A Legal Framework for Ease of Doing Business for Foreign Direct Investment Promotion (B)” Japan International Cooperation Agency (JICA) Japan International Cooperation Agency (JICA) - Kobe, Hyogo, Japan Training programme - “A Legal Framework for Ease of Doing Business for Foreign Direct Investment Promotion (B)” JICA Knowledge Co-Creation Programme Kansai International Center, Japan International Cooperation Agency

1. “A Legal Framework for Ease of Doing
Business for Foreign Direct Investment
Promotion (B)” (J1704287)
FINAL OUTCOME PRESENTATION
SRI LANKA
RAJITHA PERERA – SENIOR STATE COUNSEL
ATTORNEY GENERALS DEPARTMENT OF SRI LANKA
1

2. Background /General Information
2Country Profile – Location 7.8731° N, 80.7718° E

3. Sri Lanka
3

4. National Flag & Emblem
4

5. Geography & Climate
• Official name : Democratic Socialist Republic of Sri Lanka
• Widely used name : Sri Lanka
• Internet domain : .lk
• Geographical location : South Asian Region
• Geo – Coordinates :
– Between 5 55”and 9 50”North Latitudes
– Between 79 31”and 81 53”East Longitudes
• Land area :
– 65,610 sq. km
– 2905 sq. km of Inland water
• Administrative divisions :
– 9 Provinces,
– 25 Districts
5

6. Geography & Climate
• Capital City
– (Administrative) Sri Jayewardenepura Kotte
– (Commercial) : Colombo
• Standard time : GMT + 5.30 hours
• Climate : Tropical - with two monsoons
• Climate variations :
– North- East Monsoon (September - March)
– South –West Monsoon (May - August)
• Annual average rainfall : 1687 mm
• Average temperature : Min 24.4 c - Max 31.7 c
• Literacy Rate 92.6
• Life expectancy:
– 72 years (Men)
– 78 years (Women)
6

7. Demographics
• Population : 20.9 Million
• Ethnic groups :
– Sinhalese (74.9%)
– Tamils (15.4%),
– Muslims(9.2%),
– Others (0.5%)
• Religions
– Buddhist 70.2%,
– Hindu 12.6%,
– Muslim 9.7%,
– Roman Catholic 6.1%,
– Christian 1.3%,
– other 0.05%
7

8. Demographics
• Official languages : Sinhala & Tamil
• English is the Business Language and commonly used in Government,
Private Institutions & Banks and widely spoken in all urban areas
• Source -INVESTMENT GUIDE
BOARD OF INVESTMENT OF SRI LANKA 2017 March
8

9. Current Economic Position
9
http://www.treasury.gov.lk/sri-lanka-at-a-glance

10. Contd …
10
http://www.treasury.gov.lk/sri-lanka-at-a-glance

11. Policy & Strategy- Budget Speech 2017
• Budget Speech 2017
• The government is prepared to set in motion the program to achieve an
annual growth rate of over 7% highlighting the strategic importance of
Sri Lanka as a hub in the realm of global logistics and commercial
operations .
• Economic integration agreements with Regional Governments - China,
India, Singapore.
• Opportunities for entrepreneurs and professionals with the focus on digital
economy, tourism, commercial agriculture.
• Acceleration of the process of industrialization.
11

12. Policy & Strategy- Budget Speech 2017
• Removal of restrictive barriers, provision of necessary legal and
institutional support including the creation of an enabling environment for
doing business.
• Integration with markets such as India, China, Japan and Korea.
• Integration opportunities with the ASEAN Economic Community, and
Trans Pacific Partnership (TPP) and China's One Belt One Road Initiative
• Productivity enhancement, investments in ICT and infrastructure
development as being integral requirements for the economic growth
envisaged.
• An ambitious reform program to strengthen “Ease of Doing Business”
and to be within the top 70 Nations by 2018.
12

13. Policy & Strategy- Budget Speech 2017
• Small and Medium Enterprises (SMEs) sector to be developed with
assistance including financial, marketing and other related facilities.
• SME credit guarantee scheme of Rs. 500 million as seed capital.
• Improvements to the infrastructure in SMEs .
• Improvements to domestic and international connectivity and access to
international markets
13

14. Policy & Strategy In Public Private
Partnership (PPP)
• A concerted effort will be adopted to nurture and foster the private sector -
the “Engine of Growth”, ensuring and emphasizing a greater role in
economic activities in all spheres.
• Development of corridors for investment in public and private sectors with
the role of the private sector being duly recognized to offer additional
exposure.
• Removal of restrictive barriers, provision of necessary legal and
institutional support including the creation of an enabling environment for
doing business with ease will be further facilitated by the government
proactively.
• Public Private Partnerships replacing government dominance in
economic development programs will be pursued positively
14

