Colombo, April 10

Sri Lanka will bring legal reforms to encourage much needed foreign investment, as the cash-strapped island tries to turn its $8 billion Chinese debt into equity, prime minister said today.

Ranil Wickremesinghe, who returned home today after a three-day visit to China, said streamlined regulations and a free trade agreement would be in place to increase economic ties with Beijing.

“The Chinese are interested (in investing) and are awaiting our (new) laws,” Wickremesinghe said, adding that he was hoping to unveil an economic master plan with a regulatory framework by June.

He said Chinese would be offered equity stakes in loss-making projects — a second international airport and a deep sea port — commissioned by former president Mahinda Rajapakse.

“We are setting aside an area of 1,000 acres as special investment zone for Chinese firms to set up operations in Hambantota,” prime minister said, referring to area where white elephant projects are located.

The two ports could be viable for big logistics companies, Wickremesinghe said.

He played down a controversy over a $1.4 billion land reclamation project in Colombo known as Port City, which is being built by a Chinese company.

The state-owned Chinese firm had demanded $125 million as compensation for suspending work soon after President Maithripala Sirisena came to power in January last year.