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Sri Lanka has delayed a joint venture with China Merchants Port Holdings Company to develop a port on the south-eastern coast of Sri Lanka.

The Cabinet of Sri Lanka has already approved the deal under which the country will lease 80% of Hambantota port to the Hong Kong-based listed firm for 99 years for US$1.12 billion.

China Merchants has already made a payment of US$5 million as a security deposit. The company will pay 10 percent of the US$1.12 billion within one month of signing all the agreements, and the remaining 90 percent within six months of signing the transaction documents.

The delay was due to unfinished negotiations between the stakeholders and it also follows protests by Hambantota inhabitants who say the government is trying to evict thousands of families to provide the 15,000 acres of land for an industrial zone for Chinese investors along with the port deal.

The project involves the development of four container berths to bring the port's capacity to 2 million TEUs per year. The port is located on the south-eastern coast of Sri Lanka, only ten knots away from the Asia-Europe trade route, which is one of the world's busiest trade routes. 

China is Sri Lanka's largest lender, up to last year providing more than US$6 billion for port facilities and others transport infrastructure.