15. “VISION 2025” -A Country Enriched
• Make Sri Lanka a rich country by 2025.
• Transform Sri Lanka into the hub of the Indian Ocean with a knowledge-
based, highly competitive, social-market economy.
• Position Sri Lanka as an export-oriented economic hub at the center of the
Indian Ocean.
• Sri Lanka’s domestic market of 20 million consumers with a modest per
capita income must rely on external demand for sustained, high, and long-
term growth.
• Strategically position Sri Lanka as the hub of the Indian Ocean, securing
opportunities for local businesses in global production networks (GPNs).
15

16. Vision 2025
• Over the next three years, within the 2025 Vision, Sri Lanka is to implement
a comprehensive economic strategy to address constraints to growth.
• Raise per capita income to USD 5,000 per year.
• Create one million new jobs.
• Increase FDI to USD 5 billion per year.
• Double exports to USD 20 billion per year.
• Sri Lanka to become an upper-middle income country.
16

17. Vision 2025
• Introduce supportive legal reforms.
• Inland Revenue Act,
• Foreign Exchange Act,
• Voluntary Disclosures of Income Act,
• State Land Bank Act,
• Anti Dumping Act,
• State Commercial Enterprises Act,
• Ports and Airports Act,
• Ruhunu Economic Act
• Development Corporation Act,
• Lands (Special Provisions) Act,
• Sustainable Development Act,
• Liability Management Act,
• National Debt Office Act
17

18. Vision 2025
• The Government’s strategy to strengthen the national macroeconomic
framework will have three prongs:
• Fiscal consolidation,
• Ensuring price stability,
• Maintaining a market-based competitive exchange rate.
• Prioritize capital expenditure outlays for development with a
comprehensive Public Investment Programme (PIP).
• Single Window for new business registration that brings together 20+
Government agencies to streamline procedures and improve the investment
climate.
18

19. Vision 2025
• Integrate SMEs into the formal sector.
• New Trade Policy, along with an original National Export Strategy
• Trade adjustment programme to mitigate any harmful effects on domestic
firms and affected workers.
• Advantages of new and existing Free Trade Agreements (FTAs).
• Trade and economic partnerships that cover goods, services, and
investment with China, Singapore, and India will be finalized.
• Leverage the resumption of duty free access to Europe through GSP+ to
over 6,000 products, and negotiate expanded market access for the post
GSP+ era. 19

20. Current Investment Status with Statistical
Data
• Foreign Direct Investment in Sri Lanka increased by 395 USD Million
in the second quarter of 2017.
• Source (https://tradingeconomics.com/sri-lanka/foreign-direct-investment)
20

21. Incentives under BOI Law.
• Under Section 17
• Tax Incentives & Duty free (Customs Duty) import facility on plant
Machinery & Equipment, during the project implementation period.
• Exemption on Exchange Control
21

22. Incentives under 2025 Programme
• Phase out tax holidays.
• Standardized package of incentives with clear eligibility criteria.
• Incentives will be linked directly to physical investments made in the form
of capital allowances.
• Appropriately designed incentives will be offered for those in high
technology and innovative industries.
• It Is likely that more details will emerge at the Budget Speech for 2018 in
Nov 2017.
22

23. 2 CURRENT SITUATION ON TARGET
SECTOR
• POLICY AREAS TO CREATE MORE ROBUST
ENVIORMENT FOR ATTRACTING FOREIGN DIRECT
INVESTMENTS.
• (A) SELECTED POLICY AREA - PUBLIC PRIVATE
PARTNETSHIP(PPP) FOR INFRASTRUCTURE
DEVELOPMENT
• (B)SELECTED SECTOR - SEA PORT , AIR PORT AND
RELATED INFRSTURCTURE
23

24. Vision and Strategy for Policy Area
• Cabinet Memorandum MF/02/CM/2017/04 dated 02.01.2017 by
Ministry of Finance & Development Strategies(MOF&DS) and the
Ministry of Ministry of International Trade.
• Establishment of Public Private Partnership division under the
MOF&DS to promote proper collaboration between public and
private sectors for economic development and public welfare of the
country.
• Cabinet Memorandum MF/62/CM/2017/147 dated 03.07.2017 by
Ministry of Finance & Mass Media
» Contd.
24

25. Vision and Strategy for Policy Area
• Creation of the An Independent Agency with Legal, Administrative,
and Financial Authority.
• The Establishment of the National Agency for Public Private
Partnership
• Mandate
– Identify suitable projects based on feasibility studies and to
maintain a project pipeline in consultation with the relevant
ministries.
– Develop relevant standards, criteria and benchmarks relating to
PPP projects.
25

26. Vision and Strategy for Policy Area
– Decide on suitable types of PPP as BOT, BOO, BOOT and buy
back agreements.
– Prepare guidelines in association with the National
Procurement Commission applicable to all stages.
– Invite bids, select partners in collaboration with relevant
ministries.
26

27. Vision and Strategy for Selected Sector
27
• Sea Port and Airport Development
• The Sri Lankan government has declared its intention to develop
the country as a leading regional aviation, navigation and trading
hub in South Asia.
• Therefore, the development of maritime & aviation transportation is
at the forefront of the government's infrastructure development
agenda.
• The focus of these developments is to expand the capacity and
improve the efficiency of existing ports through modernization and
construction of new ports and airports in strategic locations.

