The Hon. Faiszer Musthapha, PC

¶ 01 Hon. Presiding Member, I welcome the appointment of Mr. Harsha Amarasekera, PC, as Chairman of the Port City Commission—his leadership will be valuable. I also urge the prompt appointment of a Director-General for the BOI, a post vacant for four years.

¶ 02 Constructively, I must warn that some Amendments may create systemic risks. Section 42(1) will now exclude application of the Banking Act to offshore banking businesses in the Port City. Previously, licences were issued under the Banking Act; now the Port City Commission can issue such licences. Does the Commission have the expertise? This risks creating a shadow banking system. Also, allowing Port City offshore banks to borrow US dollar funds from domestic banks could drain reserves and destabilize the domestic system.

¶ 03 Previously, the Banking Act applied (except Part IV), allowing the Central Bank to set prudential directives above international minima (e.g., 10% capital adequacy vs. Basel III’s 8%). The Amendment requires regulations “in terms of international banking standards,” which are fluid and undefined. I propose rewording to make such standards applicable “as far as practicable,” preserving the Central Bank’s discretion to protect the system.

¶ 04 On talent: India’s GIFT City has retained professionals. Here, after these Amendments, Sri Lankan residents working in Port City will pay income tax, at a time when brain drain is severe due to the 36% tax slab. To retain professionals, please reconsider taxing Sri Lankans working in the Port City.

¶ 05 On attracting investment: Sri Lankans investing in real estate face about 21 approvals; agencies like Wildlife, Forest, and Coast Conservation cause long delays. Create a one-stop shop. Prevent capital flight to Dubai and elsewhere by enabling efficient, profitable investment at home. Real estate taxes can consume 35% of sale value. Streamline processes and timelines under the Port City Act (currently no statutory decision time limit for approvals). Avoid keeping applications in abeyance.

¶ 06 The BOI has become a white elephant. Amendments to the Strategic Development Projects Act are noted. Do not be dictated by the IMF. Our energy and labour costs are high; we need competitive concessions. Who will set up offshore banks here now, with a high tax regime? Level the playing field: domestic banks require USD 60 million, while offshore banks require USD 15 million, and foreign entities could get Port City licences under a separate regime. This is an uneven field. I urge rethinking the licensing authority residing with the Commission rather than the Central Bank. Thank you.