Sri Lanka’s Colombo Port To Develop New Logistics Hub After Chinese Firm’s Exit

Sri Lanka’s Ports Authority (SLPA) will develop a new logistics hub at the Port of Colombo through a public-private partnership (PPP) model, following the cancellation of a major Chinese-backed project, the authority announced on Monday, October 19.

The decision follows the withdrawal of Hong Kong-listed China Merchants Port Holdings (CMPH) from the proposed South Asia Commercial and Logistics Hub (SACLH). The project was initially announced in 2023, with reports citing an investment of USD 392 million. However, the SLPA’s latest statement puts the earlier project’s planned investment at approximately USD 280 million, with a proposed floor area of 150,000 square metres.

China Merchants held a 70 per cent stake through its wholly owned subsidiary, Fortune Centre Group Limited. The SLPA and Sri Lankan engineering company Access Engineering PLC each held 15 per cent.

The project was designed as a major logistics complex under a 50-year build-operate-transfer arrangement, under which a private investor would develop and operate the facility before transferring it to the state. It was granted Strategic Development Project status in December 2023, making it eligible for tax concessions, including exemptions from corporate income tax and dividend taxes for 15 years.

However, changes in external circumstances, implementation arrangements and timelines, alongside commercial considerations, led the shareholders to abandon the venture. Reports also cited land and regulatory hurdles among the challenges that affected its progress.

The three shareholders had invested approximately USD 37.1 million. Under the settlement, the SLPA agreed to pay USD 21.905 million to the project company within 30 days. The venture also had around USD 7.85 million in distributable cash. The funds are to be allocated among shareholders according to their ownership stakes, subject to applicable deductions and expenses.

The partners will also take steps to wind up or deregister the project company.

The SLPA said the new facility would be developed through a competitive bidding process, subject to relevant approvals. The proposed hub aims to expand Colombo’s capabilities beyond container transshipment by supporting integrated and value-added logistics services.