Japanese companies like Mitsubishi Corp. and Taisei Corp. are closing offices and cancelling contracts in Sri Lanka as its devastating economic crisis makes maintaining businesses difficult, Nikkei Asia reported.

Trading house Mitsubishi says it will close its Colombo office at the end of March, citing “changes in the economic environment”. The office was set up to gather information and to serve as a liaison with the headquarters in Japan.

The company handles engineering, procurement, and construction for power plants and trades in steel and chemical products in Sri Lanka. Projects already in progress will continue and be managed by staff in neighbouring countries.

In March 2020, engineering group Taisei won a contract worth 62 billion yen ($ 462 million at current rates) for the construction of a four-story passenger terminal building, an elevated bridge, and more for the second phase of the expansion of Bandaranaike International Airport near Colombo.

As the economic turmoil deepened, the Japan International Cooperation Agency stopped lending to state airport operator Airport and Aviation Services (Sri Lanka), drying up funds for the project. The engineering company is negotiating with the airport operator to cancel the project and is in the process of liquidating the project. It has apparently booked losses on the project.

“We will refrain from commenting on individual projects,” the company said.

Japan International Cooperation Agency (JICA) is not expected to withdraw funding for the airport construction itself and will likely look for another company to take over. Sri Lankan media have reported that a Chinese company was interested in the project, but the JICA loan is conditioned on participation by Japanese companies.