*Colombo, Hambantota ports declared Free Ports: Duty-free zone to attract FDI, boost hub status
July 30, 2013, 7:45 pmThe Ministry of Finance and Planning has declared the ports at Colombo and Hambantota as Free Ports and the export processing zones at Katunayake, Koggala, and Mattala Rajapaksa International Air Port as bonded areas in a bid to attract more foreign direct investment.
Rohan Masakorala, CEO Shippers’ Academy Colombo and Immediate Past Secretary General of the Asian Shippers’ Council, said the decision to make Colombo and Hambantota Free Ports was a ‘very good move’. "This has been in the pipeline for some time and would give Sri Lanka a better chance of developing into a regional logistical hub and attract more foreign direct investment".
"A Free Port is a 100 percent duty-free area and encourages international companies to set up operations and trade with each other freely outside the sphere of Customs regulations and procedures. This does not mean that the government would lose trade related taxes because domestic trade would continue unchanged. A free port would encourage foreign direct investments," he said speaking to The Island Financial Review.
"Domestic exporters and importers can make use of the free ports to their advantage as well by making use of storage facilities. There would also be scope for value addition for our exports and this move should give them a lot of confidence. Free ports would help us boost transshipments to India and make better use of free trade agreements.
"The port cities of Dubai and Singapore have thrived on the free port concept and with costs rising in these destinations, Sri Lanka has better prospects of exploiting its strategic location and attracting more international trade," Masakorala said.
According to the Treasury, businesses setting up operations in the free port with a minimum 65 percent of investments from foreign sources will be regulated under the Finance Act—Commercial Hub Regulation No. 1 of 2013.
"The enterprises which will be benefitted from this arrangement will be entreport trade involving import, minor processing and re-export, off – shore business where goods can be procured from one country or manufactured in one country and shipped to another country without bringing them to Sri Lanka. Provision of front end services to clients abroad, operations of the headquarters of the leading buyers, logistic services are also will be covered by the regulations gazetted as Commercial Hub Regulations No 1 of 2013," the Treasury said in a statement yesterday.
"The minimum investment of a new enterprise which is engaged in business activities mentioned aboveshould be US$5 million. These companies are expected to achieve an annual re- exportturnover of not less than US$ 20 million over a period of five years. If the business is engaged in logistic services such as a bonded warehouse or in the cases of operation ofmulti country consolidation in Sri Lanka the minimum investment will be US$ 3 million.
The movement of goods to and from a Free Port is subjected to the CustomsOrdinance and Imports and Exports Control Act. The country of origin certificateissued by the Department of Commerce will be made available for enterprises located in the free ports or bonded areas. These regulations are expected to bring revolutionary changes to the trade and investment policies of the country. As outlined in the Mahinda Chinthana policy frame work these measures will open up new avenues for Sri Lanka to connect with the other world economies and attain a higher growth rate by deploying more and more foreign investments," the Treasury said.
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