The Sri Lanka Ports Authority (SLPA) announced yesterday (19) that it would pursue the development of a new logistics hub within the Colombo Port under a public–private partnership (PPP) model, following the decision to discontinue the 2023 US$ 126 million proposed joint venture involving the China Merchants Port Holdings Limited Company (CMPH) and Access Engineering PLC.
The CMPH is part of the China Merchants Group, a Chinese State-owned enterprise directly supervised by the Chinese Government’s State-owned Assets Supervision and Administration Commission.
The announcement came a day after the CMPH disclosed that the shareholders had agreed to terminate the South Asia Commercial and Logistics Hub (SACLH) project and settle their outstanding obligations, with the SLPA agreeing to pay approximately $ 21.9 million as part of the settlement.
The construction of the logistic hub was initially scheduled to begin in the second half of 2023, with completion expected by the end of last year (2025). The project was also expected to generate at least 1,800 direct jobs and approximately 10,500 indirect employment opportunities.
However, sources told The Daily Morning the proposed logistics hub was to be located within the Port, which has already been facing congestion challenges. The project also drew criticism over plans to allocate around 14 acres of Port land for a multi-storey warehousing complex and lease the land to the CMPH. Critics had questioned the suitability of establishing a large-scale logistics facility within the congested Port and had called for the project to be relocated outside the sea-Port, citing practices at other international ports where logistics facilities operate away from core port areas to ease congestion.
There was also speculation that the proposed land lease arrangements remained unresolved, with no lease agreement signed. This was cited as a possible factor behind the developers’ decision to withdraw from the project, although this has not been officially confirmed.
The original project deal initiated in 2023, underwent several rounds of talks, however, it never took off the ground. The project was intended to create a major integrated logistics facility at the Port under a 50-year build-operate-transfer (BOT) arrangement. The project Company, SACLH, was owned 70 per cent by a wholly owned subsidiary of the CMPH, with the SLPA and Access Engineering each holding a 15% stake, a poor commitment, sources said.
The proposed logistics hub was designed to strengthen Colombo’s position as a regional maritime and logistics centre by providing modern warehousing, cargo-handling and value-added logistics services. Earlier plans envisaged a facility spanning approximately 150,000 square metres, with a five-to-eight-storey building and a storage capacity of around 530,000 cubic metres. The complex was planned for a central location within the Port, close to the Colombo Port City and the central business District, with direct connectivity to the Airport through the Port Access Elevated Highway. Its proposed services included less-than-container-load operations, multi-country consolidation, container freight station facilities, general warehousing and other value-added logistics services.
Investment figures announced during the project’s development varied according to the scope and stage of the proposal. The earlier plan referred to an investment of approximately $ 280 million, while the CMPH had also outlined a $ 126 million investment alongside an upfront payment of $ 26 million. The project was subsequently described in reports as a proposed $ 392 million logistics hub.
However, following assessments of external circumstances, commercial considerations and the interests of the shareholders, the parties decided not to proceed with the project.
In its announcement dated 15 October, the CMPH said that the parties had agreed to terminate the shareholders’ agreement, the BOT agreement and the site lease agreement through a settlement agreement, bringing the project to an orderly end.
According to the Company’s disclosure, the project had received total shareholder capital contributions of $ 37.14 million. The China Merchants’ wholly owned subsidiary contributed $ 26 million, while Access Engineering and the SLPA contributed $ 5.57 million each.
Under the settlement arrangements, the SLPA will pay approximately $ 21.905 million after deductions for the relevant tax and late-payment liabilities. The settlement is intended to resolve outstanding matters relating to the project.
Meanwhile, the SLPA has made clear that the termination of the joint venture will not derail its plans to expand logistics infrastructure at the Port. Instead, the SLPA intends to invite private-sector participation through a competitive bidding process under the PPP model, subject to the relevant approvals. The SLPA expects the initiative to help transform the Port from a predominantly container transshipment hub into a broader maritime and logistics centre, while improving operational efficiency, attracting investment and generating sustainable long-term revenue. The SLPA has also emphasised that the alternative development model is intended to align with its strategic priorities, commercial objectives and Sri Lanka’s national economic interests.