Colombo, Oct. 20 (Daily Mirror) - Sri Lankan observers see geopolitical influence, among others, behind the withdrawal of China Merchants Port Holdings from a $392 million joint venture to develop a major logistics hub at Sri Lanka’s main seaport in Colombo, which is a leading transhipment hub in the region.
Director of BRISL (Belt and Road Initiative Sri Lanka) Maya Majueran says the withdrawal of China Merchants Port from the South Asia Commercial and Logistics Hub is unfortunate for Sri Lanka, but it would be a mistake to attribute it to any single cause.
The evidence points to a cumulative risk stack that made the project unviable, he said.
However, he said that three factors converged in this instance.
“First, geopolitical pressure: India and the U.S. have consistently viewed Chinese involvement in Colombo's logistics infrastructure with concern, raising the political cost of proceeding. Second, the government's decision to shorten the tax break period, driven partly by IMF fiscal consolidation, materially reduced the project's financial return for a long-payback logistics facility. Third, slow approval procedures, including land disputes, court challenges, and inter-agency delays, raised execution risk and the cost of capital,” he said.
BRISL is an education and consulting platform that specialises in cultural, business and technological cooperation under the BRI.
The Sri Lanka Ports Authority said the decision followed an assessment of external circumstances and commercial considerations, adding that the project would continue.
The company cited changes in external circumstances, including shifts in the project’s implementation environment and timetable, as well as each party’s commercial considerations. After reassessing the project, it concluded that termination was in the best interests of all sides.
According to the project company’s audited accounts as of Dec. 31, 2025, the shareholders had contributed $37.14 million (about Rs. 12.3 billion) in cash. Fortune Centre Group, a wholly owned China Merchants subsidiary registered in the British Virgin Islands, put in $26 million (about Rs. 8.6 billion). The Sri Lanka Ports Authority and Access Engineering, a Colombo-listed construction company, each contributed $5.57 million (about Rs. 1.84 billion).
Under the settlement, the ports authority agreed that the $26 million is payable back to the shareholders, after deductions for tax and late-payment liabilities. Those deductions include a $3.9 million (about Rs. 1.29 billion) value-added tax bill that the authority has already paid. The authority will pay the remaining $21.905 million (about Rs. 7.25 billion) as a lump sum within 30 days of the agreement.
The authority will pool that payment with about $7.85 million (about Rs. 2.6 billion) in cash left in the project company and divide it according to ownership. The China Merchants subsidiary will receive about $20.83 million (about Rs. 6.89 billion). Access Engineering and the ports authority will each receive about $4.46 million (about Rs. 1.48 billion). Each shareholder will recover roughly 80 per cent of what it put in.
China Merchants already operates a $500 million deep-water container terminal. The company also operates the Hambantota Port.
However, withdrawal does not bode well for Sri Lanka’s investment climate at a time when the country is starved for FDI (Foreign Direct Investment).