SRI Lanka on Tuesday granted Chinese companies a separate economic zone on the island which has just ended nearly four decades of ethnic bloodshed.

China's Huichen Investment Holdings Limited will manage and bring new investments into the Mirigama zone, some 55 kilometres north of Colombo, for a period of 33 years, officials said. 

Over the next three-years, Huichen will invest US$28 million (S$40.5 million) to develop roads, power and sewerage facilities in the zone, said Investment Promotions Minister Anura Priyadharshana Yapa. 

'This is the first time the government has given a foreign country a specific area to develop and attract foreign investments into the country,' Mr Yapa told reporters. 

Huichen's president, Mr Huang Yuping, said nearly 30 Chinese firms involved in manufacturing and IT-related services had shown interest in setting up operations at the Mirigama zone. 

With the end of its long-running war with ethnic Tamil Tiger rebels, Sri Lanka has set its sights on attracting US$1 billion in foreign investment this year, Mr Yapa said. 

China is an increasingly key military and political ally. 

Beijing helped block a resolution censuring Sri Lanka for its handling of the final stages of the war against Tamil Tigers last month and is a main supplier of small arms to the South Asian nation.