Sri Lanka Gives 40-Year Tax Deal to China Port City Investors

Sri Lanka is offering 40 years of tax relief to investors in its China-built port after the project failed to attract any foreign interest after nearly 12 months of operations.

With the global economic downturn, attracting investment to Colombo’s Port City has become increasingly difficult, Minister for Mass Media and Cabinet spokesman Bandula Gunawardana said.

He said in a statement that Oman, for example, has offered tax breaks in its ports to attract industries and businesses.

“Attracting investors is a challenge while local investors in the country are moving to countries such as Bangladesh, Ethiopia and Kenya due to favourable investment opportunities,” he said.

The minister said that the Port City project was worth $1.4 billion and the largest foreign direct investment in the history of Sri Lanka.

As recently as April, Nikkei Asia described the site as “a still barren, sand-filled island built by the Chinese off the coast of Sri Lanka’s commercial capital”.


Economic Chaos

The port has been criticised as an example of reckless spending by the government, which has seen the country plunge into economic chaos unable to repay loans and running short of food, fuel and medicine.

Sri Lanka has “built highways, airports and convention halls in the jungles which didn’t give any returns” in foreign currency, an opposition lawmaker, Kabir Hashim, said.

“Now we don’t have the dollars to pay them back the dollar loans.”

The Port City project follows the construction of a Chinese-built container terminal in Hambantota in the southeast as a prime example of what Hashim calls official recklessness.

It was built in the hometown of then-president Mahinda Rajapaksa and paid for with $1.1 billion in Chinese loans despite the plan having been rejected by an expert panel.

Its promoters said Hambantota, on busy Indian Ocean shipping routes, would ease the burden on Sri Lanka’s main port in Colombo. But it failed to generate foreign revenue.

Beijing bailed out the port in 2017 by having a state-owned company, China Merchants Group, buy a 99-year lease for $1.1 billion. That includes land for an industrial park.


  • Reuters, with additional editing by George Russell