The Sri Lanka Ports Authority (SLPA) confirmed that the parties had agreed to terminate the South Asia Commercial and Logistics Hub project after reviewing changing external conditions, implementation challenges, timelines and commercial considerations.

The decision was disclosed in a filing to the Hong Kong Stock Exchange on October 15, 2026. Under the settlement, the existing shareholders’ agreement, build-operate-transfer arrangement and site lease will be terminated, bringing the project to an end under its current structure.

China Merchants Port was expected to hold a 70 per cent stake through its subsidiary, Fortune Centre Group Limited. The SLPA and Sri Lankan construction company Access Engineering PLC each held a 15 per cent stake in the proposed venture.

The project was designed to establish a five-storey logistics complex covering approximately 150,000 square metres within Colombo Port. It was intended to expand the port’s cargo-handling and logistics capabilities and strengthen its role in regional trade.

Although the original proposal was valued at about $392 million, the project will not proceed under the existing joint-venture arrangement. The SLPA has indicated that it intends to explore alternative proposals for developing the site.

The termination also includes a financial settlement. Under the agreement, the SLPA will pay approximately $21.905 million to the project company within 30 days, while about $7.85 million in distributable cash held by the company will also be shared among the shareholders according to their ownership stakes. The settlement follows earlier tax and other liability adjustments.

The withdrawal does not mean China Merchants Port is leaving Sri Lanka altogether. The company remains involved in other major port operations in the country, including Colombo International Container Terminals, which operates the port’s South Terminal, and the Hambantota port under a long-term lease arrangement.

Hambantota has been a subject of international debate over Sri Lanka’s infrastructure financing and its relationship with China. The port was developed during the administration of former president Mahinda Rajapaksa, with substantial Chinese financing. In 2017, Sri Lanka granted China Merchants Port a 99-year lease as part of an arrangement intended to ease financial pressures and raise funds.

China also has a major investment in Port City Colombo, a large development project located beside the main port.

The Chinese company’s exit from the logistics hub comes as Sri Lanka continues efforts to strengthen its economy following the severe financial crisis that erupted in 2022. The country has been working to attract investment while managing debt obligations and improving the performance of major infrastructure projects.

Colombo Port is a key maritime gateway for Sri Lanka and a significant transshipment centre for regional trade. The cancellation of the proposed logistics hub leaves authorities with the task of finding a workable alternative to expand the port’s logistics infrastructure.

The development has also renewed attention on the strategic importance of Sri Lanka’s ports in the Indian Ocean. India and the United States have previously expressed concerns about China’s growing maritime presence in the region, although Sri Lankan authorities have maintained that the country’s ports will not be used for military purposes.

Reporting by TalkNaija Media