A Chinese state-owned firm has withdrawn from a $392 million joint venture to develop a major logistics hub at Sri Lanka’s main seaport, the key local partner said Monday.
The Sri Lanka Ports Authority (SLPA) said China Merchants Port Holdings had decided not to proceed with the collaboration announced in 2023, but the project would continue.
“Following an assessment of the prevailing external circumstances, commercial considerations and the interests of the respective shareholders, a decision was reached not to proceed with the proposed joint venture,” the SLPA said in a statement.
China Merchants was to hold 70 per cent of the proposed joint venture, while the SLPA and a Sri Lankan private construction company were each to hold 15 per cent.
The SLPA said it was now seeking a new investor for the 150,000-square-metre logistics hub at Colombo Port, where China already has other investments.
The Chinese company said in a statement to Hong Kong’s stock exchange on Friday that “terminating the project would be in the best interests of the parties”.
China Merchants’ stake, agreed in April 2023, was the first major foreign investment announced after Sri Lanka’s economy collapsed in April 2022.
Within Colombo Port, China Merchants already operate a $500 million deep-water container terminal.
They also manage the deep-water port complex at Hambantota, on Sri Lanka’s southern coast.
That port in Hambantota was widely regarded as one of the white-elephant projects launched by former president Mahinda Rajapaksa, who ruled the country for a decade until 2015.
Rajapaksa borrowed heavily from China for projects that many critics said created a debt trap and contributed to Sri Lanka’s 2022 economic crisis.
Unable to repay a large Chinese loan taken in 2017 to build Hambantota port, Sri Lanka handed it over to China Merchants for $1.12 billion under a 99-year lease.
The $1.4 billion Port City Colombo real-estate development next to Colombo Port is also a Chinese investment.
India and the United States have expressed concern that China could gain a naval advantage in the Indian Ocean through its access to Sri Lankan ports.
Sri Lanka has insisted that its ports will not be used for military purposes.
AFP