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Rising costs in Dubai, Singapore, is Sri Lanka's gain
Publication Date : 31-07-2013
Sri Lanka's ministry of finance and planning has declared the ports at Colombo and Hambantota as "free ports", and the export processing zones at Katunayake, Koggala, and the Mattala Rajapaksa International Airport as "bonded areas", in a bid to attract more foreign direct investments.
Rohan Masakorala, chief executive officer of the Shippers’ Academy Colombo and immediate-past secretary general of the Asian Shippers’ Council, said the decision to make Colombo and Hambantota free ports was a "very good move".
"This has been in the pipeline for some time and would give Sri Lanka a better chance of developing into a regional logistics hub and attract more foreign direct investment.
"A free port is a 100 percent duty-free area and encourages international companies to set up operations and trade with each other freely outside the sphere of customs regulations and procedures.
"This does not mean that the government would lose trade related taxes, because domestic trade would continue unchanged. A free port would encourage foreign direct investments," he said speaking to The Island's Financial Review.
"Domestic exporters and importers can make use of the free ports to their advantage as well, by making use of storage facilities. There would also be scope for value-adding for our exports and this move should give them a lot of confidence. Free ports would help us boost trans-shipments to India and make better use of free trade agreements.
"The port cities of Dubai and Singapore have thrived on the free port concept in the past. But with costs rising in these destinations, Sri Lanka has better prospects of exploiting its strategic location and attracting more international trade," Masakorala said.
According to Sri Lanka's Treasury, businesses setting up operations in the free port with a minimum investment of 65 percent from foreign sources will be regulated under the Finance Act—Commercial Hub Regulation No. 1 of 2013.
"The enterprises which will be benefitted from this arrangement will be entreport trade involving import, minor processing and re-export, off–shore business where goods can be procured from one country or manufactured in one country and shipped to another country without bringing them to Sri Lanka.
"Provision of front end services to overseas clients, operations of the headquarters of the leading buyers and logistics services are also will be covered by the regulations gazetted under the Commercial Hub Regulations No 1 of 2013," the Treasury said in a statement on Tuesday.
"The minimum investment of a new enterprise which is engaged in the business activities mentioned should be at least US$5 million. These companies are expected to achieve an annual re-export turnover of no less than US$ 20 million over a period of five years.
"If the business involves logistic services such as a bonded warehouse, or in the cases of operations by multi-country consolidations in Sri Lanka, the minimum investment will be $ 3 million.
The movement of goods to and from a free port is subjected to the Customs Ordinance and Imports and Exports Control Act.
The Country of Origin Certificate issued by the department of commerce will be made available for enterprises located in the free ports or bonded areas.
These regulations are expected to bring revolutionary changes to Sri Lanka's trade and investment policies. As outlined in the Mahinda Chinthana (meaning "Mahinda Vision") policy frame work, these measures will open up new avenues for Sri Lanka to connect with the other world economies and attain a higher growth rate by deploying more foreign investments, said the Treasury.