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August 15, 2022

Japan’s Taisei seeks to enter talks to stop airport expansion in Sri Lanka

The construction of the terminal and viaduct at Bandaranaike International Airport was expected to be complete by next year.

Japan-based engineering group Taisei has plans to enter discussions to possibly stop the expansion work at Bandaranaike International Airport (CMB) in Sri Lanka, reported Nikkei.

This move comes after funding for the airport expansion project was suspended.

In 2020, Taisei secured a JPY62bn ($464m) contract to construct a new multilevel terminal and viaduct at the airport, which is located near Colombo.

The construction of the terminal and viaduct was expected to be complete by next year.

Recently, the Japan International Cooperation Agency (JICA) suspended more than JPY70bn of lending to Airport and Aviation Services (Sri Lanka), which is the state airport operator. This amount would have been paid for the completion of the project.

Taisei intends to commence negotiations with the Sri Lankan state airport operator to suspend the project.

In case the funding situation does not improve, the Japanese firm could seek a release from its contract.

Currently, the South Asian Island is reeling under economic and political turmoil.

Tourism is an important economic sector of the country. However, the tourism industry has been wrecked by the Covid-19 pandemic, which in turn diminished its foreign-exchange reserves.  

In April, the Finance Ministry of Sri Lanka announced that it would stop overseas debt repayments until it could get out of the economic turmoil.

Recently, local media reported that a Sri Lankan cabinet member had announced stopping several projects funded by JICA.

The country’s new President Ranil Wickremesinghe intends to recommence bailout negotiations with the International Monetary Fund and seek financial aid from other global partners.

This airport project is claimed to account for billions of yen of the Japanese firm’s JPY221.5bn nonconsolidated overseas balance as of the end of March 2022.

A Taisei spokesperson told Nikkei: “We decline to comment on the progress of individual projects.”

A JICA spokesperson also stated that the agency ‘cannot provide information regarding our borrowers.’

As of July, around 180 Japanese firms were operating in Sri Lanka, according to research company Teikoku Databank.

Even though the present impact of Sri Lanka’s economic crisis has been restricted so far, Teikoku, in its report, stated that “protracted uncertainties in the business environment caused by political instability could affect companies’ strategies.”

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