Way forward for shipping

Industry expert talks tough on policy changes, anti-corruption measures and liberalisation 

Sri Lanka Shippers’ Council Immediate Past Chairman Sean Van Dort (right) greeting the newly-elected Sri Lanka Shippers’ Council Chairman Chrisso De Mel as Sri Lanka Shippers’ Council Vice Chairman Suren Abeysekara and Manori Dissanayake from the Ceylon Chamber of Commerce Secretariat look on 

By Asnah Anwer 

In a no-holds-barred approach, a top official of the shipping industry has called for its liberalisation, reform of key legislation and stronger anti-corruption measures to develop the sector.    

The recently-concluded 47th Annual General Meeting of the Sri Lanka Shippers’ Council brought to the fore the particular challenges of the industry and also its opportunities for development. A new Chairman and Vice Chairman, Chrisso de Mel and Suren Abeysekera respectively, were appointed at the AGM. National Policies and Economic Affairs Deputy Minister Dr. Harsha de Silva was the Chief Guest at the event.

Shippers’ Council Immediate Past Chairman Sean Van Dort delivered the welcome address at the Post Business Session of the Annual General Meeting, during which time he flagged a number of issues that plague the shipping industry in the country.

Liberalisation of the industry

Van Dort also called for the liberalisation of the industry, stating “the Sri Lanka Shippers’ Council calls for total liberalisation of the maritime sector, where age old walls have to be brought down, if as an island nation we are to benefit much more from the maritime sector,” adding, “it is high time we take the bold step of looking at this sector strongly”.

Van Dort thanked the present Government in regaining GSP+ for Sri Lanka, but also pointed to some areas of concern that need to be addressed with regard to exports and international trade.

In terms of the long-promised single window for international trade, Van Dort urged the Government to expedite the process, and called out irregularities. “We were promised a single window to carry out our work for the last 25 odd years, seems like it’s gone through the back door. All the discussions are mere talk shops, I urge this Government to expedite the process to make this a reality. This will bring down our transaction costs, and give us competitive advantages and speed to promote our products.”  

Challenges faced in establishing the Export Facilitation Centre were also noted. “We were involved with the Sri Lanka Customs in establishing the Export Facilitation Centre. We agreed to pay more charges to the government for the sake of speed and time.”

However, Van Dort alleged that he was aware that until recently there was pressure on the Customs to provide a negative report so that this Centre could be scrapped for the benefit of a few with vested interest. However Van Dort also added “given the changes that have now taken place all seems good” while going on to state “today we have a world class Export Facilitation Centre, and we are proud of it.” 

Legal reforms 

 It was also recommended that the Customs Ordinance and the Ports Authority Act are reworked in order to move towards e-documentation. “We have worked with the Sri Lanka Customs on e-documentation and it has seen its benefits to the trade, however there is still a long journey. We require the commitment of the Government to at least make this possible by the end of this year. To do this draconian laws of the customs ordinance, the Ports Authority Act must be looked at strongly with willingness to change.”

Van Dort also pointed to the corruption the industry faces in no uncertain terms. “The shipping and freight market is corrupt to its core. From managing directors to shipping executives robbing from their own companies by ways of kickbacks” while adding “we as a private sector are also responsible for this”.

The need to improve the neglected back yard operations was noted, while difficulties in obtaining cargo and the corruption that has seeped into this section of the shipping industry as well was pointed to. 

“The infrastructure in the port was developed for ship handling, however everyone forgot about the backyard operations. Today our importers suffer with cargo damages, loss of cargo at container de-stuffing points, corruption at all levels. In order to expedite their clearing process, happy money seems to be the only way out.” 

Van Dort added: “The authorities in these locations are not willing to put electronic processes and systems, they want to see us face to face. This is because when you have face to face, money talks.”

On a positive note, Van Dort stated that the Ports Authority has achieved excellent KPIs (key performance indicators) and thanked the private terminals that have contributed immensely to uplift the standards on the shipping handling side. Van Dort stated that the Council will continue to urge the Government and authorities on key issues faced in the industry. 

Need for unity and hard decisions

In his keynote address, National Policies and Economic Affairs Deputy Minister Dr. Harsha de Silva responded to the areas of concern raised by Van Dort. The Minster emphasised the need for the shipping industry to be united and work together, be self-reflexive and make hard decisions for the long term to become globally competitive. 

Delivering a strong message on the need for the public and private sectors to work in collaboration, the Minister stated: “I think we as a Government, you as a private sector, you as an industry within the private sector must be all working together,” adding “the only way you can be globally competitive is if our incentives are aligned. Your incentives, the Government’s incentives must be aligned.” 

In terms of total liberalisation, the Minister pointed that the shipping industry as a whole needs to make this decision. 

“So you talked about policy inconsistency, you talked about poor governance. All our problems, my problems, the Government’s problems... But you also said about the liberalisation of the shipping industry, you said you are 100% for the liberalisation of the industry. That question we should be asking from the industry leaders also. Whether the industry leaders are willing to liberalise the shipping industry. I am for liberalisation, but are you willing to liberalise? So I am going to put that question back to you to think about those issues.”

