By: Staff Writer
October 22, Colombo (LNW): Minister Bimal Rathnayake’s explanation for the abandonment of the proposed Colombo Port logistics hub has shifted attention towards procedural concerns surrounding the project agreement. Yet the central question remains unanswered: how did a US$392 million infrastructure venture, launched with the promise of transforming Colombo into a regional logistics powerhouse, collapse before delivering its anticipated economic benefits?
The Minister of Ports has said the government opposed proceeding under an existing agreement to allocate 10 acres of strategically located port land between the East and West Container Terminals to a Chinese-backed logistics venture. Speaking in Parliament, he maintained that the government supported the investment but could not accept an arrangement under which proper procedures had allegedly not been followed.
Rathnayake also rejected accusations that the government had driven away investors, arguing that allowing investments to proceed under questionable agreements could undermine investor confidence.
His explanation raises an important distinction between challenging an agreement on procedural grounds and abandoning an investment that could have strengthened the country’s maritime economy. While compliance with procurement, land-allocation and governance requirements is essential, the public also deserves a clear account of whether the identified deficiencies could have been corrected without terminating the project.
The South Asia Commercial and Logistics Hub (SACLH) was established in 2023 as a 50-year Build-Operate-Transfer venture. China Merchants Port Holdings held a controlling 70% stake, while the Sri Lanka Ports Authority (SLPA) and Access Engineering PLC each owned 15%.
The proposed eight-storey facility was designed to provide approximately 530,000 cubic metres of storage capacity, supporting cargo handling, warehousing and regional distribution. Its cancellation therefore represents more than the loss of a construction proposal: it removes a planned addition to the port’s logistics infrastructure at a time when Sri Lanka is seeking to maximise its strategic position in regional maritime trade.
The shareholders subsequently agreed to discontinue the venture, citing changes in external circumstances, the implementation environment, the project timetable and commercial considerations. These explanations, however, do not establish precisely which factors ultimately made the investment unviable.
Access Engineering invested approximately Rs.1.762 billion and expects to recover around Rs.1.453 billion through its proportionate settlement refund and available distributable funds. The anticipated shortfall of approximately Rs.310 million is expected to be recognised in the company’s separate financial statements.
At consolidated group level, Access Engineering had already recognised approximately Rs.387 million in its share of venture losses for the financial year ended March 31, 2026. Consequently, the settlement proceeds are expected to exceed the investment’s reduced carrying value, limiting the prospect of an additional material group-level loss.
Although this accounting outcome reduces the immediate financial exposure, it does not erase the abandoned project’s commercial consequences.
The government must now explain what procedural defects were identified, when they became apparent, whether negotiations explored corrective measures and what evidence supported the conclusion that the existing arrangement could not continue.
Rathnayake has said he personally facilitated discussions with company officials after assuming office. That assertion makes transparency over the subsequent breakdown particularly important.
The SLPA has announced plans for an alternative logistics hub under a public-private partnership model, with investors selected through competitive bidding. This provides an opportunity to rebuild confidence, provided the new process includes transparent feasibility assessments, clearly disclosed land-allocation terms and realistic implementation milestones.
Ultimately, the test of the government’s position will not be its defence of the cancellation, but whether it can demonstrate that stronger procedures will produce a viable project rather than another costly delay.
The post Colombo Port Logistics Collapse Raises Questions over Government Accountability appeared first on LNW Lanka News Web.