For literally decades, Sri Lanka’s school textbooks have included the idea that the country is ‘strategically located’. This concept of being in-between global trade routes has always been one of those ‘if only’ stories of the country – “If only Sri Lanka got its act together, its ports could have been world class.” 

Global ports themselves have become a crucial topic of discussion across the years, especially in recent decades as global trade expands. Over the last few years, where the idea of global chokepoints has re-emerged at the centre of global narratives, the idea of Sri Lanka’s ports has become pretty interesting once again.

Colombo Port’s potential

Around the world, there is no question that ports have been able to strategically benefit from their locations, particularly when positioned at critical chokepoints. 

The Port of Singapore (and the entire complex including the two ports in Malaysia’s Johor Bahru) is probably the most widely cited example, but even Dubai’s Jebel Ali Port is a more recent success story. India, too, has some ports (some of these might have better marketing than capacity), although in practice, many of India’s ports still tranship through Sri Lanka.

That brings us to Sri Lanka’s ports themselves. Given their strategic location in connecting the East and the West while sitting along one of the busiest shipping lanes in the world, the country is naturally positioned as a transhipment hub. 

Following Sri Lanka’s long recession where capacity improvement took a backseat, its ports are now becoming far more significant players. The Port of Colombo in particular seems to be significantly strengthening its importance in maritime routes while also beginning to serve as a decent foreign exchange generator for the local economy.

Some of this is also driven by increasing capacity, and historically, traffic has always caught up whenever capacity expands, resulting in an increase in port-based earnings. 

The Port of Colombo has increased its capacity from around 5.5 million Twenty-foot Equivalent Units (TEUs) in the mid 2010s to a position where it can capture around 8.3 million TEUs in 2025. Ongoing expansion projects are expected to bring capacity up to 15 million TEUs (or 12 million or 20 million TEUs depending on who is making the claim) in a few years. 

Regardless of the precise figures, if enough of the expected capacity improvements take place and the current pace of expansion continues, the Port of Colombo could climb up in global rankings and potentially end up being among the top ports in the world by the next decade. 

Geopolitical factors

All of this reflects regular expansion. Right now, however, there is obviously something else going on as well – the global geopolitical situation. The types of traffic flowing through Sri Lanka could change as a result of this (this seems to have happened during the Red Sea crisis in 2023). 

The question then becomes whether the volatility in the Middle East, along with disruptions to certain shipping lines and routes, will change the outlook for the Colombo Port. Could this end up being the kind of opportunity that Sri Lanka has anticipated and discussed for decades? Will the country ‘market’ its ports and strategic location to the world while continuing to increase its capacity?

That brings us back into the actual capacity growth that has taken place so far. Much of the recent expansion has come as a result of private sector involvement, both through the domestic private sector and through partnerships with international partners. 

Foreign investment in Sri Lankan port infrastructure is itself one of those stories that is easy to frame as geopolitical; the more straightforward explanation is probably that Sri Lanka is commercially attractive. China’s involvement through the Hambantota Port is the most cited example, although the scale of such investments and their geopolitical significance is probably at least somewhat overstated. 

Indian investment through private commercial players (again sometimes claimed to be geopolitical rather than the fairly straightforward idea that Indian private activity needs logistics) has also been significant.

A window of opportunity?

Beyond the private sector (both local and foreign), it might also be interesting to see what the Government would do in such a situation. 

While Government capital expenditure has remained below budgeted levels in the recent past, with institutional capacity not recovering appearing to be a major reason, this has already slowed down State sector investment. At the same time, Sri Lanka’s new twin surplus economy has meant that the Government has a considerable fiscal buffer. When will the Government make a move?

All in all, Sri Lanka finds itself at an interesting juncture. The global disruption that may seem like a threat on the surface could well turn out to be a window of opportunity, one that could draw further attention to what Colombo and its broader port network can offer. 

Whether the country can capitalise on it when the opportunity presents itself will be something to keep an eye on over the next few years. After all, we need something for our school textbooks to discuss for the next few decades as well. 

(Damsinghe is the Head of Macroeconomic Advisory, Ismail is a Senior Research Lead, and Deheregoda is a Junior Research Analyst at Frontier Research, a Colombo-based firm that engages in macroeconomic research and advisory for corporate and investment clients on Sri Lanka, South Asia, and Southeast Asia. Damsinghe can be reached at chayu@frontiergroup.info)

(The views and opinions expressed in this article are those of the writers and do not necessarily reflect the official position of this publication)