The draft law that is intended to govern the Port City is presently before the Supreme Court. In its current formulation the law significantly reduces the powers of parliamentarians over the Port City. The governing body of Port City will comprise appointees of the president who need not be citizens of Sri Lanka. The Port City Economic Commission will not be subject to the supervisory powers of parliament and its committees, such as the Committee on Public Enterprises. It therefore appears that the Port City is meant to be an entity with full financial and administrative autonomy from the rest of the country. As China has invested heavily in the Port City it can be reasonably expected that it will seek representation in its management.
There are further reasons for China to be playing a special role in Sri Lanka at the present time. it is bailing the country out of its huge debt repayment problems. This is being done through a combination of long term leases of Sri Lankan assets such as Hambantota port and now Port City for 99 years each, and also through loans. In the past year alone, China has provided Sri Lanka with around USD 3 billion worth of loans which has given the government some breathing space to get its development process on the move. Like in the case of Hambantota port where there was optimism about the transformation of the economy, there is optimism that the Port City will cause the much hoped for transformation of the economy.
The justification that is being given for the extraordinary legal, financial and administrative arrangements for Port City is that Sri Lanka needs foreign investments urgently to ramp up its economy and take it to the next level of development. Compared to other comparable countries such as Bangladesh and Vietnam that have increased their levels of foreign investment by several times, Sri Lanka’s growth in foreign investment is small. The previous government which followed more orthodox methods of trying to raise the level of foreign investment, such as subscribing to World Bank policies and to UN Human Rights Council recommendations, failed to attract either foreign investments or foreign grants.
The concept of the Port City with its special laws has been justified on the grounds that it is necessary to create a new environment that is attractive to foreign investors. Government members have pointed out that the general legal processes in the country are too slow and cumbersome to attract foreign investors who have multiple countries to go to. The average time to enforce a contract in Sri Lanka is estimated by the government to be three and a half years. Further it is pointed out that poor performance in resolving insolvency and enforcing contracts have put Sri Lanka at the 99th position out of 190 countries in terms of the “ease of doing business.”
There are, however, some pitfalls to be guarded against. The first is that the autonomy enjoyed by the Port City might prevent its fruits from being enjoyed by the rest of the economy and the vast majority of the population for whom luxuries like Port City will be beyond reach. The government needs to ensure that the Port City does not become an enclave that only sucks in resources from the rest of the economy for the enrichment of the few who will manage and grow their investments in it. There are danger signs of this happening. The labour laws of the rest of the country will not operate within the Port City and many other laws relating to the management, control and planning of the economy will not apply either.
There are geopolitical pitfalls too that need to be avoided Sri Lanka needs to be particularly mindful of the security interests of neighbouring India which has always shown its anxiety about the entry of big powers into Sri Lanka, be they from the east or west. As Sri Lankans know from our own experience national security gets priority above all other considerations. Indeed, the present government was elected on an election platform that stressed the need to prioritise national security in the aftermath of the Easter bomb attacks. In a parallel way it can be expected that other countries too will give priority to their national security interests. In the context of the several skirmishes and war that has taken place between India and China in the past and continue into the present, it is important that their national security interests be safeguarded.
On the positive side the Port City concept can contribute to resolving another vexed problem that has eluded a solution for generations and which has also held back Sri Lanka from developing to its full potential. For three long decades Sri Lanka suffered from an internal armed conflict that ravaged the economy and lost out on many developmental opportunities. India’s efforts to help resolve the conflict in its later stages led to the formulation of the Indo-Lanka Peace Accord of 1987 and the 13th Amendment that gave rise to the provincial council system. The provincial council system has yet to be fully implemented and now for the past three years they have been in a state of limbo without elections to them being held.
India has recently been expressing its interest in seeing the 13th Amendment more fully implemented especially in the context of UN Human Rights Council resolution 46/1 of 2021. In the draft law on the Port City that is now before the Supreme Court the government has shown its willingness to consider new concepts of national sovereignty and to stretch it to ensure there is more foreign investments for economic development. It is willing to restrict the power of parliament over the Port City to give it more autonomy. This new thinking of the government can be utilised to upgrade the power sharing arrangements in the provincial council system too. If there is a negotiated solution to the ethnic conflict the economic benefits can be enormous due to internal cohesion and the goodwill of the international community. Likewise, the lessons learnt over the past three decades about the devolution of power through the provincial councils can be used to moderate the power and autonomy given to those who will run the Port City.