The proposed project to set up a Volkswagen car plant in Sri Lanka has temporarily been halted, Deputy Minister of Public Enterprise Development Eran Wickramaratne said. “Due to the international issues they had to face, they have decided not to invest in this project in Sri Lanka for now,” Wickramaratne told a local TV station last week.

In April, Sri Lanka’s Board of Investment announced they helped to secure land for the setting up of the Volkswagen assembly plant with a total investment of 26.5 million dollars.

The project earlier planned to assemble vehicles in the 1000 cc to 2000 cc category which includes passenger cars, Sport Utility Vehicles, Multi Utility Vehicles and commercial vehicles. The original announcement on the upcoming plant was controversially made on August 17, just two days prior to the General Elections in 2015. At the time, opposition political parties had accused the government that the government was hoodwinking the public with just another election ploy The Board of Investment of Sri Lanka (BOI) then signed an agreement with Senok Automobile (Pvt) Ltd and Volkswagen AG to set up the plant for Volkswagen Automobiles in Kuliyapitiya. In March this year, the US Federal Trade Commission sued Volkswagen for false advertising.

Volkswagen recently agreed to spend more than 1.2 billion US dollars to compensate its dealers for their losses from the automaker’s diesel emissions scandal.