Why Sri Lanka keeps missing its maritime moment

At the crossroads of global change, the Port of Colombo faces a defining challenge: Transform or fall behind.

COLOMBO: Situated at the cusp of the world’s busiest shipping lanes, barely a degree north of the equator, Sri Lanka has a geographical location that port planners pay fortunes for. 

Yet for all the strategic plans drawn up over the past three decades, the island has progressed little beyond its role as a transshipment port –more than 80% of the cargo on ships docked in Sri Lanka is never unloaded here, but transshipped onward. 

Most of this cargo is bound for Indian ports, through terminals run by Sri Lanka’s state-owned Ports Authority, the China Merchants-backed Colombo International Container Terminals, and India’s Adani Group-linked Colombo West International Terminal.

Stalled deal

Efforts to change this situation include a 2019 trilateral India-Japan-Sri Lanka agreement to develop Colombo’s East Container Terminal, scrapped in 2021 under pressure from trade unions.

For all its facilities, Sri Lanka remains far from being a true logistics hub, where goods are stored, consolidated, processed, and redistributed. This is partly due to project timelines being repeatedly pushed back — the stalled East Container Terminal deal being the most prominent example.

In contrast, rival ports in the neighbourhood, from India’s newly commissioned Vizhinjam International Seaport to Dubai’s Jebel Ali and Singapore, sharpen their ambitions.

The asymmetry was on full display at a business roundtable in Colombo hosted by the Delegation of the European Union to Sri Lanka, the Delegation of German Industry and Commerce in Sri Lanka (AHK Sri Lanka) under the theme ‘Global Gateway and Sri Lanka’s Role as a Regional Maritime and Logistics Hub.’ The meeting took place on 27 May 2026, but the issues it raised there remain relevant. 

The Port of Colombo handled a record 8.29 million twenty-foot equivalent units, or TEUs, in 2025, up from 7.79 million in 2024, keeping it Southasia’s busiest container port and among the world’s top 25, according to data from the Sri Lanka Ports Authority.

The Ports Authority projected that the port’s total capacity would double to 15 million TEUs by 2026. However, delays in tendering and equipment procurement mean it is now on track to fall well short. Dig deeper, and the picture gets murkier.

Much of the Port of Colombo’s international business remains dependent on transshipment cargo that merely passes through. The containers handled at the Port are not destined for Sri Lanka –they are unloaded from one ship and transferred to another ship to continue to their destination. 

Bureaucracy: The silent saboteur

If geography is Sri Lanka’s greatest asset, bureaucracy may be its most stubborn liability.

In its 2023 Logistics Performance Index — the last edition to rank countries head-to-head before the World Bank retired the single-ranking format in favour of a broader, non-ranked scorecard — Sri Lanka placed 73rd out of 139 countries. 

Congestion at customs examination yards creates a ripple effect on Colombo Port, causing containers to pile up. Complex regulations add costs, slow down operations, and lead to a shortage of skilled personnel. All this hinders technological advancement, and leads to disqualifying factors for global shipping lines choosing between regional hubs.

Colombo’s role as the transshipment gateway for Indian cargo, which accounts for roughly 70% of the port’s transshipment volume, is now under direct threat. Vizhinjam, just 10 nautical miles from the Suez–Far East shipping route and only 135 nautical miles from Colombo, has a natural depth of 24 metres that lets it berth ultra-large container ships with little dredging, an edge Colombo cannot easily match. 

In 2023, New Delhi unveiled the India-Middle East-Europe Economic Corridor, an alternative to the Suez Canal route that India is still building and promoting. 

Experts hold that what’s needed is government reforms to fundamentally redraw established trade flows in which Sri Lanka has long played a central role.

What would a real hub require?

The EU roundtable identified key reforms: Streamlined customs, transparent regulatory frameworks, accelerated port infrastructure, and deeper inland connectivity. Sri Lanka must move beyond transshipment toward value-added services, ship repair, re-export processing, and logistics services. This requires the investor confidence that only consistent, efficient governance can produce.

