The Government’s renewed effort to divest its entire stake in Canwill Holdings Ltd. has reopened scrutiny of two long-stalled tourism projects—an unfinished mixed development in Colombo and a proposed hotel project in Hambantota—highlighting complex legal risks and broader economic implications.
Canwill Holdings, incorporated in 2011 as a fully State-owned enterprise, was intended to anchor Sri Lanka’s push into high-end hospitality infrastructure. Its flagship Colombo project, a 47-storey hotel and serviced apartment complex in Colombo 3, was largely completed structurally and granted Strategic Development Project status, qualifying it for significant tax concessions. Despite substantial capital expenditure and regulatory clearances, the project never became operational, tying up public funds for more than a decade.
The Hambantota hotel project presents even greater legal uncertainty. The 9.42-acre beachfront lease held by Helanco Hotels and Spa, a Canwill subsidiary, has expired due to the failure to commence construction. Government clarifications explicitly state there is no commitment to renew the lease, introducing a material risk that could deter potential investors or reduce valuation expectations.
The divestiture framework sets a minimum net worth or financial capability threshold of $50 million for bidders, signaling an attempt to attract credible investors capable of completing and operating complex developments. However, the absence of indicative valuation guidance at the Expression of Interest stage and the postponement of liability disclosures until the Request for Proposal phase place significant due diligence burdens on bidders.
From a legal standpoint, the structure of the transaction a full share sale rather than an asset disposal means that investors will inherit historical liabilities, including loans, guarantees, tax exposures, litigation risks, and regulatory compliance issues. While the Government has indicated it will adopt mechanisms to address past liabilities, the lack of detail raises questions about how risks will be apportioned and whether indemnities will be sufficient to reassure investors.
Economically, the prolonged stagnation of these projects has had measurable opportunity costs. The Colombo development alone could have generated foreign exchange earnings, employment, and downstream service sector activity. Instead, billions of rupees in public funds sourced from institutions such as the EPF and Sri Lanka Insurance remain locked in non-performing assets.
The divestiture, if executed transparently and competitively, could help revive investor confidence and signal a shift toward fiscal discipline. However, analysts caution that unresolved legal ambiguities, especially regarding land tenure and contingent liabilities, could suppress bid values and undermine the objective of maximizing returns to the State.
Ultimately, the Canwill case illustrates the broader challenge Sri Lanka faces in unwinding stalled public investments while balancing legal certainty, economic recovery, and accountability to public stakeholders.
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