Cabinet green lights new laws for Financial City

Proposal by PM approved, ex-AG to work with in’tl law firm Baker and McKenzie
Financial Centre likely to be established at WTC before moving to Port City
New agreement with Chinese company to include financial zone


By Uditha Jayasinghe

Sri Lanka’s ambitious plans to build an International Financial Centre are growing apace, with Cabinet approving the drafting of new laws to establish and operate a Financial City, likely to be opened at the World Trade Centre before being moved to the Port City.

The International Financial Centre (IFC) or Financial City, as it is termed in the Cabinet paper submitted by Prime Minister Ranil Wickremesinghe, aims to create 15,000 jobs and build investment of 10% of GDP in the next five years.

“The Financial City objectives include creating a world class alternative financial services centre within the South Asian region to support growth of local and regional business, capture international funds available due to Brexit and native interest rates of European banks and establish best financial regulations and controls to ensure zero business failure,” the Cabinet paper said.

The Government will now obtain the services of with well-known law firm Baker & McKenzie to set up the IFC in Colombo. Headquartered in Chicago, Baker and McKenzie has been ranked the largest international law firm in the world, with 11,500 employees. It is ranked as one of the top three law firm in the world in terms of revenue with $2.43 billion in annual revenue in FY2014-2015.

In addition, former Attorney General Y. Wijayatilake will work with Baker & McKenzie to establish a legal framework and operations of the IFC and related legal aspects. These will include a Financial City Act, special development zone laws and separate laws covering banking, finance, and company law. Attention will also be paid to insolvency law, employment law and arbitrary mechanisms, according to the Cabinet paper seen by Daily FT.

To lead financial and investment operations, the Government has recruited Dr. Ranjan Sara as an Advisor to the Finance Ministry. He is to ensure financial coordination with international partners and lead investment and operational duties, the Cabinet paper noted.

This special legal framework will initially apply to an office space, likely to be rented at the World Trade Centre or nearby with relocation planned once the Port City is completed. Cabinet approval has been given to allocate Rs. 78 million to the National Policies and Economic Affairs Ministry under Wickremesinghe to cover initial costs for 2016. Such expenses include local legal, marketing and financial advisory costs as well as providing infrastructure for the IFC.

“We have already reached an agreement with the Chinese Government to establish the financial centre in a part of the Port City,” Cabinet Spokesman Dr. Rajitha Senaratne told reporters. A fresh agreement to be signed with the China Harbour Engineering Company (CHEC), likely later this month, will include an international financial zone the Government hopes will become home to global financial institutions in banking, finance, wealth management, equity funds and capital markets.

A financial centre is a location that is home to a cluster of nationally or internationally significant financial services providers such as banks, investment managers or stock exchanges. A prominent financial centre can be described as an international financial centre or a global financial centre and is often also a global city. An offshore financial centre is typically a smaller, low-tax jurisdiction that primarily serves non-residents.

International Financial Centres (IFCs)—such as London, New York, and Tokyo—are large international full-service centres with advanced settlement and payments systems, supporting large domestic economies, with deep and liquid markets where both the sources and uses of funds are diverse, and where legal and regulatory frameworks are adequate to safeguard the integrity of principal-agent relationships and supervisory functions.

In Asia, Singapore and Hong Kong have long been in competition to round off the top five financial centres in the world.

- See more at: http://www.ft.lk/article/560806/Cabinet-green-lights-new-laws-for-Financial-City#sthash.Ua4ANrXQ.dpuf