The recent launch of the Trade Facilitation Framework for Multi-Country Consolidation (MCC)in Sri Lanka will take Sri Lanka a step closer to becoming a maritime logistics hub in the Indian Ocean while boosting foreign investment inflows and trade, say experts. Addressing the launch of the Global Alliance for Trade Facilitation (GATF) project in Colombo recently, GATF Senior Adviser and Sri Lanka Project Manager, Eric Miller, said the project, to be implemented in three phases over 30 months, will work collaboratively to identify and address bottlenecks that prevent Sri Lanka from reaching its full potential in the provision of MCC services.
“Sri Lanka is positioned in the centre of the Indian Ocean at the crossroads of international trade, making it ideally located to become a key regional logistics hub.
But to realise this vision, Sri Lanka needs to put in place the right processes and legal framework for MCC,” said Miller at the event titled ‘Positioning Sri Lanka as a Hub for MCC Services’ held at the Hilton Colombo Residences.
MCC refers to the logistics activity where less-than-container load (LCL) cargoes from different origins are combined into Full Container Loads (FCL) and shipped to their destinations. An MCC hub is an intermediate point where multiple shippers from multiple origins consolidate their shipments to build FCL, before sending them on to their next destination. MCC offers traders flexibility, lower transit costs and an efficient service.It is especially useful for SMEs that ship small volumes and for large companies that source small volumes of goods from multiple countries or suppliers.
Apart from the island’s locational advantage, Miller said Colombo Port offers the least deviation from the main East–West trade route among South Asian ports and is also globally competitive on connectivity. Hence, Sri Lanka is only the second developing country in Asia, after Vietnam, to be chosen by GATF for project implementation.
“What you see here is not just an opportunity that is transshipment where you open one box and put it into another. But this is about opening the box, doing value addition, quality control, re-labelling to the European market and doing checks to ensure accuracy. In other words, leveraging logistics for job creation,” Miller pointed out.
Sri Lanka’s Colombo Port has the only deep-water container port terminal in South Asia which is able to accommodate large vessels of 18,000 TEUs or more.
Colombo Port terminals CICT and South Asia Gateway Terminals (SAGT) make an average of 35 moves per crane, surpassing the productivity of other South Asian terminals.
“Even when the world average growth was less than 2%, container throughput in the Colombo Port in 2016 grew by a sharp 10.6%,” the Chief of the GATF project said.
Expounding on the opportunitiesin MCC and maritime logistics, Miller pointed out that shippers are increasingly looking for supply chain strategies to reduce international transport, such as consolidating shipments at a single location by engaging 3PLs as a matchmaker for shipments along shared routes. The re-working of global supply chains is an opportunity for high growth in Sri Lanka’s maritime logistics sector, he said.
On the other hand, GATF’s Sri Lanka Project Manager noted that since five shipping lines handle more than half of the Colombo Port cargoes, decisions to change ports by shipping lines would significantly impact the container traffic passing through the Port.
“Deployment strategies of new global alliances in shipping lead to unpredictable shifts in volumes handled by transshipment ports,” he highlighted. According to the World Bank, although ports handling ‘both transshipment and gateway/domestic cargoe face less risk of shipping lines switching ports”, in Sri Lanka, a mere 25% of container throughput is gateway/local, indicating the high risk for shipping lines to switch ports.
Miller also identified red tape, poor infrastructure especially warehousing space, lack of policy cohesion, weak destination marketing, lack of consensus and limited research as some of the key bottlenecks facing Sri Lanka.
Deputy Director of GATF José Raúl Perales said that while it is true that Sri Lanka sits on a strategic point along some of the world’s most important commercial lanes, the island needs a long term vision, global mindset and ability to develop linkages across Asia’s actors to truly take advantage of geography.
“This has to be done in a way that makes international trade competitiveness objectives feel part of people’s lives at every level of economic activity. This is one of the key long term objectives of our project in Sri Lanka,” the GATF Deputy highlighted.
He added that the project aspires to be a catalyst of new opportunities for millions of entrepreneurs and producers in Sri Lanka and elsewhere in the region enabling connectivity to global markets.
“By bringing the authorities and the private sector together to design and implement solutions, we believe we can combine ambitious and meaningful initiatives such as MCC with the sustainability and long term vision required to making border solutions become a reality and bear fruit,” he added.
MCC model
The MCC project implementation involves reviewing existing laws and regulations and devising a model MCC legal framework, mapping the time and documentation requirements to move cargoe to and from an MCC facility with a view to targeting efficiencies and undertaking a baseline assessment of port tariffs and the fee structure for MCC operations.
GATF officials say this will improve the competitiveness of Sri Lanka’s exports by providing an access point to global supply chains at lower prices and with increased frequency of shipping, lower transit costs of trading small quantities of goods, giving small and medium-sized enterprises new access to trading partners around the world.The project is assisted by the Women in Logistics and Transport (WiLAT) Sri Lanka and Verité Research.
“This is a groundbreaking project for our country, and fits in well with the broader initiatives we are working on to position Sri Lanka strongly as a competitive trade hub in the Indian Ocean. I believe we are only the second country in Asia, after Vietnam, to be selected for a project by GATF. This is a testament to the confidence placed in the Government’s reform agenda to shape Sri Lanka into a more trade and investment driven economy, from the previous public debt fueled growth model,” Minister of Development Strategies and International Trade Malik Samarawickrama said.