China Merchants Port Holdings has pulled out of the proposed US$392 million South Asia Commercial and Logistics Hub (SACLH) project at the Port of Colombo, with the Sri Lanka Ports Authority (SLPA) agreeing to pay US$21.9 million as part of a settlement following the project’s termination.The Chinese port operator confirmed the cancellation in a filing to the Hong Kong Stock Exchange on October 15, 2026.The development was originally envisioned as one of South Asia’s largest logistics complexes and was to be implemented under a 50-year build-operate-transfer (BOT) agreement.According to the filing, the decision to discontinue the project was driven by changes in external conditions, developments affecting the project’s implementation environment and timeline, and commercial considerations among the parties involved.China Merchants Port held a 70% stake in the project through its subsidiary, Fortune Centre Group Limited. The SLPA and Sri Lankan engineering firm Access Engineering PLC each owned the remaining 15%.The three shareholders had collectively invested US$37.14 million in the project, of which US$26 million was contributed by the Chinese company’s subsidiary.Under the settlement agreement, the SLPA is required to pay US$21.905 million to the project company within 30 days. The settlement proceeds, together with approximately US$7.85 million in remaining distributable cash, will be shared among the shareholders according to their respective ownership percentages, after accounting for applicable deductions and expenses.The proposed five-storey logistics complex received Strategic Development Project status from the Sri Lankan government in December 2023. This designation granted the project several tax incentives, including exemptions from corporate income tax and dividend taxes for a period of 15 years.Despite these incentives, the development faced delays and implementation challenges that prevented it from moving forward as initially intended. Maritime industry publication Lloyd’s List also reported that land-related issues and regulatory obstacles contributed to the difficulties.Following the project’s cancellation, the SLPA is expected to invite new investment proposals for the site.The withdrawal represents a significant setback for Sri Lanka’s efforts to attract major foreign investment into its port logistics sector. The project had been expected to strengthen the Port of Colombo’s role as a key regional shipping, trade and logistics hub.