China Merchants Port Holdings (CMPH) has withdrawn from a proposed $392 million South Asia Commercial and Logistics (SACL) hub at the Port of Colombo, with the Sri Lanka Ports Authority (SLPA) agreeing to pay $21.9 million to settle the investment. The project’s cancellation follows prolonged delays, disagreements over tax concessions and concerns about the original agreement.
Announced in April 2023, the project was planned as an eight-storey, five-million-square-foot logistics complex with a storage capacity of 530,000 cubic metres. CMPH, SLPA and Sri Lankan firm Access Engineering were the project partners, with the latter two holding 15% stakes each. Originally scheduled for completion by the end of 2025, the facility was expected to generate 1,800 direct jobs and 10,500 indirect jobs.
However, the project failed to progress amid disputes over proposed tax concessions and the terms of the agreement. The facility was initially expected to qualify for Strategic Development Project (SDP) incentives, but these concessions were withdrawn following objections from the International Monetary Fund (IMF), which has urged Sri Lanka to curb tax concessions. Allegations that the original agreement was signed without a proper tender process and concerns over potential revenue losses also attracted opposition from port unions.
In October 2026, Sri Lankan minister Bimal Rathnayake told Parliament that the deal was cancelled because the parties could not agree on the agreement’s terms. The proposed development was to occupy 10 acres between Colombo Port’s East and West Container Terminals. SLPA Chairman Admiral (Retd) Sirimevan Ranasinghe had earlier indicated that construction would take 42–45 months, pushing completion to around 2029.
The cancellation comes as Colombo seeks to strengthen its position as a regional transshipment and logistics hub. Although the port benefits from strong international shipping connectivity, the World Bank’s Container Port Performance Index 2025 ranked Colombo 95th, behind India’s Jawaharlal Nehru Port (22nd) and Mundra (30th). A dedicated logistics centre could have enabled cargo processing, warehousing and distribution beyond conventional ship-to-ship transshipment, while easing storage pressures within terminal yards.
The SLPA has now decided to invite tenders for a new logistics hub under a public-private partnership (PPP) model. However, attracting a replacement investor could take time, given regional competition, geopolitical uncertainty and concerns over the reliability of long-term investment agreements.
CMPH, which already operates Colombo International Container Terminals with an 85% stake, is expected to recover approximately $20.83 million under the settlement before winding-up costs. Nevertheless, the failed project could make prospective investors more cautious, prompting demands for clearer concession terms, stronger contractual safeguards and regulatory approvals before committing capital.
The setback also raises questions about policy consistency and investor confidence, particularly because Sri Lanka’s IMF programme was approved in March 2023, before the SACL agreement was signed in April that year. Rebuilding confidence will be critical if Colombo is to attract fresh investment and capture greater value from the cargo moving through its port.