By:Staff WriterColombo (LNW): ‘China Merchants’ to invest US$ 392 million in SA’s largest logistics hub in SL.
A Chinese state-owned firm said on Monday it plans to take its investment in Sri Lanka to US $2 billion by building South Asia’s largest logistics hub.
The investment by the China Merchants Group in a large logistics complex at Colombo Port, with an estimated construction cost of $392 million, is the first major foreign investment in Sri Lanka since the default.
The logistics centre project will take CMG’s “accumulated investment in Sri Lanka to… over 2 billion US dollars, making it the largest foreign investment enterprise in the island”, the company said in a statement on Monday.
CMG will have a 70 percent stake in the company set up to build the logistics complex at Colombo, the only deep-sea port between Dubai and Singapore.
Describing the project as South Asia’s largest logistics hub, CMG said it expects to complete it by the end of 2025. CMG also manages the port complex at Hambantota on the southern tip of Sri Lanka.
That port was considered among the white-elephant projects launched by former president Mahinda Rajapaksa, who ruled the country for a decade until 2015.
Rajapaksa borrowed heavily from China for projects that many criticised as a debt trap that led to the worst economic crisis in Sri Lanka’s history.
Unable to repay a huge loan taken from China in 2017 to build Hambantota port, Sri Lanka handed it over to CMG for $1.12 billion on a 99-year lease.
Neighbouring India as well as the United States have also expressed concern about China gaining a naval advantage in the Indian Ocean with its access to Sri Lanka’s ports.Sri Lanka has insisted that its ports will not be used for any military purposes.
Sri Lanka’s strategic location among the main marine and air navigation routes within the South Asian region makes the country a lucrative destination for entrepot and logistic development.
The country’s close proximity to emerging markets, and it’s already developed air and seaports in Colombo and Hambantota makes it an important logistics hub in the region providing entrepot and transhipment services to leading shipping lines and exporters.
During the last five years, the World Shipping Council has consecutively ranked Sri Lanka’s Colombo Port among Top 50 World Container Ports above other South Asia ports based on the volume of the containers handled.
Sri Lankan logistics services contribute 2.5% of gross domestic product, which represents around USD 2 billion. Logistics services include container trucking, warehousing, ports and shipping, but exclude domestic transport of passengers, fisheries and interregional domestic cargo transportation.
The total share of logistics in national exports is estimated at 7%. The industry provides full-time direct employment to over 40,000–50,000 people.
Around 70% of registered service providers are of local origin while the rest are multinational. Currently, there are 130 shipping agencies and 120 freight forwarders in associations, and 500+ companies registered with the Merchant Shipping Secretariat (MSS), which also includes clearing agents.