The Hon. Kathiravelu Shanmugam Kugathasan

¶ 01 Hon. Deputy Chairperson of Committees, I speak on Amendments to the Colombo Port City Economic Commission Act.

¶ 02 Under Act No. 11 of 2021, Port City was established as a distinct authority area allowing 100 per cent foreign ownership and business in 16 foreign currencies. The 2025 Amendment Bill No. 41, gazetted in November 2025 and presented in December 2025, updates the law to facilitate business, investment and governance in the Port City SEZ with standardized regulations, incentives, and single-window approvals, aligning with Sri Lanka’s broader 2025 reform agenda and positioning Port City as a global financial and business centre.

¶ 03 This is a key milestone to shift from a “loosely autonomous zone” to one with strategic regulatory integration. Four main elements: 1) Central Bank oversight of offshore banking, aligned with international standards. 2) Fiscal discipline: removal of full PIT exemption for Port City employees. Existing employees get a three-year transition; new hires pay under domestic tax law. 3) Financial integration: foreign exchange matters will be under the Foreign Exchange Act No. 12 of 2017. 4) Performance monitoring: BSI incentives to be granted after MOF technical analysis, with tax holiday duration based on investment size and job creation in line with Central Bank regulations of 2025.

¶ 04 Section 52 makes tax filing mandatory for all approved operators, enabling the State to monitor and estimate revenue foregone.

¶ 05 Comparing 2021 and 2025 frameworks: the original model broadly insulated the zone, risking “shadow banking”. The 2025 Bill integrates the zone with national economic objectives. Tax holidays of up to 40 years are reduced to a maximum of 15 years. Section 42 empowers the Central Bank to issue directions and guidance to offshore banks, aligned with global prudential bodies, and to set minimum capital and adequacy ratios—preventing a shadow-banking hub and ensuring a transparent financial centre. Licensing authority shifts from the Commission to the Minister on Central Bank recommendation, underscoring prudential integrity. Nonetheless, concerns exist that reduced incentives may dampen investor confidence; UNCTAD-classified evidence suggests our package could be less favourable.

¶ 06 Solutions: research shows tax incentives have limited impact on FDI attraction. We should: - Emphasize non-tax facilitations: streamlined business start-up, visas, IP protection, and labour law clarity. - Ensure MOF’s BSI assessments are technical and apolitical. - Integrate Port City with the domestic economy through local supply chains and technology transfer.

¶ 07 This Amendment is a necessary “corrective treatment”: adopting prudential banking standards and integrating national laws signals Sri Lanka is a regulated, world-class platform—not a tax haven. Maintain policy stability to earn global confidence.

¶ 08 Thank you.