28. Present Position of Selected Sector -Sea Ports
• Colombo Port
• South Asia Gateway Terminals - SAGT
• September 1999 a concession agreement was signed between the
Government of Sri Lanka and SAGT a consortium of local and international
establishments in shipping, commerce and finance.
• It is comprised of John Keells Holdings PLC, A.P. Moller Group. Evergreen
International SA, Peony Investments SA and the Sri Lanka Ports Authority.
• $500.00 Mn. Investment
• 30 year B.O.T and is a Public Private Partnership.
28

29. COLOMBO PORT EXPANSION PROJECT - CPEP
Harbor Infrastructure Works (CPEP-HIW)
• The Asian Development Bank (ADB) approved a loan of USD 300 million
from ADB’s ordinary capital resources to finance the public sector
component of the Colombo Port Expansion Project. 1
• The project was developed on a public–private partnership (PPP) basis
and comprises of a public sector component for harbor infrastructure
works, and public-private partnership development of container
terminals.
• The project aimed to assist the government to consolidate Colombo Port’s
position as a transshipment hub port for the South Asian region by
providing sufficient container handling capacity and sufficient depth for
new-generation vessels
29

30. South Container Terminal - CICT
• South Container Terminal was developed under Public Private
Partnership (PPP) under B.O.T basis with. Colombo International
Container Terminals Limited (CICT) and SLPA.
• Colombo International Container Terminals Ltd., (CICT) is a joint venture
Company China Merchant Holdings and Aitken Spence and the Sri Lanka
Ports Authority (SLPA).
• 35 year Build Operate and Transfer Agreement with SLPA.
• CICT holds 85% of the partnership whilst the balance 15% is being held by
SLPA.
• CICT commenced construction works of the terminal in December 2011 and
completed the works and commenced operation in 2013 with an envisaged
investment of US$ 500 million.
30

31. East Container Terminal - ECT- Phase I
• The SLPA has completed a 440m single berth as the first phase of the ECT
development plan to cater the shortfall in the capacity of container handling in the
port of Colombo.
• This consists of 440m quay wall alongside water depth of 18m and successfully
completed in May 2015 with a project cost of USD 80 million.
• The Asian Development Bank (ADB) and the Sri Lanka Ports Authority
(SLPA) signed a transaction advisory services agreement to develop the
East Container Terminal (ECT) of Colombo Port through public–private
partnership (PPP). 23rd
February 2016
• (
https://www.adb.org/news/adb-help-sri-lanka-expand-colombo-port-operations-using-pp
)
• 06 June 2016 - Invitation for Expression of Interest for Prequalification to Bid for the
Development of East Container Terminal of Port of Colombo 31

32. COLOMBO PORT CITY
32

33. COLOMBO PORT CITY
• CHEC Port City Colombo (Private) Limited (CPCC) (the Project Company)
is a BOI approved Company specifically set up for the purpose of making a
foreign direct investment (FDI) in the Colombo Port City Project.
• It is a 100% owned subsidiary of China Harbour Engineering Company Ltd
(CHEC). China Communications & Construction Company (CCCC) which
is the Parent Company of CHEC is listed on the Stock Exchanges of
Shanghai and Hong Kong.
• CPCC to invest over US$ 1.4 billion (over Rs.210 billion), thereby making
this the largest ever FDI project to be implemented in Sri Lanka so far. This
excludes the additional investments to be made on real estate projects once
the land is reclaimed.
33

34. COLOMBO PORT CITY
All lands reclaimed by the Project Company shall be owned by the Urban
Development Authority or any other agency nominated by the Government of
Sri Lanka (GOSL).
Of the total of 269 Ha reclaimed, the total saleable/marketable land of
approximately 178 Ha is to be divided between the Project Company and
GOSL.
The Project Company would be allocated 116 Ha and GOSL 62 Ha.
The GOSL will lease the 116 Ha of marketable land to the Project Company for
99 years, who will have the right to grant fresh 99 year leases to third party
developers
34
http://www.portcitycolombo.lk/faq/

35. HAMBANTOTA PORT
http://www.bbc.com/news/world-asia-40761732

36. HAMBANTOTA PORT
• Hambantota Port Development -
• The port is ideally located to serve the main East-West shipping lane
connecting Europe and the Middle-east with South East Asia.
• The port was expected initially to function as a service and industrial port
and later to be developed to handle trans-shipment cargo.
• Inaugurated in November 2010
• Phase II of the port estimated at a cost of US$ 800 Mn.
• The bunkering facilities at the Port of Hambantota, is to set up at a cost
of US$ 76.5 million.
36

