Liberalise shipping industry to welcome investors
What we should do to become a maritime hub
While there is no doubt about the country’s prospects of becoming a maritime hub given its strategic location and the Government plan and support, what the country must do initially is realise the full potential it would receive by creating this ‘hub status’.
Navy Commander Vice Admiral Jayanath Colombage noted that Sri Lanka being at the centre of the East-West trade route, through which 50% of the global containerised traffic passes, the country experiences nearly 300 ships passing through Hambantota and 400 ships through Colombo Port monthly.
Having conducted a survey with the Ministry of Defence, there are some 15 points that needs to be focused on to achieve the intended status, he said. These include geography, which the country is blessed with, maritime vision of leader and people, size of seafaring operation, off-shore commercial activities, naval and coast guard services and a good ship building industry among others. However, “we don’t even have 7,000 seafarers at sea, which is quite small,” Admiral Colombage said. “In terms of naval and coast-guard services, the Sri Lanka Navy is ready to do its job in achieving maritime hub status.”
Having well developed main and minor ports, productive trade (not only thriving on transhipment cargo), scientific research and data, a leisure industry at sea that looks beyond the beach, user-friendly customs and monetary policy are also key factors in achieving the set goal. “We also need a conducive environment for FDI, port registration and regulation, and peace, democracy, political and social stability.”
Also serving as Chairman of Ceylon Shipping Cooperation, Colombage noted that orders have been placed for two ships while a few more will be chartered to support the industry. What is needed is to educate seafarers and to explore sea-bed potential to become key players in the regional business.
Improvements needed for hub status
“We have only 7,500 active seafarers and only 250 ship captains. We only have a very few ship owning companies and only four to five ships in Sri Lanka,” CINEC President and Managing Director Capt. Ajith Peiris said.
Even though ship owning industry is a pretty successful industry one can embark on, many do not due to the weak ship financing in the country. “We have very few financial institutions which will support and that too, not to a great extent. When we try to have ships they ask for collateral, a building or land which is not the normal way of ship financing,” Peiris added.
The country can also look at ship management business and crew management business. It easier to achieve the latter as many local crew are being employed by ship owning countries. To improve this, what is needed are training berths for practicals and enhance quality of training institutions in the country. Ship building and repairs must also be enhanced as currently; there is a monopoly with only Colombo Dockyard providing the service.
“Maritime surveys and insurance, bunkering, ship channelling and maritime tourism need also to be improved,” he said. “We also need marinas to attract yachts, ship finances and cruise line shipping.”
Importantly, what has to be improved is legislation, acts and regulations to be business friendly to attract investors while safeguarding Sri Lankan businessmen. “Authorities need to be trained to understand the necessity for this business environment, with timely action and approvals as well.”
Call on logistics companies – Yusuf
Expolanka Holdings Plc Group Managing Director Hanif Yusuf voicing his thoughts stressed the importance of the logistics sector for the maritime hub to be a real hub.
The entire outsourcing of logistic business is some US$ 270 billion and is controlled by over 100 companies, of which 25 or less control one-third of the entire global operation. “Out of these, a considerable number of companies are in Singapore. Singapore invites these logistics companies,” Yusuf said. “Hub will only work with external developers as part of it.”
Commenting further, Yusuf expressed: “I might disagree a bit about safeguarding Sri Lankan businessmen, but global companies work with global companies. This is how we must invite them to come in.”
Despite branding the five hub concept, Sri Lanka in the recent past had restrictions on foreign ship owners coming in – how do we create a hub with such restrictions? He noted that President made a special gazette announcement to adjust this. “We must look at attracting multinationals to come here and set up businesses.”
There is also a lack of private sector participation. “If the Government is talking of investment, perhaps policies need to be a bit more streamlined. There were restrictions on foreign shipping companies coming in. We want better ship companies to come in, we do want to revitalise shipping to be one step behind Singapore and not just one step forward of India.”
Shipping unable to recover costs in SL
As shipping agents at the forefront in marketing Sri Lanka for several decades pursuing shipping lines to use our facilities and move cargo and containers through the port, Ceylon Ships’ Agents Association Chairman Ralph Anandappa’s observation was that currently shipping lines are unable to recover their costs in Sri Lanka unlike they can do in other competing hubs.
“As we all know, port capacity is reaching almost 22 million TEUs per annum by now, but we are achieving 4.3 million. We need shipping lines to move business in to Sri Lanka and, we need to also create a conducive environment and benchmark on international standards,” Anandappa said. “Right now shipping lines are incapable in recovering their costs in the country.”
Legislation also restricts shipping lines in various ways, such as intruding on how shipping lines conduct business, etc. These are added implications and will have effects, he warned.
On the bright side, there are discussions going on with Government and relevant stakeholders to try for a win-win situation. “It is also important to have dialogue between government and private sector as well as all stakeholders. We believe we need an inclusive approach to harness all synergies to make the hub concept a success.”
Need for a rational and reasonable investment base liberalisation
Agreeing with Yusuf, Shippers’ Academy Colombo CEO Rohan Masakorala said that we will not become a maritime hub if we have protectionism within the system. “If foreigners have to put in million dollars and take 40% off profits, they are not going to come here.” However, the country needs global capital, global expertise, global knowledge and global headquarters. “If you put restrictions with protectionism they won’t come in.”
In a study done in 2010 of container ships diverting to Colombo, average cost of diverting to Colombo was at US$8.71 per TEU. Compared with Chennai, Chittagong, Cochin, Karachchi, Dubai etc and the lowest other party was US$ 14.88. The calculation was done in association with Maersk line for a 10,000 TEU vessel US$6.40. “This was an advantage for ship operators and that is why they came to Colombo as a transhipment point; not because Sri Lanka has a large number of containers of exports,” he explained.
“What we as a country should do is bring in these logistics companies, promote trading, exports, and improve our base load – that is where we can support the shipping industry.”
Sri Lanka also has a serious labour law issue in the country as the laws are outdated now. Also, there needs to be an integration of logistics, aviation, shipping and warehousing – I hope this will be done soon so that there will be no duplication.
“Other than that I am very confident of the hub,” Masakorala said. “We are very capable people but we must work together. We must look at our exporters, trading environment, service providers and liberalisation must come. I would like to achieve liberalised logistics first and then the message will go to the world. I do believe shipping must be liberalised, maybe with some type of investment gateways.”