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Sri Lanka has not fulfilled its potential in terms of geographical location


Comments / 2876 Views / Saturday, 15 October 2016 00:00


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I decided to write this article after much thought, after attending the Colombo International Maritime Conference 2016. Now I feel that as a country we have not fulfilled our true potential by utilising our geographical location to attract business. It was clear that the Prime Minister has a good vision and heard him mention to some participants to give him advice on how best to open up the industry. 

Now I understand that the problem is the agency lobby who are reluctant to introduce the ship owners to the Government – the mindset of our so-called gurus and doctors of shipping who have only looked to benefit their kith and kin by exploiting the ship owners and cargo owners and at the same time naming themselves as the voice of the industry. 

Working loyally for my employers in a shipping agency house for so many years and protecting their thinking, now I understand that the world of shipping is not about agency business. I have experience of how principals have been cheated and manipulated over the years. The Government must look at the recent Evergreen Marine Corporation and the former agency saga which is proof of how they were cheated by an agency operation.

Agency owners manipulated funds from paying the Ports Authority, to container deposits, to washing of containers, the cost collected from local importers which was also collected from the principals over the years and made the ship owner suffer nearly $ 20 million loss. 

Shipping is changing around the world, principals do not want to just pay out funds for no contribution from anyone as it is a not good time for ship owners. Intermediaries in all businesses in the supply chain are being looked at by business owners, if my understanding is clear, the speaker at the conference Kriwat was clear that shipping has to be opened up and reforms be needed at the regulator level if we are to be a shipping hub. 

Working for an agency, I always defended the THC collection, but now I understand the reality of market forces as we now sell boxes in the market to Europe at $ 200 all-inclusive as that is driven by supply and demand where ships have very much of overcapacity now and this included the payment our principal had to pay to the terminal (sometimes discounted depending on the terminal our vessel berths). 

I also learnt from SLPA that by law principals had to remit USD to our Agency to pay the port seven days before ship’s arrival, but in the past because we wrongly collected THC from all importers and exporters and managed the local cash flow, our agency settled this cost to the port, and obtained USD in Singapore and Hong Kong (probably avoid tax too). This deprives inflow of foreign currency to our country, while rolling the agency network on ill-gotten cash from the local market. Such collections ran into millions. 

If one checks out the sale of a multinational shipping business agency share in Sri Lanka, it was bought over mainly with the millions that were collected as THC which was laying in credit waiting to be pulled out of Sri Lanka. 

Now I realise no agency network has brought in any new technology or innovations, game-changing modes or operation in this country. All they do is collect agency fees and offer a service to the principal while paying us Sri Lankans the lowest wages and compelling the able to leave the country for better prospects. 

By law principals are requested to pay agency commission for every transhipment container that is loaded and unloaded in Sri Lanka, and all the work the agent does is report its manifest to the terminal and customs. Who wants to pay such costs for no real work done? No principal wants to pay such charges, when they can send the discharging and loading plans direct to a terminal operator or the port. Someone questioned at the conference about the so-called CASA tariff which is protecting the agents against the ship owners, no proper answer was given! 

Why Sri Lankan Governments never did or will never open shipping fully 

There are a handful of agencies who operate shipping house agents in Colombo and they are family-owned or big corporations well-connected to ministers over the years. These ministers are well looked after by these agency networks during their election campaigns with rewards, etc. 

The present Minister of Ports and Shipping too as we understand is heavily associated with agents and think that they are the voice of shipping. Of course I know our bosses sell nationalism to the Minister who may be not aware that the poor taxpayer, consumer and exporters and the country at large are suffering due to the middle man. 

These so-called agency experts who have never worked in a competitive shipping environment only know to collect agency commissions and call themselves chairmen and doctors of shipping. 

It’s sad to note that we as Sri Lankans when required to open up offices in other countries like my present employer has done with 3PL operations, they insisted on 100% ownership. But they do not want Sri Lanka to do so. 

This protection must stop, we must open up shipping to the principals of the world to set up 100% owned offices if they wish to do so and if we need to reap the full benefits to the ports and not the agents, and make Colombo a hub for transhipment operations. This will bring the real effect to the shipping industry and will see other related industries opening up in this country. 

This is a challenge to this Government, and I feel only our current PM will have the guts to make a call and correct this situation. If not we will be selling our geographical location for the next years and the maritime conference will talk about the same topics rather than opening this kind of conversation. 

A Shipping Agency Manager


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