37. One Belt One Road - OBOR
37
https://combined-transport.eu/the-new-silk-road-obor

38. Concession Agreement
• On 29 July 2017, China Merchants Port Holdings Company Limited entered
into the Concession Agreement with SLPA, GOSL, HIPG- Hambantota
International Port Group (Private) Limited and HIPS- Hambantota
International Port Services Company (Private) Limited.
• The Port of Hambantota is located on the Southern coast of Sri Lanka
occupying a prime location within 10 nautical miles to the main shipping
route from Asia to Europe and is also in a strategic position along the “Silk
Road Economic Belt and the 21st
Century Maritime Silk Road”.
• Pursuant to the Concession Agreement, SLPA and GOSL will grant HIPG,
the sole and exclusive right to develop, operate and manage the
Hambantota Port and HIPS the sole and exclusive right to develop, operate
and manage the Common User Facilities, for the operation of the
Hambantota Port.
38

39. Concession Agreement
• The term of the Concession Agreement shall commence on the Concession
Agreement Effective Date for a term of 99 years unless otherwise
terminated earlier in accordance with the terms of the Concession
Agreement
• The Company will invest an amount of up to USD 1,120.00 Million into
Hambantota Port and marine-related activities.
• The Company acquired 85% of the total issued share capital of HIPG and
58% of the total issued share capital of HIPS.
• SLPA to hold 15% of the shares of HIPG and 42% of the shares of HIPS
39

40. TRINCOMALEE PORT
40

41. TRINCOMALLE PORT
• Trincomalee Harbor is a Seaport In Trincomalee Bay .
• A Large Natural Harbor Situated On The North-East Coast Of Sri Lanka
• Its strategic importance has shaped its recent history.
• There have been many sea battles to control the harbor.
• The Portuguese, Dutch,and the English have each held it in turn.
• In 1942 the Japanese Imperial Navy attacked Trincomalee harbor and sunk
three British warship anchored there.
41

42. Recent Developments
• Recognising the recent economic growth in Sri Lanka and the increasing
demand for maritime shipment and enhanced regional connectivity, both
leaders reaffirmed the importance of open, transparent and commercial use
of port facilities under full Sri Lankan Government control.
• In this regard, they welcomed the grant aid totaling one billion yen, for
which Notes were exchanged today, aiming at providing facilities for
improved management of the Port of Trincomalee in the Eastern Province
• Japan-Sri Lanka Summit Meeting Joint Statement –Deepening and
Expansion of the Comprehensive Partnership between Japan and Sri Lanka-
12 April 2017
• H.E. Mr. Shinzo Abe, Prime Minister of Japan, and H.E. Mr. Ranil
Wickremesinghe, Prime Minister of the Democratic Socialist Republic of Sri
Lanka, in Tokyo
• http://www.mofa.go.jp/files/000249616.pdf 42

43. Recent Developments- Trincomalee upper oil tank farm.
• Prime Minister Ranil Wickremesinghe has mandated the setting up of a
committee to negotiate with India the development of the Trincomalee
upper oil tank farm.
• India and Sri Lanka signed a Memorandum of Understanding with a
commitment, among other things, to develop the upper tank farm in
Trincomalee in a joint venture between the Indian Oil Corporation (IOC)
and the Ceylon Petroleum Corporation (CPC).
• Among the areas to be explored is the CPC’s shareholding in the joint
venture company and the investment each party will make
43

44. AAGC and Sri Lanka
• April 2017 saw India and Sri Lanka sign a ‘Memorandum of Understanding
[MoU] for cooperation in economic projects..
• The MoU lists a host of projects to work towards, with the spotlight on a
proposed joint venture to develop the World War II-era oil storage facility
in Trincomalee.
• In September 2017, Tokyo initiated trilateral discussions with New Delhi
and Colombo on the joint development of Trincomalee, potentially adding
Japanese expertise in mass projects to the northeastern hub.
• India and Japan have also received a letter of intent from the government of
Sri Lanka to jointly build the country’s first liquefied natural gas (LNG)
terminal near Colombo
• (http://georgetownsecuritystudiesreview.org/2017/10/11/sri-lanka-battleground-
for-an-asian-power-imbroglio/
44

45. The Asia Africa Growth Corridor - AAGC
45
(https://www.silkroadbriefing.com/news/2017/09/05/japan-india-propose-asia-africa-growth-corridor-alt-obor/)

46. Vision and Strategy for Selected Sector
• Expansion of Bandaranaike International Airport
• A project was under taken to expand the island's first international airport
at Katunayake, 35 km north of Colombo.
• Under the project the expansion were effected to the transit area,
construction of new baggage-reclaim area and widening of the existing
runway.
• A feasibility study is being carried out for a second runway.
46

47. Vision and Strategy for Selected Sector
• A Second International Airport at Mattala
47
https://lanka.com/transport/information/rajapaksa-international-airport-mattala/

