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Local offshore banking businesses allowed in Port City

28 May 2021

By Imsha Iqbal    Local offshore banking businesses are allowed to invest within the Colombo Port City (CPC) Special Economic Zone, the Colombo Port City Economic Commission Act states.  It is said that the companies that are licensed through the Banking Act of Sri Lanka or any law in any other country can submit applications to the Colombo Port City Economic Commission – the only investor facilitator window – in order to engage in banking business within the CPC Special Economic Zone.  The applications that are accepted by the Commission will be directed to the Ministry of Finance for authorisation to be licensed in order to conduct business in the CPC. Regardless of whether the entity is a local bank, it has to raise funds overseas in order to continue its offshore banking business within the Special Economic Zone, the CPC Economic Commission Act states. However, apart from the authorisation and overseas fund-raising aspects, the permissible offshore banking businesses can accept savings and time and demand deposits from any authorised or non-resident person in a designated currency, borrow any sum in a designated currency from a non-resident, and engage in transactions in a designated currency with an offshore banking unit or with a non-resident. The designated currencies include any foreign currency such as Chinese yuan and US dollars, but exclude Sri Lankan rupees.   When it comes to the law pertaining to raising foreign funds, any foreign funds in foreign banks and funds raised through loans from outside Sri Lanka, including from foreign banks, can qualify as foreign funds raised outside Sri Lanka. Investing within the CPC can be done through any form of lawful business which provides either financial or non-financial services other than offshore business. These businesses can only be run by an authorised person, company, partnership, or foundation. The CPC Economic Commission Act further demonstrates the framework of the law governing the Port City, investments, offshore banking businesses, parameters of authorised operations, and concessions granted for the projects within the Port City. The CPC intends to be an international business and service hub to promote key economic activities such as international trade, shipping logistics operations, offshore banking and financial services, information technology and business process outsourcing, corporate headquarter operations, regional distribution operations, as well as tourism and entertainment.  The CPC Economic Commission Act was passed in Parliament on 19 May 2021. However, it is pending certification by the Speaker.


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