In a groundbreaking move, the Securities and Exchange Commission (SEC) has given its approval to a regulatory framework aimed at facilitating the issuance and listing of Infrastructure Bonds on the Colombo Stock Exchange (CSE). This pivotal decision by the SEC is intended to stimulate both foreign and local investments in infrastructure projects, contributing significantly to the economic development and overall well-being of the country.
Emphasizing the essential role of Infrastructure Bonds in raising capital for crucial projects such as roads, rail, water management, waste management systems, airports, seaports, mixed development projects, natural disaster protection systems, deep water ports, gas supply systems, utility projects, and telecommunications infrastructure, among others, the SEC underscores their integral role in fostering economic growth and sustainability. Recognizing the necessity for Sri Lanka to establish a market for Infrastructure Bonds and raise long-term capital for infrastructure projects, the SEC highlights the importance of this initiative.
In an official statement, the SEC notes that the scope of infrastructure development in emerging economies has evolved significantly, encompassing traditional projects like power, oil and gas, and water, as well as low-carbon, climate-resilient infrastructure such as renewable energy projects. The SEC’s decision is backed by a comprehensive study of comparable jurisdictions that successfully employed Infrastructure Bonds to finance major development projects.
As part of its Capital Market Reforms Agenda, comprising 12 Key Areas for action, the SEC aims to enhance development, transparency, and investor confidence in the capital market. The introduction of infrastructure financing products is strategically designed to propel the capital market to new heights, contributing significantly to its growth and sustainability. The CSE is expected to actively promote this product among potential issuers.
The regulatory framework for Infrastructure Bonds includes provisions ensuring investor protection, stringent due diligence, disclosure, and reporting requirements for issuers. This ensures that investors are kept informed about the performance of infrastructure projects, utilization of proceeds, risk factors, and enforcement procedures for non-compliance with the regulatory framework.
Disclosure requirements mandate details about the project in which the capital is deployed, progress updates on meeting core objectives, benefits to the public, and any deviations in the use or allocation of capital proceeds. The SEC’s initiative reflects its commitment to creating an enabling environment for long-term investments in infrastructure projects, supporting the nation’s economic growth and development.
Mr. Faizal Salieh, Chairman of SEC, stated, “The misallocation of capital is a root cause of our economic crisis. It is our objective to enable instruments that can raise long-term capital for development projects and provide investor assurance that such capital is allocated to the project’s stated purpose with transparency and accountability. We have now created an opportunity for Government bodies such as Municipal Councils, Urban Councils, Local Government Councils, the Urban Development Authority, etc., and even large private sector companies to finance infrastructure projects through these bonds.”