48. MATTALA AIRPORT
• The construction of the new international airport at Mattala in the southern
Hambantota district was carried in two phases.
• The first phase was completed and opened on 18th March 2013.
• The Runaway and a taxi way will be expanded in the second stage to allow
for larger planes, including the latest airbus A380 to land.
• This air port will open up the vast southern and eastern areas of Sri Lanka
for development including tourism projects.
• The airport is in close proximity to the Hambantota port.
48

49. Recent Developments
• The Government of India (GOI) has expressed interest in developing the
Mattala Rajapaksa International Airport (MRIA).
• A joint venture company between GOI or its assigned entity and Government of
Sri Lanka (GOSL) or its assigned entity for the operation of MRIA on the basis
of sharing of equity at the ratio of 70:30 for 40 years”.
• The Indian have also shown interest to “operate, manage, maintain and develop
MRIA with and not limited to commercial aviation, aircraft maintenance repair
and overhaul, flying school, etc..”.
• Invest USD 205 million as their equity share and GOSL is to share the balance of
USD 88 million totaling to USD 293 million as per their valuation of assets of
MRIA.
• In December of 2016, the Government of Sri Lanka called for Expressions of
Interest (EOI) to develop the MRIA through a public-private partnership. Since
then, eight parties had sent in proposals for the project, one of them was the
Airport Authority of India. 49

50. Vision and Strategy for Selected Sector
• Development of High Mobility Road Network
• The National Road Master Plan.
• Major Road Development:
– Colombo - Katunayake Expressway - CKE (25km)
– Southern Highway (126km)
– Outer Circular Highway - OCH (29.2km)
– Central Expressway Colombo - Kandy Highway (99km)
– Source-
http://www.investsrilanka.com/why_sri_lanka/developed_infrastructure
50

51. Vision 2025 and PPP
• Encourage Public-Private Partnerships (PPPs).
• Support PPPs as a means of reducing reliance on loan agreements in the
provision of public assets and services.
• Formulating a clear PPP policy with a well-defined legal, regulatory and
institutional framework to attract private players with the requisite
capacities.
• Potential areas for expanding PPPs include health care, leisure, tourism,
education, ports and aviation.
• Prioritise expanding opportunities for alternate financing, including
securitization, to support PPP programmes
51

52. 2025 and PPP
• The Government will encourage the Build-Operate-Transfer model in small
to medium scale infrastructure projects across the country.
• Sri Lanka’s strategic location makes it a naturally strong logistical hub.
• Using PPPs, the Government will expand port infrastructure and related
services, including the East and the West Terminals at Colombo port.
• This will capture the growing transshipment trade across production
networks in the East and markets in the West.
• The implementation of a Single Window and a new Customs Act will make
this sector more efficient through digitalization
•
52

53. Vision and Strategy for Selected Sector
• Maritime Sector
• Expansion of existing international sea port & establishment of new ones
• Construction of new terminals
• Developing skills required for maritime industries
• Supporting logistic establishments
• Ship building and repairing industries
• Developing minor ports & connectivity
• Expanding related leisure activities
• Further research on exploring sea bed potential
• Marine support industries
• Rigging & offshore engineering
• Supply of spares, food, water and other goods
• Bunkering service
• Maintenance services
• Transshipments service
53

54. Vision and Strategy for Selected Sector
• Aviation Sector
• Expansion of existing international air port and establishment of new ones
• Improving aviation services to become a “location for aviation services”
• Improving airport facilities to become a good destination as well as a good
transit point.
• Infrastructure Sector
• Development of road net work including highways, expressways and
railways,
• Housing, Shopping malls and urban development
• Water supply and sanitation,
• Establishment of industrial zones,
• Warehousing and logistic centers etc.
54

55. OVERVIEW OF CURRENT FDI PRJECTS
PURPORSES AND OUTPUTS
• PAST AND CURRENT PPP PROJECT EXPERIENCE
• Sri Lanka has a long history of implementing PPPs in their development of
infrastructure.
• Between 1990 and 2014 Sri Lanka entered into 73 PPP projects with a total
investment of over $ 6 billion.
• Source- The World Bank Private Participation in Infrastructure Database
• REPORT ON SRI LANKA’S CURRENT PPP ENVIRONMENT AND
RECOMMENDATIONS FOR FUTURE PPP STRATEGY Leadership in Public
Financial Management II (LPFM II)
• http://pdf.usaid.gov/pdf_docs/PA00MB6R.pdf
55

56. OVERVIEW OF CURRENT FDI PROJECTS
PURPORSES AND OUTPUTS IN RELATION TO TARGET
SECTOR
56
REPORT ON SRI LANKA’S CURRENT PPP ENVIRONMENT AND RECOMMENDATIONS FOR FUTURE PPP
STRATEGY Leadership in Public Financial Management II (LPFM II)
http://pdf.usaid.gov/pdf_docs/PA00MB6R.pdf

57. PORTS AND AIRPORTS - OUTPUT
• The third and eighth largest PPP projects that came to financial close were
the 35-year Colombo South Container Terminal and the 30-year Colombo
Port projects.
• The equity investors included multinational companies.
• The Colombo South Container Terminal was awarded based on “lowest
cost of construction or operation”.
• The contract was signed in 2012 and the primary equity investors were
Aitken Spence & Company Ltd with 30 percent ownership and China
Harbor Engineering Company Ltd with 55 percent ownership.
• The Colombo Port project reached financial closure in 1999, with the AP
Moller – Maersk Group owning 33 percent and John Keels Holding Ltd.
owning 43 percent of the project.

