China Withdraws From $392m Sri Lanka Port Logistics Project

A Chinese state-owned company, China Merchants Port Holdings, has withdrawn from a proposed $392 million joint venture to develop a major logistics hub at Colombo Port, Sri Lanka’s main seaport. The Sri Lanka Ports Authority (SLPA) announced on Monday that the project, first unveiled in 2023, would proceed despite the company’s decision not to continue with the partnership. In a statement, the authority said the decision followed an assessment of external circumstances, commercial considerations and the interests of the shareholders. Under the original agreement, China Merchants was expected to own 70 per cent of the venture, while the SLPA and a Sri Lankan private construction company would each hold 15 per cent. The authority is now seeking a new investor for the proposed 150,000-square-metre logistics hub. China Merchants also informed the Hong Kong stock exchange on Friday that terminating the project would be in the parties’ best interests.

The Chinese company’s proposed investment, agreed in April 2023, was the first major foreign investment announced after Sri Lanka’s economic collapse in April 2022. China Merchants already operates a $500 million deep-water container terminal at Colombo Port and manages the Hambantota deep-water port complex on the country’s southern coast. Hambantota was developed under former president Mahinda Rajapaksa, who governed from 2005 to 2015, and became controversial after Sri Lanka, unable to repay a major Chinese loan taken in 2017 for its construction, transferred the port to China Merchants for $1.12 billion under a 99-year lease. Critics have argued that Chinese-funded projects contributed to the country’s debt problems. China has also invested $1.4 billion in the Port City Colombo real-estate development beside the main port, while India and the United States have raised concerns that China’s access to Sri Lankan ports could provide it with a strategic naval advantage in the Indian Ocean.

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