Sri Lanka has the location and is ideally positioned for an Indian Ocean logistics hub, Senior Advisor and Sri Lanka Project Manager, Global Alliance for Trade Facilitation, Eric Miller said at the launch of the Global Alliance for Trade Facilitation project: ‘Positioning Sri Lanka as Hub for Multi-Country Consolidation (MCC) Services’ in Colombo last week.
He said the Colombo Port offers the least deviation from the main East-West trade route among South Asian ports and added that the port is globally competitive on connectivity. The Colombo Port was ranked 15th in the UNCTAD Liner Shipping Connectivity Index in 2017 and 13th by the Drewry Port Connectivity Index in Quarter 4, 2017.
The Colombo Port was ranked among the top 30 of the world’s fastest growing ports in the first half this year and the port recorded a 15.6 % growth in container handling according to the Alphaliner Monthly 2018 during the same period.
“The Colombo port has the only deep water container port terminal in South Asia that is able to handle large vessels of 18,000 TEUs ( Twenty-Foot Equivalent Unit) or more. The Colombo Port Terminal CICT and SAGT make an average of 35 moves per crane, surpassing the productivity of other South Asian terminals,” Miller said.
TEUs is used to measure a ship’s cargo carrying capacity. The Colombo Port recorded a 19.8% increase in transshipment throughput in the first half of this year to 2.73 million TEUs from 2.28 million TEUs in the corresponding period last year.
Miller said the container throughput in the Colombo Port grew by 10.6 % in 2016 even when the world average growth was below two percent.
He said there are immense opportunities for Sri Lanka’s shippers as people are increasingly looking for supply chain strategies to reduce international transport such as consolidating shipments as a single location by engaging 3PLs as matchmaker for shipments along shared routes. The re-working of the global supply chain is an opportunity for high growth in Sri Lanka’s maritime logistics sector.
However, according to maritime logistics experts Sri Lanka’s locational advantage is vital but that alone is not adequate to become a maritime logistics hub in the region.
Red tape, poor infrastructure facilities, lack of policy cohesion and consistency, weak destination marketing, lack of consensus among stakeholders and limited research and data analysis are some of the bottlenecks faced by Sri Lanka. Besides experts noted that shipping line decisions, small volume of local cargo, increasing vessel size and reliance on India are some of the major challenges Sri Lanka will have to overcome if it is to position itself as a maritime hub in the region. ‘Five shipping lines handle over half of Colombo port’s cargo. Therefore, shipping line decisions to change ports would significantly impact the container traffic passing through the port,” Miller said, while noting that deployment strategies of new global alliances in shipping lead to unpredictable shifts in volumes handled by transshipment ports.
According to the World Bank ports handling both transshipment and gateway/domestic cargo faces less risk of shipping lines switching ports.
Miller noted that only 25 % of container throughput in Sri Lanka is gateway or local, indicating that the risk of shipping lines switching is high.
He also noted that the size and scale of cargo ships are increasingly becoming larger and this makes the need for ports in Sri Lanka to be able to accommodate larger vessels to be competitive.
The average capacity of vessels increased from 2,200 TEUs in 1978 to 18,000 TEUs in 2015. Today, ultra large vessels with capacities of over 20,000 TEUs operate across ports.
Miller also said the reliance on Indian ports is on the rise as India is engaging in a series of port related reforms to make their ports competitive, such as developing deep water ports capable of handling new generation mega ships in the South and in close proximity to the East-West sea route.
“Currently 35% of Colombo Port’s transshipment volume is Indian transshipment which is stagnant at 1.2 million TEUs despite India’s transshipment volume increasing by 14 % in 2015-16,” Miller said.
He said enabling better trade facilitation is essential as a World Bank study of 126 countries found 75% of delays in trade is due to administrative hurdles, including Customs and tax procedures, certifications, clearances and cargo inspections.
The study shows that outdated trade regulations combined with burdensome and non transparent administrative procedures inflict ‘ invisible tariff or tax’ equivalent to 164.25 %.
“Each day of delay in transportation and border clearance is equal to 0.6-2.3% of tariff. Unless goods can get in and out quickly trade and investment will go elsewhere,” Miller said.
Minister of Development Strategies and International Trade Malik Samarawickrama said launching the Multi-Country Consolidation project will help Sri Lanka to position itself as a trade and logistics hub in the Indian Ocean.
‘This is a timely initiative by GATF which has selected Sri Lanka the as the second developing country after Vietnam for the implementation of the MCC project. MCC will be a major boost for Colombo Ports; third- party logistics (3PL) business. Sri Lanka needs to focus on new technologies to be competitive,” the Minister said.
He said Sri Lanka cannot rest on its laurels always as other ports are getting ahead of us. We have been trying to be a maritime hub in the region. There are many things that should be fixed before that. Trade liberalisation is underway for which steps such as bringing down para tariffs, single window operation for trade and a commitment to liberalise maritime services have been taken.
However, MCC will help the country to realise this dream.
Sri Lanka is a signatory to the WTO Trade Facilitation Agreement (TFA) which was signed in December 2013 in Bali. The TFA contains provisions for expediting the movement, release and clearance of goods including goods in transit.
It also sets out measures for effective cooperation between Customs and other relevant authorities on trade facilitation and Customs compliance issues.
The full implementation of the WTO TFA will reduce all most-favoured nation tariffs from the current average of nine percent to zero.