Dr. de Silva also pointed to the potential of Sri Lanka as a key player in the Indian Ocean, stating: “To me Sri Lanka is not a South Asian country. I consider Sri Lanka as an Indian Ocean country. I believe Sri Lanka’s future depends on how we leverage the maritime opportunities…Our history tells us that every time we were prosperous we leveraged the maritime operations, and it is going to be the same in the future.” 

Optimistic of Sri Lanka’s strategic location and the future of the region, the Minister went on to add: “The near future is pregnant with hope. We all know that Asia is the place to be, the Indian Ocean will be the ocean that will create wealth and we are the centre of the Indian Ocean. We will become the hub of the ocean.”

However, for trade to thrive it was stated that a conducive environment needs to be maintained, with the Minister stating that trade, security and diplomatic relations are all intertwined. 

“For commerce to happen there must be that conducive environment. Sri Lanka has continuously been friends of our neighbours. We have maintained that diplomatic relations which has always been conducive to trade.” 

He noted that although in the recent past certain bridges were burnt, “I take pride as a Government of Sri Lanka, that in the last one and a half years we’ve rebuilt all those damaged bridges – whether it is the European Union, whether it is China, India or America. We have an extraordinary relationship with the rest of the world.  Which provides us that guarantee, that conducive environment.” 

In relation to this, he noted: “In the Indian Ocean, security is something that we need to be concerned about.” For unlike the Atlantic and the Pacific oceans, there is no order in the Indian Ocean.

New Office Bearers for Year 2017-18

“There is no one entity that controls the Indian Ocean and there won’t be any one entity that controls the Indian Ocean. So in that context it is essential that Sri Lanka, if we are going to leverage the Indian Ocean, must take the initiative in giving leadership to creating that order in the Indian Ocean. That is why the Prime Minister has been bold in offering Sri Lanka to attempt to create an Indian Ocean order that gives freedom of navigation and freedom of oversight within a rules based context.  Big countries, small countries will have to work together to protect the security of the Indian Ocean. That is I think critical for trade and commerce to take place.” 

The present slump in global trade was also commented on, though Minister de Silva was optimistic about Sri Lanka. “As you know global trade has not been growing very rapidly. In fact after many years, global trade has slowed down” the Minister stated, due to the rise in populist leaders and nationalist thinking around the world. 

However he added: “I don’t think, even though there has been a certain slowdown in global trade, that the world will see a significant contraction in trade. Even though there might be some in the West, the East – the Indian Ocean region – will continue to thrive. So I think the field of play for us will continue to remain wide open.”  

SL optimism 

 Reflecting on the challenge of the Government in transforming the drop in export figures, the Minister noted that the country needs a structural shift in policies. “There is no way this country is going to grow by having patchwork solutions. We have to change our economic game plan. We have to understand what our advantages are. We have to work with the private sector…In that context the challenges we face are rather enormous.”  Regarding this, the need to draw Foreign Direct Investment and switch from a buyer driven networks to producer driven networks was also stressed. “What our apparel sector did was theoretically not possible. It’s an outlier. Because what we are used to and what happens in the country is by and large what is called buyer driven networks. We have to change the model. To flip it from a buyer driven network to producers driven networks, which means there is skin in the game. It is selling to the ultimate buyer based on what he or she has developed, produced and branded as theirs. How do we get skin in the game? By making sure that we have FDIs. That is the money you put in the mouth not just the arm’s length agreement.

“So to convert the buyer driven network to a production driven network takes a lot of work. A lot of policy change. But that is the challenge that we face. What I am trying to say is for the industry to prosper and grow, which it certainly can and might do with our comparative advantage, we have to have people put money in building not just goods and services, but brands. And that is really where our success or failure will be determined.”

The Minister also reflected on the challenges that the Government has faced in putting in place trade agreements. “We are doing the best we can as the Government, we are trying to get into trade agreements with others,” he stated while noting that some people do not approve, seeing it as a threat to the country’s sovereignty. However de Silva pointed out that Singapore has 16 trade agreements while “we have one, a working one, and that also people are throwing stones at”.

On the recently gained GSP+ the Minister noted: “GSP+ should be used as a stepping stone to carve out, develop and design a free trade agreement with Europe. That is what it ought to do.” 

He also noted the need to begin discussions to also gain access to other markets such as in the USA with free trade agreements. “So from the Government’s point of view we are trying to link Sri Lanka, to build bridges with Sri Lanka and the rest world. We did that with the diplomatic initiatives at the beginning. We normalised the relationship. Including getting GSP+ back. Now we have to build on it.” 

Proposal to action 

 Meanwhile Sri Lanka Shippers’ Council incoming Chairman Chrisso de Mel in his acceptance speech pledged: “I will always do the very best I can for the SLSC and will hopefully lead the team to continue the great work done by those who have served before me.”

De Mel further stated: “One of the key factors in order to position the SLSC to achieve its goals and maintain its reputation is to improve and build on the structure that is in place. This enables us to maintain our focus in key areas, and the improvement that we seek in our country.”

Certain difficulties were also noted. “The industries have marked and understood various reforms that need to take place. They have responded with important proposals for the budget etc., but the frustrating thing for most of us is the difficulty in moving from proposal to action. Whether it be matters regarding infrastructure, local Government agencies, customs and border protection requirements or ports and airport services.”

“These failures and policy inconsistencies have driven much fear and concern in the minds of investors, while private sector has been far too docile,” he added.

Pix by Indraratne Balasuriya