58. Some of the Proposals under FDI Target
Sector
58
The Ministry of Megapolis & Western Region Development has a robust
infrastructure project pipeline.
The listed projects are identified to be implemented as PPP’s.

59. Present Promotion Procedure
• Sri Lanka has a long history of implementing PPPs in their
development of infrastructure.
• Between 1990 and 2014 Sri Lanka entered into 73 PPP projects
with a total investment of over $ 6 billion
• No PPP Legislation or Regulations in Operation.
• Established Detailed Guidelines and Procedure
• Guidelines on Government Tender Procedure
Revised Edition of January 1998
Part II for Private Sector Infrastructure Projects
(BOO/BOT/BOOT Projects)
59

60. Present Promotion Procedure
• CHAPTER XIV
• BOO/BOT/BOOT PROJECTS
• 225. Introduction:
• Infrastructure projects which are not identified to be financed under
the Consolidated Fund, may be identified to be financed/developed
by private investors.
• Projects financed by the private sector will be considered on a Build,
Own and Operate, Build, Own and Transfer, Build, Own, Operate
and Transfer (BOO/BOT/BOOT)* and other variants would be
built, owned and operated by the investor or transferred or leased
to the public sector after a concession period.
60

61. Present Promotion Procedure
• 226. Co-ordination:
• Previous Position
• The Bureau of Infrastructure Investment (BII) of the Board of Investment of
Sri Lanka (BOI) will function as the promoting, facilitating and
co-ordinating agency for servicing the Line Ministries/Line Agencies under
the overall supervision of the Ministry of Finance.
• Present Position
• The National Agency for Public Private Partnership
• Mandate
– Identify suitable projects based on feasibility studies and to maintain a
project pipeline in consultation with the relevant ministries.
61

62. Present Promotion Procedure
• 229. Infrastructure Projects
• Infrastructure Development Projects managed by the Private Sector on
Build- Own-Operate (BOO), Build-Own-Transfer (BOT) or other variant
basis, which will be wholly or partly implemented by the private sector
include, but are not limited to:
• Power plants - Solid waste management
• Highways - Warehouses, housing, markets
• Ports - Other economic infrastructure
• Airports - Land reclamation
• Telecommunications
• Railways
• Transport systems
• Industrial parks
• Water supply and drainage
62

63. Present Promotion Procedure
• Supplement – 30
• Reference 237 – Dealing with Unsolicited Project Proposals
Issue Date: 26.12.2016
• Introduced the “Swiss Challenge” Procedure on Unsolicited
Proposals
• Unsolicited Proposal - A proposal presented by a private proponent on his own
initiative without tenders being called by the Government.
• PPP Contract in Sri Lanka currently serves as the legally-binding document
for all PPP projects
63

64. Present Promotion Procedure
• Introduction
• Since funding available from the Consolidated Fund and the capacity of the
public sector to implement the increasing number of infrastructure projects
is limited, the Government of Sri Lanka is considering obtaining of funds
from alternative sources while ensuring an efficient infrastructure service
delivery and maximizing value for money.
• When dealing with unsolicited proposals presented by private proponents
on their own initiative without tenders being called by the Government ,
(“Unsolicited Proposals”), such Unsolicited Proposals should be dealt in
accordance with the “Swiss Challenge” procurement method.
• The Government agency will publish a Request for Proposals (“RFP”) and
invite counter proposals from interested parties on development projects or
services.
64

65. 3 LEGAL FRAMEWORK
• Public Law
– Constitutional Law
– International Treaties and Agreements.
– Article 157. Where Parliament by resolution, approves, any Treaty or
Agreement between the Government of Sri Lanka and the Government
of any foreign State for the promotion and protection of the investments
in Sri Lanka of such foreign State, its nationals, or of corporations,
companies and other associations incorporated or constituted under its
laws, such Treaty or Agreement shall have the force of law in Sri
Lanka..
65

66. Public Law
– Administrative Law
– Board of Investment of Sri Lanka Law, No. 4 of 1978
– Sri Lanka Export Development Act (No. 40 of 1979)
– Strategic Development Projects Act, No. 14 of 2008
– Foreign Exchange Act No 12 - 2017
– Banking Act No 30 of 1988
– Securities and Exchange Commission of Sri Lanka Act No. 36 of 1987
– Takeovers and Mergers Code of 1995 (revised in 2003)
– Finance Act No. 12 of 2012
– The Inland Revenue Act, No. 10 of 2006
– The Customs Ordinance (Chapter 235)
– Land Acquisition Act.
– Sri Lanka National Involuntary Resettlement Policy of 2001
– National Policy on Payment of Compensation (NPPC)
66

