The Port City is envisioned as an important enabler for achieving Sri Lanka’s growth aspirations. In this context, the International Chamber of Commerce (ICC), Sri Lanka in association with Boston Consulting Group (BCG), Think Ahead ACCA, Sri Lanka-China Business Council of the Ceylon Chamber of Commerce and the Daily FT, organised a power-packed webinar to critically analyse ‘How Port City can become the game changer for Sri Lanka’s economic growth trajectory.’
Economic clusters can act as catalysts for a region’s growth and become game changers for a country’s economic growth trajectory. The Port City in Sri Lanka is expected to position Sri Lanka as an attractive investment destination in Asia. According to BCG Managing Director and Partner Saurabh Bakliwal, “The advantage of clusters is not really about the location since capital, goods, technology, and know-how can easily be transported. The advantage comes from creating an E2E ecosystem where companies can come and drive innovation.” He believes that economic clusters can engender several advantages. These include:
- Overcome economic cost disadvantages and activate investments in new sectors
- Enable growth of co-located ecosystems to build long-term competitive advantage
- Address short-term local skill gaps; attract global talent pools and expertise
- Address ‘risks of doing business’ in a new emerging market
However, it is important to not only focus on the technical aspect of such a cluster but also the socio-economic aspects. As State Minister of Money and Capital Market and State Enterprise Reforms Ajith Nivard Cabraal pointed out, “In order to attract investments, Sri Lanka needs to create a win-win situation for all. This means building the relevant infrastructure for investors and their families, focusing on efficiency and skill development, and leveraging the geographical and climatic advantage of the country.” On this note, BCG Managing Director and Partner Natarajan Sankar highlights the three pillars of success for an economic cluster. These include:
- Deep understanding of the opportunity and investor pools
- Compelling value proposition using a mix of financial and non-financial incentive levers
- Early wins and securing anchor investors to activate the virtuous cycle
The advantages that are likely to accrue can only be realised if these factors are kept in mind while execution. As Former Prime Minister Ranil Wickremesinghe questioned, “What is the game plan?” He further highlighted the significance of having a holistic roadmap that clearly defines where the investors are going to come from, what the value proposition would be for the investors, and how Sri Lanka is going to compete with the likes of Dubai and Singapore.
Further he said, all Sri Lankans would like to see a successful financial structure taking place in the country. Indeed, several of these issues need to be clarified as poor implementation and conceptualisation has led to the failure of many such zones in other parts of the world. In the past, developing economies positioned themselves as outsourcing hubs. However, such trends are now changing according to KPMG Sri Lanka Managing Partner, Middle East and South Asia Region (MESA) Chairman Reyaz Mihular. “We are now moving towards delivery centres. This has a synergistic effect of getting top people together in one location and creating great value.”
Further he highlighted the need to get highly skilled people into the commission to ensure the commission succeeds. However, Former Prime Minister Ranil Wickremesinghe highlighted the importance to include the Central Bank Governor and the Secretary Finance into the commission to ensure proper governance and administration in the Port City.
Former State Minister of Finance Eran Wickramaratne MP said, “The Port City must succeed. It will catalyse our next growth phase to create a knowledge based highly competitive economy at the centre of the Indian Ocean. It should become a dynamic hub that would attract the best global talent that will link Sri Lanka to the world and create national wealth. But, if we are to attract top financial names we must have credible regulation. We must not remove the Central Bank from being the financial regulator. Overall he noted the need to fix the macro issues in the economy, if are to attract investment into
Building Port City on a strong foundation
BOI Chairman Sanjaya Mohottala pointed out, “Sri Lanka needs to ruminate over a few key questions. Firstly, how does Sri Lanka compete with the likes of Dubai and Singapore and create an opportunity for itself? Secondly, where are we today? And, thirdly, how does do we become developed?” Inevitably, there are lessons to be learnt from countries that have been successful in creating thriving economic clusters.
Natarajan Sankar cites the example of Dubai Multi Commodities Centre (DMCC) as a good study of an economic cluster done right. He shares, “They had a clear economic and development logic, i.e., to become the main trade hub for commodities globally, clearly defined target sectors, and a wide range of value propositions that included financial and non-financial incentives for investors.”
Further, NDB Bank PLC Chairman Eshana De Silva believes that just like Labuan in Malaysia, Port City is an opportunity for Sri Lanka to attract investment banks and offer them a gateway to South Asia.
There are several other aspects that need to be aligned to ensure the success of Port City. As CHEC Port City Colombo Managing Director Jiang Houliang asked, “How do we sell the city to the outside world?” In addition to the factors already highlighted, Ajith Navard Cabraal points out that Sri Lanka should also create good business propositions, chart business friendly laws, and offer good living conditions to investors who choose to set shop in Sri Lanka. There is also a need to focus on positioning and effectively market the key value propositions to investors.
According to CHEC Port City Colombo Asst. Managing Director Thulci Aluwihare, “The infrastructure development at the Port City is progressing as per schedule and should be completed by mid-next year.” He believes that Sri Lanka has a massive cost advantage in terms of real estate, manpower, and set-up cost. However, law continues to be the missing piece. From the perspective of the law, Ambassadors’ Forum President Sarath Wijesinghe PC believes, “The legal regime at the Port City is excellent. It is governed by the Sri Lankan legal system and has a Commission on top.”
As we emerge out of the pandemic, competitive intensity is likely to increase. In such a scenario, ICC Paris Deputy Director Trade and Investment Damien Bruckard believes, “Globally, there is renewed focus on sustainability and investors are increasingly adding assets that meet their sustainability goals.”
Mayor of Colombo Rosy Senanayake issuing a statement noted, “The Port City project will have a significant impact on the economy in terms of much-needed FDIs to the country, together with the potential new employment and trade opportunities that the project will generate and the Colombo Municipal Council will work closely with the Port City to provide the services.”
Indeed, the competitive landscape is changing and birthing new imperatives. In the backdrop of such a landscape, it has become increasingly important for Sri Lanka to assess how it can create a successful economic cluster and partake in the region’s growth. Many of the panellists however noted the need for Parliament to have oversight of the Port City administration. The session was moderated by ICCSL Chairman Dinesh Weerakkody and Daily FT Editor Nisthar Cassim.