Nov 27, 2015 (LBO) – Sri Lanka’s plans to set up an international financial district bodes well for financial sector development and should be set up with the right talent in place, experts said.
“We have talked about this for many years, but this is a budget where we have heard for the first time a policy to create a Dubai Financial Centre type financial hub,” Ravi Abeysuriya, the chief executive of the Candor group of companies, said approving of the policy.
In the budget proposals for 2016, plans were announced for a specific zone along the lines of the Dubai International Financial Centre and other off-shore centres in the world.
The zone will cover a 300,000 square foot area in DR Wijewardena Mawatha in Colombo, where a facility will be constructed.
Such centres are usually low-tax jurisdictions that provide corporate and commercial services to non-resident companies. They require separate legislation and tax statutes.
The Colombo International Financial Centre will have its own commercial court for resolution of commercial disputes in line with financial centre regulatory requirements, the budget proposals said.
According to experts, low-tax jurisdictions are not the same as tax havens and attract significant international financial flows.
Despite concerns about money laundering and financing of terrorist groups, offshore financial centres have been the subject of scrutiny by groups such as the Financial Action Task Force, set up by the G-7 in 1989, which has membership of 36 countries.
A significant draw is for private equity firms to set up operations and benefit from low taxation.
Almost 30 percent of foreign direct investment into India last year was channeled through Mauritius due to the low tax regime in Mauritius.
“The challenge will be to get the right sort of talent to be there,” Rajendra Theagarajah, chief executive officer of NDB said.
“The intent is good, but we have to be fair in terms of the expectations until the building blocks are in place,” he said.
Malaysia’s Labuan International Business and Financial Centre advertises as a midshore solution offering client confidentiality and compliance with international best standards.
Mumbai and Kuala Lumpur both have plans to set up international financial districts.
“Its a place for trading offices, booking locations where you book your margins here, it is not an unusual thing,” Theagarajah said.