Port City cuts across “time zones”
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It’s only early morning in Colombo, when an international commercial city in the Far East begins its working day. For instance, the international corporations that are headquartered in Tokyo or international financial businesses that are operating from Seoul opens for businesses at 10 o’clock in the morning, while it is only 6.30 in Colombo. If it is Shanghai – the modern financial city of China, or Beijing – the cultural and administrative city of China, begin their global businesses at 10 o’clock in the morning, it is 7.30 in Colombo.
Turning towards the West – the opposite direction of the globe, it is too early in Colombo to go to sleep when the international commercial and financial cities in the West close their businesses of the day. For instance, when people working in London close their businesses at 4 o’clock in the evening, it is only 8.30 at night in Colombo. If it is in other Western European cities such as Amsterdam or Frankfurt, 4 o’clock in the evening means only 7.30 in the night in Colombo.
So, what’s the big deal about the time zone differences between the Far East and the Western Europe? The big deal is that, if the right investment climate and business environment is established, the Colombo Port City has the unique advantage to cut across time zone differences. The advantage is that the Port City has the strategic locational advantage to connect between those cities in the Far East and in the West, which fall apart by up to 8 hours.
The Colombo Port City is a reclaimed island of a 5.7 million square meters. The total land area is divided among commercial and business use, residential facilities, parks and greenery, leisure, public streets and amenities, and other. It also has a reclaimed sand beach area which Colombo didn’t have so far, and a safe swimming lagoon.
Locational advantage
The locational advantage of the island of Sri Lanka has been important in the modern times as well as in the ancient times. I believe that this locational advantage was exploited more in the ancient times than in the modern times, because during our time we have built up policy and regulatory as well as other barriers to keep from connecting to the world.
In spite of the many barriers, the country is already the gateway to South Asia and even beyond that in terms of aviation and port activities. The country is located adjoining one of the busiest shipping lanes in the world, connecting the European, African, and the West Asian countries with the Asian countries towards the Far East. In that sense, the country also connects the Far East and the West through an international shipping route in the world.
The Colombo Port, which has lost its advantage position over the past 70 years, is still among the top-25 busiest seaports in the world, not because of trade generated from the country, but because of trans-shipment cargo generated from other countries. Hambantota Port, on the other hand is the closest seaport of the country to the international shipping lane between the East and the West with only 15 nautical miles distance from the shipping route and provides ample physical space to expand as an international different from the Colombo Port. The potential for massive economic progress connected to Trincomalee Port, being one of the largest and deepest among the natural harbours in the world, is yet to be seen in the years to come.
A new dimension to the country’s international advantage position has been added by the Colombo Port City. The advantage over the time zone difference enhances the time-efficiency and cost-advantage to the commercial and financial businesses for which it matters. These businesses are essentially “global” by nature, which have the capacity to derive many benefits directly and indirectly to the nation through its connectivity to the entire economy.
Benchmark cities
File picture of construction at the Colombo Port City.
All look good and promising, but how to transform the Port City into an attractive international business enclave in the Asian region is the main issue. The most important is to look around in the East Asian and West Asian regions and to learn from the already established international business enclaves and to be mindful about the emerging business enclaves. There are no similar competitive business enclaves established in the neighbourhood, despite the emerging ones. It is also an advantage which can fade away over time.
If the Port City is looking forward to being “better than the best” in the region, it has to learn at least from Singapore in the Southeast Asia and Dubai from West Asia. This is necessary in order to in order to identify what is meant by being better than even the best business enclaves in the Asian region. This comparison will provide the benchmarks and guidelines to overcome the infrastructure bottlenecks, policy obstacles and regulatory barriers with an entirely new and innovative approach to the Port City as a Special Economic Zone (SEZ) of Sri Lanka.
The city state of Singapore with only 700 square kilometres has exploited the best of its geographical location with its deep-water harbour, adjoining the Southeast Asian shipping lane through the Malacca Strait. By adopting the best practices of free and open policy regime favouring trade and investment, Singapore became one of the best locations for trade, shipping, manufacturing and logistics as essential components of its success story.
The success of Dubai city of the United Arab Emirates (UAE) as a business location is even more exciting. It shows how an unknown desert city with social and cultural boundaries that separated it from the Western value system has transformed itself into one of the most successful business enclaves exploiting its locational advantage. It was also made possible by adopting a free and open policy regime for trade and investment.
Special Economic Zones
As to the Ease of Doing Business Index 2020, out of 190 countries in the world, Singapore is ranked as number 2 and the UAE as number 16, while the rank of Dubai as a separate business enclave must be among the top-ranked countries. Compared with them, Sri Lanka’s 99th ranking position shows that the country has a long way to progress. Many international data reports such as Global Competitiveness and Economic Freedom and other confirm the lack of competitiveness of Sri Lanka as a promising business economy.
Even though if it is a difficult choice to improve the business environment overnight, there is a short cut – a Special Economic Zone (SEZ) which has a special administrative system with free and open policy for trade, investment and business. China in the Far East has a long history of the establishment of SEZs which dates back to the 1980s. There are both corporate and income tax incentives and relaxed regulatory systems for investment within the SEZs, which have been designed to attract foreign investment.
China has five SEZs, apart from its many other free trade zones (FTZs). In the recent past the SEZs have been increasingly becoming “free and open” zones. For instance, with a more proactive opening-up strategy the entire island of Hainan which about half of Sri Lanka in terms of both land area and population, has already been declared to be a competitive SEZ. Under the Special Economic Zones Act of 2005, India has stepped up establishing a series of Special Economic Zones (SEZs) in major commercial cities throughout the country. SEZs have become popular among many countries in the East Asian as well as West Asian countries.
Late-comer’s advantage
While it is not possible to replicate any of the existing SEZ structures, neither has the Colombo Port City all the advantages that other countries enjoy, in spite of its own unique advantages. In addition, the late comers have a specific advantage of learning from the forerunners and adopting innovative practices in offering attractive policy and regulatory systems, incentives and living environments, modern environmental solutions, and modern technological standards as centripetal forces to attract international investors and world-class professionals, not only for working but also for living. The Port City model could be replicated in Hambantota and Trincomalee, while its success would guide the policy reforms in the entire country as well.
(The writer is a Professor of Economics at the University of Colombo and can be reached at sirimal@econ.cmb.ac.lk and follow on Twitter @SirimalAshoka).