Sri Lanka’s Port City Colombo (PCC) is lining up US$4 billion in investment, a signal that the challenging mega project is on track to start construction early next year.
Investors in discussions are from Southeast Asia, India, the Middle East, China and Japan, according to news reports.
“Port City Colombo is an absolute game changer for Colombo,” says Steven Mayes, Managing Director of JLL Sri Lanka. The project “will drive connectivity with the existing Colombo, via investment in a new expressway, a new network of road tunnels to alleviate existing congestion and the project metro system.”
Hong Kong Shanghai China Bank is among those backing the project, which will be built on 269 hectares of land reclaimed from the sea next to the city center.
The first phase of construction will include an office tower, two luxury condominium towers and a shopping mall in an area dubbed the Colombo International Financial Centre (CIFC). Effectively a free trade zone with financial incentives, tax breaks and the removal of visa issues, it is expected that the CIFC will be a boon for businesses.
The project is being developed by China Harbour Engineering Company (CHEC), which is part of China Communication Construction Company (CCCC).
Betting on Colombo
Much of the interest, reported by Reuters, in PCC stems from the need to modernize the current Central Business District to serve the needs of international firms and occupiers.
“It suffers from a lack of quality international class A commercial office space and has significant sustainability issues due to poor infrastructure, car parking provision and public transportation,” says Mayes. There are also problems such as historic title issues and alleged land grabbing during the civil conflict period had prevented proper and sufficient office development, he says.
And with Sri Lanka poised to play a pivotal role as “financial and logistical hub located midway between East and West Asia” as part of China’s Belt Road Initiative, the PPC is a “welcome addition as there is need to build up the necessary space and infrastructure for investors and occupiers, which would be interested to establish their presence,” points out Wang Chuan, Managing Director of Bank of China, Sri Lanka.
Mark Prothero, CEO of HSBC Sri Lanka and Maldives, agrees the PCC is likely to provide significant opportunities for infrastructure development, business and employment as it evolves and attracts a wider level of Foreign Direct Investment. HSBC has a dedicated China Desk in Colombo to support Chinese clients investing in, which includes Mandarin-speaking capabilities to support new entrants to the market.
It’s been reported that there will be Memorandum of Understandings signed later this year between the Port City and the companies keen to invest there while the government of Sri Lanka is looking into tax incentives for Port City.
The full picture
But the project is not without several challenges, especially around the question of government stability as six ministers resigned from the parliament in April.
“The current coalition government is facing increasing pressure. The country needs to push through new reform in order to boost economic growth and attract foreign investment but the risk remains that a lack of coherent policies and political will to drive the required legislation could lead to delays.”
A lack of resolve to award contracts is further hindering the progress on infrastructure works even as the Chinese government continues to assist, such as the recent approval of a US$1 billion loan for the construction of a central highway and CCCC’s US$800 undertaking of an underground road network to PCC.
“Chinese clout will likely spur the additional investment required to overcome potential logjams and encourage the required legislation to be drafted without undue delay. In addition, the private sector could exert some positive pressure on PPC with the anticipated liberalisation of the Sri Lankan market encouraging more institutional and private investment from China, India and Japan.”
Click to read how Sri Lanka is gearing up for more foreign investment.