FINANCIAL HUBS
Compiled by Yamini Sequeira
LEVERAGE ON THE ASIAN HUB
Xiong Hongfeng makes a case for attracting investors to Port City Colombo
Financial hubs such as Dubai and Singapore serve as instructive models for burgeoning global financial centres; and they impart valuable insights. Their strategic locations at key intersections of trade routes have been instrumental in attracting international commerce and investment, underscoring the importance of maximising geographical advantages.
Xiong Hongfeng asserts: “At the heart of these financial centres is political stability, which is an indispensable element in fostering investor confidence while nurturing an environment that is conducive to business.”
“Emulating transparent and efficient regulatory frameworks, notably exemplified by systems such as those in Singapore, can be pivotal to the success of Sri Lanka’s very own Port City Colombo,” he suggests.
OPPORTUNITIES Sri Lanka’s potential, exemplified by the Port City Colombo project, presents a compelling proposition for prospective investors, supported by multiple factors. Foremost among these is its strategic positioning in the Indian Ocean, which establishes it as a vital trade and investment hub.
In addition to Sri Lanka’s strategic location, Hongfeng notes that “investing in infrastructure development – which includes modern airports, ports and efficient transportation networks – is pivotal for facilitating the seamless movement of goods and people. These factors need to be in place to leverage on our strategic location; they are a cornerstone of any thriving financial hub.”
“Sri Lanka’s investor-friendly economic policies, which encompass trade liberalisation, create extensive opportunities to diversify market access. The country has established bilateral investment treaties and free trade agreements that grant investors access to broader markets,” he elaborates.
And Hongfeng maintains that “despite political transitions, the country maintains a relatively stable political environment that offers a sense of security for long-term investments.”
“Port City Colombo’s offering of an extensive network and facilitating access to international markets will elevate its status as a regional financial hub,” he asserts.
The introduction of tax incentives – a distinctive feature of Dubai’s ‘Freezones’ and Singapore’s taxation structure – provides a potent mechanism for attracting businesses and foreign investors. It underscores the necessity for competitive tax frameworks in emerging financial centres.
ECOSYSTEM South Asia is a rapidly growing region with India poised to be one of the largest economies and exporters of goods and services, as well as advanced technologies. The high net worth individual (HNWI) base is expected to double by 2027.
Therefore, many opportunities could arise to broaden financial services in terms of trade and infrastructure financing, capital markets and wealth management.
Hongfeng states: “A regulatory environment that is both transparent and conducive to investors is imperative. This entails streamlined and efficient regulations governing business operations, contract enforcement and mechanisms for resolving disputes, which have been facilitated by the Port City Colombo’s Special Economic Zone (SEZ).”
“In addition, efficient tax structures that minimise transaction costs and administrative burdens in the ecosystem are required, along with a competitive tax structure for international business activities, which are offered to businesses of strategic importance at Port City Colombo,” he emphasises.
Attracting a skilled workforce in finance, law and related domains is paramount. Hongfeng explains: “Long-term work visas for expatriates are also critical to attract highly skilled talent from established jurisdictions for efficient knowledge and skills transfer.”
“Investment in education and talent development is also necessary to meet this demand. Addressing these obstacles will be crucial to ensuring the continued appeal of Port City Colombo to investors and its long-term success as an economic hub,” he surmises.
REFORMS Hongfeng’s suggestions include “a long-term commitment to the ongoing economic reform programme with the IMF, signalling policy certainty that’s been lacking in the past.”
“This would entail the resolution of the sovereign debt restructure, restore debt sustainability, and establish a path to restoring credit ratings and access to international capital markets in the medium term,” he explains.
Hongfeng posits that streamlining the tourism industry in terms of processes and costs for tourists, as well as broadening the product offering to a wider base of travellers, will be a key to economic success.
He emphasises: “Investors have certain expectations when investing in Port City Colombo – including favourable tax policies that would include reduced corporate income tax rates, exemptions on import duties and customs, and other financial incentives.”
“Profit repatriation is another factor that investors look for. This flexibility in capital movement is highly attractive as it allows them to manage their earnings efficiently and facilitates international transactions without unnecessary restrictions,” Hongfeng notes.
Furthermore, the option of 100 percent foreign ownership is paramount. Investors need to be confident that they can maintain complete control of their investments without running the risk of expropriation or undue government interference. This assurance of full ownership rights enhances the investment environment’s appeal.
He asserts: “The establishment of an International Commercial Dispute Resolution Centre will address a critical concern of businesses with regard to lengthy and delayed judicial action. In addition, a preferential visa system for spouses and dependents will make Port City Colombo an attractive working and living destination.”
OPERATIONS Sustainability is now a global and local priority with several key areas demanding focussed attention.
“Globally, the transition to renewable energy sources, responsible resource management, climate change mitigation, biodiversity preservation, and improved water and air quality are paramount. These efforts are crucial to addressing climate change, conserving ecosystems and ensuring human health,” Hongfeng affirms.
Promoting sustainable consumption patterns and responsible production practices is central to reducing waste and adopting eco-friendly technologies. Addressing these facets of sustainability – from energy to social equity – is essential for a more sustainable future at both the global and local levels.
Sri Lanka can leverage the fact that Asian cities continue to dominate the list of the most competitive financial centres in the world. Six of the top 10 cities in the biannual Global Financial Centres Index (GFCI) compiled by the think tank Z/Yen in cooperation with the China Development Institute (CDI) are Asian hubs.
Looking ahead, he says: “The year 2023 proved to be ahead of the general consensus as inflation was restrained to single digit levels. There’s a gradual buildup of usable reserves and a primary fiscal surplus was achieved.”