67. Contd …
• Land Acquisition Regulations of 2008 (LA Regulations 2008)
• National Environmental Act of 1980 and amendments
67

68. Social Laws
– National Environmental Act No. 47 of 1980
– Regulations on Environment Protection, Air Quality, Noise,
– Waste Management and EIA Regulations,
– Sri Lanka Sustainable Energy Authority. Act, No. 35 of 2007
– Marine Pollution Prevention Act No: 35 of 2008
– Coast Conservation Act No 35 of 2008
– Industrial Disputes Act, No.43 of 1950
– Sri Lanka Health Board Services Act No 3 of 1977
– Termination of Employment of Workmen (Special Provisions) Act,
No.45 of 1971
– Payment of Gratuity Act No 12 of 1983
– Employees Provident Fund Act No.15 of 1958
– Employees Trust Fund Act No. 46 of 1980.
– Workmen's Compensation (Amendment) Act, No. 15 of 1990
– Right to Information Act No 12 of 2016
68

69. Private Laws
– Sri Lanka Companies Act No 7 of 2007
– Sri Lankan Arbitration Act No 11 of 1995
– Sri Lanka. Intellectual Property Act No. 36 of 2003
– Unfair Contract Terms Act No. 26 of 1997
– Consumer Protection Act No.01 of 1979
69

70. 4 SWOT Analysis
• Strengths
– Strong Resilient Economy
– Location and Connectivity
– Vibrant Business Environment
– Supportive Government Policies
– Sound Legal System with Predictability
– Access to Key Markets
– Member of WTO
– Investment Protection and Double Taxation Treaties
– Commercial law based on English law
– Educated and Adaptable Workforce
– Fast Developing Infrastructure
– Quality of Life
– Social Infrastructure
70

71. SWOT Analysis
• Weaknesses
– Absence of a specific PPP Legal Frame Work
– ESG Issues
– Attracting FDI
– Institutional Weaknesses
71

72. SWOT Analysis
• Opportunities
– Strategic Location
– Access to Key Markets,
– GSP +
– FTA with India and Pakistan,
– FTA negotiations with India and China and Singapore
72

73. SWOT Analysis
• Threats
• Public Protests on Land Acquisitions
73

74. 5 The Challenge
• To develop Sri Lanka as a leading regional
aviation, navigation and trading hub by
expanding the capacity and improving the
efficiency of existing ports through
modernization and construction of new ports
and airports in strategic locations through PPP.
74

75. Challenges
– Formulate Clear Guidelines until specific PPP Legal Frame Work is
Enacted
– ESG Issues
– Identify and Encourage Related Sector Developments and develop
same with SME and FDI
– Increase FDI attractions by Improvement to the Business environment
and the Doing Business Rankings
75

76. Challenge 1 - ACTION PLAN
• Prepare detailed PPP Guidelines and Structure
• Areas of Importance
– Technical Parameters - -- Construction
– Concession Period -- Operations and Maintenance
– Concessionaire Rights and Obligations -- Right for Substitution
– Government Rights and Obligations -- Force Majeure:
– Concession Fee -- Termination
– Risk-Benefit Allocation: -- Monitoring and Supervision
– Project Implementation - -- Dispute Resolution:
– Government Support and Guarantees
– User Fee:
76

77. Factors to be Noted in Formulation of a
National Policy on PPP
• Technical Parameters:
• Only the core minimum requirements of design, construction, and
investment of the project should be identified giving flexibility to innovate
and add value.
• The desired technical aspects, capacity, level of services, and required
output of the facility should be clearly specified in the technical bid
including a clear calendar that establishes the desired milestones.
• Localization to be included as a necessary component and to require the
investor to submit a detailed schedule in relation to Localization and
exchange/transfer of knowledge.
77

78. Factors to be Noted in Formulation of a
National Policy on PPP
• Concession Period:
• The time required to recoup the investment in the project should be
considered in formulating the applicable Concession Period .
• Based upon Sunset Policy
• Continuation of incentives to depend on the outcome of the results.
• All incentives should be introduced with a “sunset clause” mentioning that
the given incentives will expire at a specified certain date
• Discretion to be retained with the Government to extended, extend subject
to conditions or based on a positive evaluation of past effects.
78

79. Factors to be Noted in Formulation of a
National Policy on PPP
• Concession Fee:
• Must be clearly calculated and stated in the concession contract.
• The concession fee formula to be dependent and decided on a case by case
basis based upon the specific circumstances and government objectives of
each project.
• The concession fee formula should necessarily consider :
– i) promote productive investments;
– ii) maximize profits for the PPP partners
79

