77 & 91 laws will not be sufficient to make a logistics hub

Since liberalising the economy in 1977, Sri Lanka has seen reforms being adopted in the shipping sector briefly in 1991. However, due to the internal conflict the reforms and the modernisation that the industry needed in terms of establishing policy and laws have lagged behind considerably. For example, the Indian economy was liberalised in 1991. Since then, India had enacted a multimodal transport act, shipping and trade practices act, a competition act along with 100% liberalisation of shipping business, which is in line with 99% of the regional maritime nations.

If the proper laws are not in place and government is forced to look at satisfying interests of a few by not bringing in proper legal framework and regulatory reforms, the development of the logistics sector is going to be an impossible task and the majority will be the losers.. It is important that the policy of the government should be to create trade not to divert trade. Therefore, the Government must as its public role ensure transparent and a competitive environment for trading purposes. Stable macroeconomic environment with steady laws and accountability procedures will help Sri Lanka to develop a strong export oriented trading hub that will also help the service providers. The country needs to expand its market access by promoting greater export products and to make them competitive in the international market.

For years the importers and the exporters have called on the government to play its role, to establish competitive laws to eliminate violation of market principles as well as to element anti competitive practices. It is also the role of the government to minimise the transaction costs. The law makers have to have an independent view to intervene to reduce unfair methods used to increase the transaction costs. There are many countries in the world that have adapted laws to ensure best practices in the national interest.

It was just a few years ago that Justice Weeramanthiri addressing a gathering at the Ceylon Chamber of Commerce highlighted the importance of government intervention when the barraging powers of trading parties/service providers are severely imbalanced in order to ensure a competitive environment.  Since 1997 Sri Lankan trading community has suffered at the hands of ad-hoc pricing systems adapted by an unregulated service industry which has a mix of players who are professional and totally unprofessional. Most are not licensed and operate loosely as facilitators of international trade of Sri Lanka. If one checks with Sri Lanka customs this could be confirmed and verified.

In most cases it is the SME businesses, importers, consumers and exporters who don’t control the freight are the victims of the anti competitive practices.

The budget 2011, pronounced that the government would bring in such legislation within 100 days, but yet this has not been delivered. It is often heard in various forums, that government should not interfere in tariffs. Certainly if fair practices are adopted and accountability is there, traders of any sort will never request and waste their time for government to interfere in tariffs or in the free market. The trade only requested to appoint a regulatory system, blinded by law just as in any developed country to eliminate anti competitive behaviour and practices which is costing the exporters and the local consumers and benefiting a few intermediaries.

Sine 1997 over 30 charges on top of freight has been forced on exporters/importers without any consultation process and accountability

Establishing laws and institutions to tackle this is the responsibility of the government, appointing committee after committee represented with parties with vested interest will not solve the problem. This should be the job of an independent panel of judges who could consult stakeholders and give recommendation to government.

The wrong story of tariff regulation is highlighted and repeated, misleading the officials and the public. It is time to stop this false propaganda as we will never emerge as a logistics hub if laws of transparency and accountability is not adopted in all sectors of international trade. What is surprising is why is the lobbyist against laws being adapted by the country in best practices to eliminate anti competitive practices in Sri Lanka? Who are they trying to protect?

The serious investors will not put in their dollars to an economy that lacks trading laws that does not suit the modern technologies and transaction process. The infrastructure alone will not deliver what the country aspires. Therefore, the, government should be cautious of building castles in the sand, where weak fundamentals and lack of laws will create serious problems of becoming a maritime and a logistics hub. We need to establish a new chapter and modernise our economy and re write laws without delay.

(The writer is the

CEO- Shippers’Academy)