Mar­itime hub: Case for the lib­er­al­i­sa­tion of ship­ping and freight for­ward­ing

Sunday Times (Sri Lanka) - - COMMENT/NEWS -

One of the key ob­jec­tives of the Gov­ern­ment’s Vi­sion 2025 is to de­velop Sri Lanka as a mar­itime and trad­ing hub for the In­dian Ocean, fully lever­ag­ing its con­duc ive geog raphic lo­cat i o n . Accordingly, sig­nif­i­cant in­vest­ments have been made in the coun­try’s phys­i­cal in­fra­struc­ture, par­tic­u­larly in the Ham­ban­tota Port and the Colombo Port, with fur­ther de­vel­op­ment of the Trin­co­ma­lee Port on the hori­zon.

Nonethe­less, Sri Lanka’s ship­ping in­dus­try re­mains pri­mar­ily a trans-ship­ment driven in­dus­try. For the in­dus­try to evolve beyond this it is nec­es­sary to see the de­vel­op­ment of broader ser­vices in ship­ping and lo­gis­tics. It is then that Sri Lanka could truly be­come a mar­itime hub.

Sri Lanka is not a mega ship owner, and lacks the global scale or cap­i­tal to de­velop that level of ship­ping ac­tiv­ity. In this con­text, to be­come a hub we must po­si­tion our­selves to en­cour­age the ma­jor global in­dus­try play­ers to set up in Sri Lanka and pro­vide mar­itime ser­vices to Sri

Sri Lanka’s am­bi­tions of be­com­ing the mar­itime hub for the In­dian Ocean would re­ceive a ma­jor boost if we can at­tract a ma­jor global ship­ping com­pany such as Maersk to make an an­chor in­vest­ment in Sri Lanka.

Lankan traders and to the re­gion beyond.

How­ever, at present there is a re­stric­tion by law that makes it unattrac­tive for global ship­ping lines to es­tab­lish a ma­jor pres­ence in Sri Lanka. By law, a for­eign en­tity can­not own more than 40 per­cent of a ship­ping com­pany in Sri Lanka. Nat­u­rally, for a com­pany in­tend­ing to es­tab­lish a ma­jor pres­ence in an econ­omy, they would ex­pect to at least have con­trol over their op­er­a­tion and not a mi­nor­ity stake.

This re­stric­tive struc­ture is not the case for the ma­jor­ity of Sri Lanka’s for­eign in­vest­ment regime. Even strate­gic sec­tors such as bank­ing and telecom­mu­ni­ca­tions can have ma­jor­ity for­eign own­er­ship. This has en­abled Sri Lankans to ac­cess world class telecom­mu­ni­ca­tions ser­vices and in­ter­na­tional bank­ing ser­vices.

In ship­ping as well, Sri Lanka should move to­wards a more lib­eral regime to at­tract the top global play­ers to in­vest in Sri Lanka. In fact our sup­pos­edly less lib­eral neigh­bours, In­dia, and Pak­istan have fully lib­er­alised their ship­ping in­dus­tries.

Whilst Sri Lanka’s ship­ping in­dus­try is no doubt a force to reckon with, the choice of hav­ing an agency or not should be the wish of the owner of the busi­ness who brings in ves­sels to port in Sri Lanka and re­gional cargo to Colombo. In fact if the ser­vice pro­vided by Sri Lanka’s in­dus­try adds sig­nif­i­cant value, there is no rea­son for the own­ing com­pany to change its model.

But it should be their choice. The own­ers and op­er­a­tors should have the free­dom to de­cide on their op­er­at­ing mod­els. That free­dom would make Sri Lanka a com­pet­i­tive and an at­trac­tive choice to in­vest and re­lo­cate re­gional head­quar­ters which will, over a pe­riod of time, help trans­form the lo­ca­tion ad­van­tage to a real mean­ing­ful lo­gis­tics hub.

Fur­ther­more, with lib­er­al­i­sa­tion come bet­ter op­tions for lo­cal ex­porters and im­porters, as they can have di­rect deal­ings with­out third par­ties, which will re­duce costs such as com­mis­sions. To drive our ex­port growth we must create the most com­pet­i­tive struc­ture for ex­port sup­port­ing ser­vices such as ship­ping and lo­gis­tics.

Sri Lanka’s am­bi­tions of be­com­ing the mar­itime hub for the In­dian Ocean would re­ceive a ma­jor boost if we can at­tract a ma­jor global ship­ping com­pany such as Maersk to make an an­chor in­vest­ment in Sri Lanka. Other lead­ing ship­pers and freight for­warders are likely to then fol­low suit, creat­ing a crit­i­cal mass for a hub.

Go­ing a step fur­ther, we can look at po­si­tion­ing Sri Lanka to at­tract com­pa­nies like Ama­zon for ware­hous­ing for e- Com­merce in the re­gion. Sup­port ser­vices such as fi­nan­cial ser­vices, le­gal ser­vices and other pro­fes­sional ser­vices can thrive in this en­vi­ron­ment. To do all this we need the right in­vest­ment cli­mate.

We need to se­ri­ously con­sider the ap­proach of al­low­ing up to 100 per­cent for­eign own­er­ship in cases where the ship­ping com­pany would make a sig­nif­i­cant in­vest­ment over a pe­riod of time. Our in­vest­ment pol­icy should not be one of at­tract­ing fly by night op­er­a­tors -- and our in­vest­ment thresh­olds and con­di­tions can be struc­tured to achieve that. In other cases with­out ma­jor in­vest­ment, a grad­ual ap­proach to lib­er­al­i­sa­tion will be con­sid­ered.

One thing is for sure, and that is we need to move beyond our cur­rent re­stric­tive in­vest­ment struc­ture in ship­ping to have any chance of be­com­ing a true mar­itime hub for the In­dian Ocean.

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