80. Factors to be Noted in Formulation of a
National Policy on PPP
• Risk-Benefit Allocation:
• Risks and benefits should be allocated to the party best suited to manage
them.
• echnical risks with respect to construction, operations, maintenance, and
traffic development are allocated to the concessionaire.
• In most cases, commercial risks and benefits, such as development of
commercial revenues, are allocated to the concessionaire as the party with
the greatest capacity to maximize such revenues.
80

81. Factors to be Noted in Formulation of a
National Policy on PPP
• Project Implementation:
• An agreed timeframe to be included in the concession contract.
• Adherence to the time schedule will assist in bringing about significant
reductions in costs and the timely provision of the infrastructure being
constructed.
• "Engineering, Procurement, and Construction" (EPC) to be utilized at the
initial stage
• Localization to be considered as far as practical
81

82. Factors to be Noted in Formulation of a
National Policy on PPP
• Government Support and Guarantees:
• An undertaking to fulfill the obligations of a third party in the event of a
default.
• Guarantees or other credit enhancements.
• Capital Contribution
• Protection of revenue shortfall
• Repayment sources for PPP projects can come entirely from service tariffs
or user charges, or from Government budgets, or a combination of both
• VGF – Viability Gap Funding
• Supports and guarantees to provide or facilitate considered as key
elements necessary for the success of the concession project,
82

83. Factors to be Noted in Formulation of a
National Policy on PPP
• IMPORTANT
• It is essential that Guarantees, and other
contingent liabilities related to a PPP to be
developed in consultation with the
Treasury and Attorney General and then
be approved by the Cabinet of Ministers.
83

84. Factors to be Noted in Formulation of a
National Policy on PPP
• Operations and Maintenance:
• To be governed by strict standards to ensure a high level of service to users.
• Violations should receive penalties, and such penalties should be stated in
the Contract.
• Localization
• Training and Transfer of knowledge
• Systematic plan to Transfer Operations and Maintenance.
84

85. Factors to be Noted in Formulation of a
National Policy on PPP
• Force Majeure:
• Necessary in order to provide protection to the concessionaire against
political actions that may have serious adverse effects on the project.
• Termination:
• The Contract should have provisions for the termination of the contract or
for a compulsory buy-out by the Contracting Authority to specify that the
concessionaire may not use the public assets to recover its investments.
• A penalty to the concessionaire for termination of the contract should be
included in the contract to discourage early termination.
• In the event of termination, the government is obligated to replace the
concessionaire to ensure that the project continues to operate, services
continue to be provided, and that existing debt continues to be repaid.
85

86. Factors to be Noted in Formulation of a
National Policy on PPP
• Monitoring and Supervision:
• The Contract should have provisions that allow the government to
intervene only in the event of concessionaire default or national interest.
The Contract should also make provisions for an Independent
• Dispute Resolution:
• An effective dispute resolution mechanism is important and must be
contained in the Contract.
• The Contract must also address issues relating to suspension of rights,
change in law, insurance and defects liability, indemnity, redress of public
grievances, and disclosure of project documents, among others.
86

87. Challenge 2 ESG Issues Action Plan
• Amend the Land Acquisition Act
• Social Impact Assessment (SIA) to be made Mandatory and Separate
• Simplify the Land Acquisition process and the payment of Compensation
• Introduce legislation on Involuntary Resettlement based upon the
Sri Lanka National Involuntary Resettlement Policy of 2001.
• Introduce more attractive compensation packages for Land Acquisition.
87

88. Challenge 3 -Identify and Encourage
Sector Developments
• Though SME and FDI
• Warehouse Business Development
• Bonded Operations
• Supporting logistic Establishments
• Ship building and repairing industries
• Marine support industries
• Rigging & offshore engineering
• Bunkering service
• Maintenance services
• Transshipments service
• Localization to be considered
88

89. Challenge 4 -Increase FDI attractions by
Improvements to Doing Business Rankings
• One Stop Shop for Investment
• Single Window for new business registration that brings together 20+
Government agencies to streamline procedures and improve the investment
climate.
• Customs E Clearance Scheme
• Introduction of New Business related Legislations
• Finalization of FTA’s with India, China and Singapore.
• Clarify and reform investment incentive policies to improve investment
policy predictability.
• Ensure policy coherence and consistency
• Leverage the resumption of duty free access to Europe through GSP+ to
over 6,000 products, and negotiate expanded market access for the post
GSP+ era.
89

90. We Will Succeed
90

91. Thank You !!!
91

92. DISCLAIMER
• The views and opinions expressed in this PPP are those of the author and
do not reflect the official policy or position of any agency or that of the
government.
• All Rights Reserved.
No part of this may be reproduced, stored in a retrieval system, or
transmitted, in any form or by any means, electronic, mechanical,
photocopying, recording, or otherwise, without the prior written
permission of the Author.
• rajitha999@yahoo.com
• 2017.11.0
92