Sri Lanka currently provides only basic port and maritime services. Besides transshipment, these include bunkering, ship services, small-scale boat and ship repair, freight forwarding, warehousing, limited cold-chain storage, air cargo and crew supply. 

However, the scope for expansion is huge, according to Gamini B. Herath, Chief Advisor, Competency-based Economies through Formation of Enterprise known as CEFE Net Sri Lanka, a non-profit business and entrepreneurship-training network.

“None of the higher-value services are currently available in the country,” he told Sapan News in a written response. 

These opportunities include ship repair and construction, maritime finance, offshore services, digital logistics, pharmaceutical-grade cold storage, e-commerce, and green fuels such as LNG, methanol, and ammonia. That absence, Herath argues, is not a failure but a tremendous, untapped opportunity.

To seize the moment, he says the sector must become the top priority in Sri Lanka’s development strategy, guided by a new 10-to-20-year vision drawn up jointly by government, state enterprises and the private sector, and underpinned by long-term political commitment. 

Policymakers need to tackle land, tax and fiscal policy, investment promotion, regulatory bottlenecks and human-capacity development together rather than piecemeal, he says. There is also a need to digitalise trade-facilitation services across customs, exchange control, immigration, and flag registration.

Herath’s proposed vehicle is a new Maritime and Logistics Hub Development Authority, led by the executive alongside a council of ministers and an expert committee drawn from industry, with the power to clear the way for private and state investment. He frames its mission as consolidating and expanding port capacity, deepening multimodal connectivity and scaling up value-added logistics services in support of an economy worth USD 500 billion or more in nominal GDP by 2035.

The two most urgent moves, he says, are building an investment and finance ecosystem that lowers the cost of capital and expands serviced investment space, and creating a transparent trade-facilitation regime — simplified tariffs, digitalised customs, risk-based controls — that cuts costs and clearance times.

The market needs to be fully liberalised, noted Sean Van Dort, Chairman of the Global Shippers’ Forum, a UK-based trade group. Adding that it can happen by opening the sector to full ownership for “the principals who are willing to invest and bring their technologies, innovations, and world-class operating processes,” he told Sapan News via WhatsApp.

Missed opportunities

Experts also note that Sri Lanka has repeatedly missed opportunities because of a persistent failure to enact meaningful reforms, a pattern the IMF has flagged across multiple sectors of the economy.

“Backward decisions and delayed action” have hampered infrastructure upgrades, the modernisation of laws, and the creation of a predictable investment environment, Rohan Maskorala, founder of Shippers’ Academy, Colombo, told Sapan News in a telephone interview.

He pointed to restrictive ownership clauses as a key deterrent, drawing on the models of Singapore, Hong Kong and major European shipping hubs, which have embedded openness to investment into their foundational laws. With current disruptions in the Middle East pushing global shipping lines to seek alternatives, he warns that the window is open — but not for long.

“Business happens in the environment, not in the location,” said Maskorala. “We cannot sit on it and wait. Sri Lanka has every natural advantage needed to be a great maritime hub. What it lacks is the institutional discipline to turn promise into performance. Policy makers and experts have identified the solutions.”

Sri Lanka has every natural advantage needed to be a great maritime hub. What it lacks is the institutional discipline to turn promise into performance. Policymakers and experts have identified the solutions. 

The urgent question now, for the sake of Sri Lanka’s future, is whether policy makers will act on the island nation’s geographic advantage, being situated at the cusp of major trade routes. That reality is no longer enough on its own. 

Madhuri Peiris is a freelance writer in Sri Lanka covering the arts, travel, finance, and the environment. She has worked as a full-time editor and journalist at leading Sri Lankan newspapers. She has a BSc in Environmental Science from the University of Delhi, India, and a Post Graduate Diploma in Environmental Science from the University of Colombo, Sri Lanka.

This is a Sapan News syndicated feature available for republication with due credit https://www.sapannews.com.

Note on Southasia as one word: We use ‘Southasia’ as one word, “seeking to restore some of the historical unity of our common living space, without wishing any violence on the existing nation states” – Himal Southasian

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Also published in:

• Brown Pundits: Why Sri Lanka keeps missing its maritime moment, 16 July 2026