November 29, 2021

Why new Bill makes Colombo Port City a ‘Chinese Province’ in Sri Lanka

7 min read

By N. Sathiya Moorthy

Even as Sri Lanka, like much of the rest of the world, is plagued still by the COVID-19 pandemic, the nation’s energy is being sapped by the ongoing controversy over the Colombo Port City Economic Commission Bill presented to Parliament last week. Under the nation’s law, every new Bill has to be cleared by the Supreme Court before Parliament votes on it, and a five-Judge Bench, headed by Chief Justice Jayantha Jayasuriya, is seized of the matter, and the court’s observations are expected early on.

Along with the Hambantota Port Project, the Colombo Port City special economic zone (SEZ) became controversial at birth, both for Chinese involvement and the hyper-secrecy of the post-war government of the former President Mahinda Rajapaksa, now Prime Minister. Despite internal differences, the successor government of President Maithripala Sirisena and Prime Minister Ranil Wickremesinghe claimed to have sanitised the SEZ after the latter had declared its imminent cancellation if the combine won the presidency in 2015—which it did.

The new Bill has to be reviewed in this background. As it is becoming evident, various provisions of the Bill go against the spirit of existing laws, or judicial pronouncements, or the socio-political realities of the nation.

Provisions and departures

To begin with, the Bill provides for the setting up of a Colombo Port City (CPC) Commission of five or seven members, as a one-stop decision-maker on all matters SEZ. Given the depth and width of the provisions, it is unclear if the incumbent government will use it as a model code for new SEZs of the Rajapaksas in politics or if it would be accepted it if a future government were to extend similar facilities to nations other than China.

The powers of the CPC Commission include clearing individual applications for ‘authorised persons’ to do business in the Port City (or declining them), tax-breaks, customs, VAT, and other export-import concessions for investors, and also exceptions from casino and gaming laws, amongst others. No such investment protection and/or concessions are now available to domestic and foreign investors, who have been in the business longer and with greater commitment to the country.

Unlike existing norms, private auditors, and not the auditor-general, who is a constitutional authority, alone can oversee the SEZ accounts. For the same reasons, the CPC is out-of-bounds for Parliament and parliamentary panels. This again is a travesty of the existing laws and practices, what with the government being a partner with the Chinese promoter. The judiciary is being told to prioritise the SEZ cases, to make the foreign investors feel welcome and comfortable.

The Bill empowers the President—beginning with incumbent Gotabaya Rajapaksa—to nominate five of seven members to the Commission, to the complete exclusion of the ‘collective responsibility’ of the Cabinet and/or Parliament. Needless to say, the President also has the power to sack any member or members unilaterally and replace them (with more malleable individuals).

This is particularly unacceptable in a nation where the constant refrain of the civil society has been to reduce the exclusive powers of the Executive President, and make him/her accountable. Even when the current dispensation got Parliament to vote for the 20th Amendment, restoring the President’s powers—which was taken away by the previous regime’s 19th Amendment to the Constitution—incumbent Gotabaya was known to have given a commitment to his intransigent allies that he would reverse it all under the new Constitution; he had promised in his election manifesto. The 20-A also overturned a court ruling that (even) ‘dual citizens’ cannot become MPs, an impediment on their contesting the presidential polls.

Project welcomed but with apprehensions

Amongst the Opposition parties, the Samagi Jana Balawegaya (SJB) and its parent, United National Party (UNP), whose leaders were a part of the previous Wickremesinghe government, continue to welcome the CPC project, but are opposed to the Bill. Without naming China or any other nation, SJB founder and Leader of the Opposition, Sajith Premadasa, has said that the country ‘will become servile to foreigners’ if the Bill became law. Premadasa said that they would scuttle the ‘insidious tactic of the government’, which was ‘violating the Constitution in a blatant attempt to betray the sovereignty of the country’.

Even as the Supreme Court began hearing the case, SJB’s Opposition Chief Whip, Lakshman Kiriella, pointed out how 25 laws of Parliament would not apply to the Port City. He urged the government to amend the Bill to check against ‘money-laundering’ in the SEZ and to ensure that the SEZ would be overseen by parliamentary panels like the Committee on Public Enterprises (COPE) and Committee on Public Accounts (COPA).

Leader of the left-leaning Janatha Vimukthi Peramuna (JVP), Anura Kumara Dissanayake, who was the first to sound the bugle, as almost always, said that the Bill is tantamount to creating a ‘Chinese province’ in Sri Lanka. He wants a referendum, implying that the Bill soughts to alter the nation’s constitutional scheme.

