Draft shipping policy creates storm

Barely a week after a sudden tariff revision, which was implemented without the knowledge of the private sector or the new Minister, a new so-called final shipping and logistics policy document has surfaced last week, making the UNF Government policy a mockery in major areas of economic reforms.

The industry has been once again given a national shipping policy document named as the final draft on 8 January, to respond to by 12 January. 

The final draft has not been briefed or sent to the relevant new Ministers or their advisors, including the Shipping Minister and Finance Minister and non-Cabinet Minister Dr. Harsha De Silva, who oversees national policies under the Prime Minister.

Industry sources alleged that this document is directly contradictory in the sectors and areas to the Finance Minister’s policy statement and reforms on the shipping and maritime sector presented for the 2018 budget, which was passed in Parliament to expand Sri Lanka beyond a transshipment location to make it a hub with the presence of international players with reasonable investments. 

The draft proposals have brought in protectionist elements to the national policy and in addition, specific numbers and percentages and Government-protected tariff mechanisms included at this policy-level document, making the publicly elected policymakers prisoners of a sectorial-based industry agenda.

Local shipping agents have been given the most recognition and prominence with safeguards whilst international ship owners, terminal operators and shippers have been given less recognition and importance.

The drafting committee appointed by the former Ports Chairman and now Secretary with the blessings of former Minister Mahinda Samarasinghe, who was in confrontation of the government policy to liberalise, wanted to provide continuous public protection to local agents. They had appointed many service providers with vested interests in drafting this document. Interestingly the key export sectors and associations who bring in over $16 billion to the country were kept out by giving few slots to associations that are not directly represented by the exporters.

Daily FT learns that the following paragraph has been included whilst a letter of protest had been sent by the Sri Lanka Shippers’ Council representatives, which represents some 10 associations. Exporters of major commodities and industrial products, tea, apparel, rubber and other products and chambers along with the freight forwarders have requested for further liberalisation and removal of tariff protections to individual groups by the Government to set in market forces.

Some of the contents/paragraphs of the draft policy paper are as follows.

 

Shipping Agency services 

The objective of the Government is to uplift the standards of shipping agency services provided to foreign ships at all ports of Sri Lanka and to safeguard the national interest with regard to employment, tax revenue generation, and protection of small and medium sized businesses. As this is the provision of local agency services, the importance of having local expertise engaged to encourage the local entrepreneurs and ensuring reinvestment back in to ancillary services and logistics infrastructure is quite essential. Therefore, it is necessary to;



(a) Introduce minimum standards for local shipping agents to ensure quality of service standards and compliance with code of conduct;

(b) Establish processes to facilitate ease of doing business for shipping agency operators;

(c) Identify and promote fiscal and other support measures that would encourage and promote shipping agency business;

(d) Maintain the status quo of minimum 60% equity holding for locals in shipping agency companies. However, if a foreign liner shipping principal would require to own 100% equity of its’ own agency company in Sri Lanka, same can be encouraged, provided this will be subject to sizable investment by the shipping line no less than $ 100 million and other investment criteria to be stipulated by the subject Ministry of Ports and Shipping in consultation with the stakeholders. This is in order to ensure that this is in line with Government’s policy for encouraging FDIs in the maritime industry; 

(e) Maintain the minimum tariffs’ legislation payable to shipping agents prescribed by the Ministry in-charge of Shipping, DGMS, and CASA to maintain quality, stability and to prevent rate wars. 

(f) Establish national policies, regulations, rules, and legislation conducive to carrying out shipping agency businesses in Sri Lanka., and also revamp the existing shipping agency laws;

According to Finance Ministry sources, all these are against government policy as a national policy cannot include dollar figures and percentages and fixed tariffs. Public policy will depend on time to time changes as promised to the people by political establishments as the world is changing rapidly. We need to fit into the global supply chain and the Government’s job is to negotiate under changing circumstances depending on market conditions. Public policy will be in the highest interest of the people, not individual interests or vested interests, and national policy can only have broad level statements, not the wish list of individuals or groups. Imagine if we had such clauses to a national policy in negotiation of the port deals such as Hambantota. The Government of the day would have to stick by numbers that some interested parties would want instead of the reality of the business environment and circumstances they pointed out.

This must be thoroughly examined through independent professionals who have no personal involvement in the business and a Government-led ministerial committee even before it is taken beyond this point. Such documents are as important as a Constitution of the country. We believe the new Shipping Minister will be vigilant. It seems somebody else’s agenda is being pushed through under the pretext of a national shipping and logistics policy.