Budget 2016: Shippers’ Council hopes for implementation of competitive market-oriented policies

The Sri Lanka Shippers’ Council, the apex body representing 14 product associations and chambers, expressed confidence that the Government would implement the policies announced by the Prime Minister and further elaborated by Finance Minister Ravi Karunanayake at the Budget 2016 speech. 

The Chairman of the Sri Lanka Shippers’ Council, Sean Van Dort, said: “Overall the Budget focuses on promoting exports and investments and also shows that services provided to exporters are said to be liberalised. We welcome that after many decades the Government has realised the importance of inviting ship owners to make their presence in Sri Lanka and that the conducive environment for them to invest will be created. Given the port capacity and the location along with regional trade growth we need to encourage ship owners to set up regional headquarters and increase port activity in Sri Lanka.”  

“The council is aware that millions of public money has been invested to build ports by way of borrowing. Therefore, the Government must make sure that ports and terminals must recover such investments by increasing shipping activity. We must encourage activities beyond transhipment. The authorities must talk to ship owners directly and entice them to make more frequencies and new services to call over in our ports. The benefit of port development has to be passed on to the import and export industry and to the general public of the country by attracting more FDI and creating more jobs,” stated Van Dort.

 

Concern over protectionist

He went on to say: “We have seen doors being opened for the logistics industry. However, we are concerned that heavy lobbying is made by protectionists which may heavily cost the country and its people. If we are to benefit from the location advantage we need to create a conducive environment, at least on par with Singapore or Dubai for logistics and freight forwarding. We appreciate the fact that the Hon. Finance Minister talks of building a critical mass for this business. However, we believe asking investors to put in $ 10 million to buy into freight forwarding industry is a non-starter. The business of freight forwarding unlike logistics is not a capital intensive business. It’s a kind of a brokerage in Sri Lanka. 

“The country needs companies of medium scale that would bring in regional forwarding and consolidation business. These medium size companies will create the critical mass. They need to be encouraged with a reasonable cap for investment. The $ 5 million was a good start announced by the budget speech. But suddenly it has gone again to $ 10 million, which is a barrier to entry for medium size forwarding companies. The investment $ 10 million was already in place but it’s a known fact that no foreign investment was secured in the freight forwarding industry even with an 80% shareholding policy. The sudden increase from budget speech of $ 5 million to $ 10 million raises a huge concern in the industry. 

“It is my opinion that this country’s freight forwarding and shipping is plagued by agency syndrome which is the middle man’s roll, which exploits both sides and sits back and collects agency fees without any innovation or value addition in most cases.

“I represent the apparel industry in the Shippers’Council, where we have welcomed foreign investment into this country and have never objected to such investment as it brought in new innovation, skills and job creation. In fact our local companies do compete with them and that has brought in a higher standard moulding and making a brand value to ‘Made in Sri Lanka’. Why are the freight forwarding companies so fearful of good healthy competition, which in the long run would benefit our motherland?”

Van Dort appreciated a recent comment made by Deputy Minister Eran Wickramaratne at the CILT conference, where he said “because of a few protectionists who will acquire wealth for personal gain the rest of the country will suffer. Those protectionists do not know that due to their own actions their next generations too will be poor.” 

Van Dort went on to say that if the National Government could not drive a proper open market economy, Sri Lanka would fail once again. 

On the brighter side he said: “We appreciate as a council that the Government has announced many positive steps to reform institutions through digitalisation, which will increase speed, reduce corruption and reduce transaction costs. We welcome the setting up of the export council too. Finally, I would also like to appreciate the effort to build the social net by increasing spending on health, education and rural development.”  

“The SLSC, which is the oldest council in Asia, will continue to cooperate and support the efforts of Government to make Sri Lanka a real hub for logistics and help our export sector grow as this is a priority for the country and us,” he said.