The SJB, UNP, and JVP are also amongst the 12 petitioners before the Supreme Court, which also includes the independent Sri Lanka Bar Association (SLBA). Under the law, the government can present an amended Bill, based on the Supreme Court’s observation, to the Parliament or get it passed as is, if upheld without change.

Any court observation that the Bill needs to be cleared by the non-existing Provincial Councils (PC) can mean the fast-tracking of much-delayed PC polls. Alternatively, it can revive the intra-government discourse on trimming the PCs’ powers, as sought earlier by disparate elements within the ruling combine.

Ruling MP fears for life

For his part, Cabinet spokesman Keheliya Rambukwella is on record that the Government will follow the SC orders, as even otherwise it has little choice. Should the court rule that certain provisions of the Bill require a national referendum, the government may side-step the same, anticipating a ‘political reversal’, if not outright defeat, which the Rajapaksas can ill-afford at the moment.

However, senior minister, SLPP chairman and constitutional expert, G L Peiris, is confident as he says that the advocate-general (AG) had cleared the Bill in its entirety and implies that it faced no judicial hurdle, hence. But under the Constitution, the court, and not the AG, is the final arbiter.

As if responding to criticisms, especially those raised by ruling SLPP parliamentarian, Junior Minister, Wijeyadasa Rajapkshe and former Central Bank Governor Ajith Nivard Cabraal, said that the nation’s police will have jurisdiction over the SEZ, that Sri Lankans required no visa in the SEZ, and that they can work and will be paid in foreign currency. None of these are germane to the criticism.

 On similar notes was the much-anticipated statement by the Agriculture Minister Mahindananda Aluthugame that foreign powers were behind the Opposition’s anti-Bill campaigns. MP Wijeyadasa has since approached the Inspector-General of Police that he feared for his life after President Gotabaya berated him on phone, following his public criticism of the Bill at a news conference a day earlier.

However, counsel for the President’s Secretary, who is among the respondents as is the protocol has since told the Supreme Court that ‘certain amendments are possible’ and listed out some specifics. But the Bench pointed to other provisions which were more contentious than these.

Money-laundering haven

Incidentally, in the fortnight ahead of the presentation of the Bill to Parliament, President Gotabaya had told Chinese counterpart Xi Jinping that Sri Lanka wanted to learn from the Chinese Communist Party’s ‘governance experience’. Media reports also quoted President Xi telling President Gotabaya that China was ready to work with Sri Lanka. The two leaders agreed to strengthen bilateral ties and work towards post-pandemic economic recovery.

Expectedly, Chinese envoy Qi Zhenhong has said that along with Hambantota, Port City would become twin engines of growth for Sri Lankan economy. However, US Ambassador Alaina B. Teplitz went equally overboard, to declare that the SEZ could become a ‘money-laundering haven’. The truth seems to lie in between.

Ambassador Teplitz may have been peeved as the Gotabaya dispensation had gone back on the predecessor’s commitment on the Memorandum of Understanding (MoU) on the US $450-million US investments, which required fewer concessions than the SEZ. Neighbouring India, too, may have problems.

As may be recalled, the Gotabaya government had cancelled the tri-nation East Container Terminal (ECT) agreement of the predecessor, also involving Japan, citing ‘sovereignty-security’ protests by labour unions and Sinhala nationalists, led by some Buddhist monks. Both groups are now opposed to the SEZ Bill too but the government is going ahead with the same—and is also defending it all the way up to the Supreme Court.

Independent of the Bill’s fate, the government will have to convince the people that the SEZ would at least provide jobs and incomes to the local population, unlike Hambantota, where China alone stands to benefit. Even Opposition backers of the CPC project per se have not talked about its job-creation potential for locals, it not stopping exclusively with the Chinese. A lot will hence depend on the government’s willingness to honestly let other ‘foreigners’ too to invest in the CPC-SEZ. For, unlike China, investors from nations such as India and Japan, Singapore and Australia, the US and Europe, involve local suppliers and enterprises and also provide jobs and incomes to the locals.

(Sathiya Moorthy is Distinguished Fellow and Head of ORF’s Chennai Initiative.Sathiya Moorthy has worked with several newspapers in India, both in English and local languages. He was editorial advisor at a trilingual TV group in Sri Lanka and was based in Colombo, from October 2005 to March 2006.)

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