Despite historical tensions between India and China, the China-backed Colombo Port City (CPC)—envisioned as a premier international financial and investment hub—is actively courting Indian investors.
The rationale is clear: the $1.1 billion project stands to gain immensely by integrating with India’s growth story, simultaneously boosting Sri Lanka’s economy.
Strategically located adjacent to downtown Colombo with a scenic waterfront, Port City Colombo is a state-of-the-art Special Economic Zone (SEZ) designed to blend business and leisure. Its prime positioning—646 km from Chennai, 1,525 km from Mumbai, and 2,395 km from New Delhi—makes it an ideal gateway for Indian businesses. Within a five-hour flight radius, CPC connects to over 1.7 billion people across South Asia, Southeast Asia, and the Middle East.
CPC leverages Sri Lanka’s free trade agreements with India, Singapore, and Thailand, covering a combined market of over $850 billion. Its time zone aligns with India and East Asia, enhancing operational efficiency. India-Sri Lanka economic ties are strong and supportive. India provided $4.5 billion in aid during Sri Lanka’s 2022–23 debt crisis. Recent MoUs on energy, defence, and trade further solidify bilateral relations.
There is cultural affinity between Indians and Sri Lankans. Sri Lanka and India both have a skilled talent pool, and geographic proximity make Sri Lanka a natural partner.
An encouraging fact is that the existing Indian Investments in Sri Lanka are substantial. Indian FDI in Sri Lanka reached $2.25 billion by 2023, spanning sectors like energy (Lanka IOC), telecom (Bharti Airtel), and hospitality (Taj Hotels). The Adani Group’s $700 million investment in the Western Terminal in the Colombo port, (adjacent to CPC) underscores confidence in Colombo’s port infrastructure.
The CPC offers attractive incentives for businesses. It offers tTax exemptions (up to 25 years), followed by a 50% reduction for the next decade and 0% personal income tax for foreign currency earners. It allows full foreign ownership, profit repatriation, and multi-year visas (5–10 years) for investors and employees.
Single-window clearance by the Colombo Port City Economic Commission (CPCEC) minimizes bureaucratic hurdles.
Key sectors for Indian investment
Sri Lanka aims for 3 million tourists in 2025, fueling demand for luxury residences, hotels, and serviced apartments. Indian developers like Oberoi Group and The Leela Palaces can capitalize on premium land parcels. With Sri Lanka targeting $5 billion in IT revenue, CPC is emerging as a regional tech hub—ideal for Indian startups and IT giants. Proximity to Colombo Port (South Asia’s busiest transshipment hub) makes CPC a strategic base for trade and financial services.
Catering to high-net-worth individuals (HNWIs), CPC’s Marina District and upcoming Luxury Yacht Marina offer lucrative retail and mixed-use development opportunities.
Designed as a green, pedestrian-friendly city, CPC includes 27 hectares of parks, international schools, and healthcare facilities—appealing to Indian families seeking premium living abroad.
However, despite CPC’s potential, India’s cautious stance on China may temper investor enthusiasm. Key concerns include: Ongoing border disputes between India and China; China’s support for Pakistan on cross-border terrorism; and Security apprehensions over Chinese telecom equipment. If India and China achieve a sustained détente, CPC could flourish, significantly benefiting both Sri Lanka and India’s economic trajectories.
Overall, Colombo Port City presents a unique opportunity for Indian investors to expand into a high-growth, business-friendly SEZ with unparalleled regional connectivity. With strong incentives, regulatory ease, and strategic advantages, CPC is poised to become a cornerstone of South Asia’s economic future—provided geopolitical dynamics remain favourable.