respect the Court. Had the Bill been passed in Parliament, Sri Lanka would have passed a Bill that consists of a number of Clauses that go against the Constitution. It is a sign that the Government does not protect the country or the country’s law.”
Now that the SC has delivered its determination, the controversy surrounding the Bill's inconsistency with the Constitution will soon be over. However, the biggest challenge, i.e. making the Port City a beneficial project economically, geopolitically, socially, and culturally, is still far from over.
As those who spoke with The Morning stressed, when forming laws and policies for a project that is capable of changing the history of Sri Lanka, perhaps, a much broader discussion should have taken place.
The amendments recommended by the SC and a national level discussion could therefore help Sri Lanka yield the maximum benefits of this project.